Uber and Lyft Fares Remain Elevated
Ride-Hailing Drivers Shun Service for Now
Uber (UBER) and Lyft (LYFT) fares remain high despite widespread vaccination rollouts. With enhanced federal unemployment benefits largely expired nationwide, both ride-hailing companies expected the majority of their drivers to return to the wheel. That has not happened, however, which is keeping prices high, since prices are tied directly to driver supply. Fares have only dropped slightly since the summer peak.
It makes sense that the ride-hailing companies would have expected a fully restored workforce by now. This past spring and summer, states that opted out of paying extra unemployment benefits saw fares decline as more drivers chose to go back to work. Nevertheless, since increased federal unemployment benefits expired at the end of September prices remain elevated. In October, Uber and Lyft riders paid 22% more compared to January. Prices are up 30% from 2019.
Demand Outstripping Supply
That is not to say drivers aren’t returning, they are just doing so at a slower pace than demand for the services. Uber said there are more drivers on the platform than at any point during the pandemic. Still in certain cities labor shortages are keeping prices elevated across the country. Both Uber and Lyft expect these increased fares to level out, but can’t forecast when. Another dynamic pushing fares higher is an uptick in the number of longer trips and fewer discounts for riders.
Companies across the country are reeling from labor shortages that have persisted despite widespread vaccinations and an end to extra unemployment benefits. Concerns about getting COVID-19, childcare needs, career changes, and early retirements are just some of the reasons economists point to when explaining continued labor shortages.
Fares Won’t Return to Pre-Pandemic Levels
To recruit drivers, Uber and Lyft have been spending millions, luring them with bonuses. In a sign they think the labor picture is improving, both companies began to rein in those incentives. That is particularly true in markets where drivers are returning to work.
Bringing on more drivers will reduce fares but it will not bring them back to pre-pandemic levels. Uber and Lyft are under pressure to prove they can slash costs and grow without cheap fares. They are phasing out discounts to riders as a result. Worker shortages are a big problem for Uber, Lyft, and their customers. Both companies report quarterly earnings next week so investors will be looking for more context around these labor bottlenecks.
Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.
SOSS21110203
All your finances.
All in one app.
App Store rating
