Lyft And Uber – The Challenge For The Ride Hailing Giants

The labour crunch has turned from a headache into a severe migraine for Lyft as it faces an uphill battle in the big fight to attract drivers back into its ranks.

As demand for ride hailing services fell off a cliff during the pandemic, some of its most reliable recruits got out from behind the wheel and found new positions in other sectors. With hospitality also starved of staff as the economy re-opened it’s become tough to attract drivers back without the lure of bigger incentives. Instead of being seen as a nimble player using tech efficiencies to streamline costs, Lyft is being weighed down by real world labour costs and that’s why its shares have careered down the hill.

There has been some relief among investors that for now Uber isn’t in the same vulnerable position as Lyft in having to offer steep incentives to lure drivers back. The fact that its Uber Eats business thrived during the pandemic, while its ride hailing services were forced to hibernate during lockdowns, would have helped with retention rates, whereas Lyft did not have that integrated service to fall back on and is having to pedal much harder to attract recruits back behind the wheel.

Uber still posted a loss despite a 136% increase in revenues compared to the same time last year, but this was mainly linked to accounting changes over the group’s stakes in the beleaguered Chinese ride hailing company Didi Global, rather than the strength of its core operations and that has helped offset disappointment.

Uber also has grand ambitions to become a one stop transport hub for the world, and that strategy of diversification into other sectors appeared to be being well received. However Uber still has plenty of regulatory road bumps to navigate in countries around the globe, not least over its reliance on the gig economy, so it is still set to face labour challenges ahead which could eat into its profits prospects.

For now people still seem to be glued to new found pandemic habits of ordering in restaurant dishes and opting for grocery deliveries. But the niggling worries are still there that as the cost-of-living squeeze intensifies and as savings are eaten away, there may be less appetite to pay for an easier life.

With many supermarkets and restaurants set to pass on the cost of higher commodity prices, more consumers may begin to trim budgets by starting with little luxuries like on demand delivery. That could prove a big bump in the road for companies like Lyft and Uber to navigate as they also try and swerve the competition being posed by new instant delivery start-ups like GoPuff and Getir.’’