Uber, Lyft take different spending routes in race to add drivers


FILE PHOTO: A sign marks a rendezvous location for Lyft and Uber users at San Diego State University in San Diego, California, U.S., May 13, 2020. REUTERS/Mike Blake/File Photo

(Reuters) - A return to business as usual for Uber Technologies Inc and its rival Lyft Inc has thrown up a new challenge to the ride-hailing firms looking for profitability - spend more to bring back drivers to meet the rising demand for rides.

Between the two, their spending plans have differed.

Uber shelled out $250 million in the second quarter and has now begun cutting back as it added more hands behind the wheels, while Lyft has decided to keep spending into the third quarter.

With trip demand so far outpacing driver supply, the ride-hail businesses risk alienating returning customers with higher prices and longer wait times if drivers fail to show up in big numbers.

Labor shortages have widely hampered an economic recovery in the United States, with the service industry struggling the most to find staff as enhanced U.S. jobless benefits, which are set to phase out in September, keep away workers for now.

"Despite the smaller pool of drivers available today, the benefits cliff in September is something Uber and the industry will benefit from," Angelo Zino, analyst at CFRA Research said.

Returning drivers to their platforms is crucial for both Uber and Lyft to grow even as they cut costs amid pressure from investors for profitability.

To focus on its core ride-hailing, food-delivery and freight services, Uber has sold capital-intensive businesses like self-driving and flying taxi units, while Lyft, a streamlined business compared to Uber, has also been keeping a tight lid on costs.

In their latest earnings calls, top executives of both companies faced questions from analysts, who have been keeping a close eye on their spending plans, on how Uber and Lyft plan to improve driver supply.

Uber finance head Nelson Chai said it was reducing direct driver incentives and was allowing drivers to keep a higher share of the fare, while keeping the amount it takes from each ride low.

"Unlike at Lyft, where margins improved sequentially, it seems Uber made less use of surge pricing to fund these driver incentives, resulting in the hit to profitability," Atlantic Equities analyst James Cordwell said.

Both companies have said riders in July were returning in greater numbers than at anytime before the pandemic started.

(Reporting by Tina Bellon in Austin, Texas, Akanksha Rana, Chavi Mehta and Aniruddha Ghosh in Bengaluru; Writing by Subrat Patnaik; Editing by Arun Koyyur)

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 46
Cxense type: free
User access status: 3
Join our Telegram channel to get our Evening Alerts and breaking news highlights

   

Next In Tech News

Bitcoin drops below US$40,000 as regulatory drumbeat grows
Yelp, Lyft, Patagonia other US firms oppose Texas abortion law
Freshworks valued at $10.13 billion after raising $1.03 billion in U.S. IPO - source
Apple iOS 15 is here, but it misses out on crucial features
Why is the chair emoji causing a sensation on social media?
Facebook Oversight Board seeks clarity on review system for high-profile users
Facebook to launch portable version of Portal video chat device
Former F1 driver Rosberg, Agnelli's Exor invest in adopt-a-tree site Treedom
EU plans to legislate for common phone charger despite Apple grumbles
AT&T plans multi-year effort to burnish its brand image

Stories You'll Enjoy


Vouchers