Seven days a week, Singh drives his yellow taxi from 2:30 in the afternoon until past 11 at night. By the time he gets home from the city, it is 2 a.m. Sometimes he doesn’t make it home until 5 in the morning. His seamed face and gray beard makes him look older than his 45 years.
. . .
Ever since his driver left him for Uber 13 months ago, Singh has been pushing the boundaries of his body to save his family’s future.
Despite working seven days a week and sleeping an average of four hours a night, he is three months behind on his medallion mortgage payments. The bank can repossess his medallion at any time.
“Losing the medallion is not so bad,” he said. “The problem is losing the house.” Singh, like many medallion owners, had borrowed against his medallion to help pay for his home.
Evgeny “Gene” Freidman is no fan of Uber. The increasing popularity of this vehicle-for-hire (or ridesharing) company has lost him millions of dollars. He has even asked New York City taxpayers for a bailout. As difficult as bailing out the big banks was to swallow, bailing out a taxi mogul—who at one point owned more than 1,000 New York City taxi medallions—is an even harder sell. A bailout would be especially outrageous considering that Freidman and his financial backers are actively working to make consumers pay more for fewer options.
Many of the new round of upstarts, on the other hand, are providing services, like transportation, that have a high marginal cost. You want someone driven around, you’ll need to pay the driver a decent hourly rate to drive them. That means they won’t be able to realize Google-like economies of scale. At the same time, the switching costs of trying a new service are pretty low. That suggests to me that at some point, they are going to have to raise prices substantially — and only then will we find out if people are willing to pay enough for it to make the company profitable.
This is why I always roll my eyes a bit when I see articles discussing how Uber, or some other company, is going to completely change the way we work/communicate/travel/insert activity here. We don’t even know what a lot of these companies will look like when they are mature.
They may be able to sustain large demand at higher prices and revolutionize our lives (and the wallets of the folks who invested in them). Or they may settle into a profitable but not transformational niche with somewhat less usage but better margins. Or many of them may slither out of existence, taking their massive investments with them. Because it’s only in myth that unicorns are immortal.
Potential UberX drivers, do not rely on what Uber tells you about how much you will make. The inflated figures Uber bandies about on Craigslist and in its PR about how much you might make are 1) inflated, and 2) before expenses. So you must discount what you make from Uber by 50% to account for Self Employment taxes (remember that you will be paying both the employee and the employer portion of these), fuel, depreciation, maintenance, and income taxes.
And after Uber has been in a city for a while, and after Uber runs its promotional discount during which drivers do not take a hit, Uber will unilaterally cut rates with little advance notice to drivers, and you will then make even less (and if you unwisely used Uber-arranged financing to buy a car, you are really stuck).
Even before your costs and deductions, Uber’s take is more like 25% of the “fare” charged to riders after Uber deducts the “Safe Rides Fee” ($1 per ride) and its 20%. Yet Uber shows the rider the top-line “fare” to the rider and to you as if that is what you earn. It’s not.
Uber’s “Safe Ride Fee” of $1 per ride is shown to the rider as part of the fare, but Uber shows the $1 fee separately when it pays drivers. So Uber makes, at the outset, $1 on every single trip. #UberLies
For example, a $6 “fare” will result in the driver being paid $6 – $1 Safe Rides Fee = $5 – (20%) $1.00 = $4.00. $4.00 / $6 = you making 67% of the “fare”. Uber’s take is more than 30%. (A $10 fare results in the driver being paid $7.20, which means Uber’s take is 28%, not 20%.) And if you think “fares” under $10 are unusual, especially after a rate cut, think again.
Uber gets so much positive press because it is allegedly “high-tech” and “innovative” and “disruptive”. But it is building its valuation on a very shaky foundation of grabbing market share by lowering rates and thus lowering driver quality and increasing driver churn. And many journalists who cover Uber have no clue about and are not interested in the misrepresentations of “income” that Uber uses to recruit drivers. After all, most journalists, like most UberX riders, love riding around for cheap, without wanting to know that UberX driver car equity is helping pay for that cheap ride.
Don’t believe us? Then read the stories linked below and listen to the Columbus, Ohio UberX driver who quit (YouTube at bottom). You have been warned.
Uber as a company is very disrespectful of its (mostly brown and black male) drivers. After Uber runs it promotions discounting rates (especially UberX), and stressing that the drivers are not losing anything, at the end of the promo period Uber then announces to its riders that lower rates are here to stay, making the decision unilaterally and with only a few hours advance notice to UberX drivers. The new rate reduction DOES impact drivers as the entire rate reduction comes out of drivers’ pockets. (In some cities that have had recent rate cuts, some UberX drivers did not work the Labor Day weekend to protest those rate cuts.)
Uber has recently pulled this underhanded trick on UberX drivers in Boston, WashingtonDC, London, Los Angeles, NJ, Tampa, Fresno, and Seattle, among other cities. So, current and potential UberX drivers, be prepared to see Uber unilaterally cut your fares by 15% to 20% while letting riders know how great Uber is for cheap rates, and giving drivers little advance notice of the new “improved” 15% to 20% pay cut.
In response to Uber unilaterally lowering rates, many Uber drivers are now attempting to cause surge pricing.
