Why aren’t Uber and Lyft all-electric already?
Uber and Lyft have been making a lot of headlines in the media due to their widely-anticipated initial public offerings. These popular ride-hailing companies, together valued at over $100 billion, provide millions of trips every day to riders across the United States and beyond. After several years of industry expansion, the impacts of ride-hailing companies are becoming apparent. In cities where Uber and Lyft are especially popular (such as San Francisco, Chicago, and New York), there are tens of thousands of drivers, more than 20% of residents use the apps, and their service is becoming a serious rival to local public transit. This results in more miles, more traffic congestion, and more pollution.
Vehicle electrification is an opportunity to eliminate these vehicles’ local pollution. Many Uber and Lyft drivers drive 40,000 or more miles per year, which is two to three times more than average private car owners. Therefore, electrifying Uber and Lyft cars can lead to greater relative environmental benefits due to their higher travel. In jurisdictions like California, London, and Shenzhen, policymakers are developing rules to steer ride-hailing fleets toward electric vehicles to capture these benefits.
But while the major automobile trends of electric vehicles and ride-hailing are each well into the millions of vehicles globally, their convergence – electric ride-hailing – has seen little progress beyond a handful of local markets. Far less than 1% of vehicles on the Uber and Lyft platforms in 2018 were electric. In California – a hotbed for both trends – Uber and Lyft drivers adopt electric vehicles at about one-third the rate of the broader market. Even their more bullish announcements about future electrification activities still amount to less than 5% of their operations by 2025. In other words, the companies are clearly lagging public adoption of electric vehicles.
Because of declining battery costs and greater availability of long-range electric vehicle models like the Chevrolet Bolt, ride-hailing fleets are increasingly ripe for electrification. So why has there been such little progress toward electrification for two companies that have pledged to “lead the transition toward a zero-emission future”?
Because it’s really tough. With ride-hailing fleets, one must convince not just the companies of the benefits of electrification, but also the drivers. Time spent charging an electric vehicle can mean downtime and lost revenue. With high daily mileage, electric ride-hailing requires public rapid charging infrastructure that is affordably priced and deployed in key locations. Access to overnight charging at homes, multi-unit dwellings, and curbsides will be key to maximize the fuel cost savings of electric vehicles and minimize reliance on public charging and downtime.
Perhaps the biggest question for drivers is whether the fuel savings gained from electric vehicles is enough to payback the higher upfront costs. Fuel is the biggest operating cost for drivers, which is why hybrids are widely considered to be the best cars for Uber and Lyft. But how do the benefits stack up for going all-electric compared to hybrid?
We analyzed exactly this question in our recent paper, exploring when ride-hailing electric vehicles reach cost parity with hybrids. The figure below shows that electric vehicles are expected to reach cost parity with hybrid alternatives in 2023 and beyond. But the two distinct blue lines show how electric vehicle costs largely depend on access to nightly residential charging. Drivers who are entirely reliant on public fast charging have increased total costs by about 30% and reach cost parity with hybrids after 2025. When nightly residential charging is available, electric vehicles can become the lowest cost technology by 2023.
Actions by government and industry stakeholders are necessary to unlock the economic benefits of electric ride-hailing and accelerate the timeline for cost parity. Government and utility charging infrastructure programs like funding its direct deployment, offering financial incentives, adopting EV-ready building codes, and providing affordable electricity rate structures, all help bring affordable charging to driver residences and public locations to ensure that electric vehicles are the most attractive technology. Regulations like those underway in California that require greenhouse gas emissions reductions from ride-hailing operations could reasonably require the full transition to electric within 3-5 years after that.
Of course, companies have a huge role to play to make electric vehicles the economic and practical choice for their drivers. Continued and expanded vehicle leasing programs like Maven Gig and Express Drive can ensure Uber and Lyft drivers have access to good electric vehicle options and understand their fuel-savings potential. Uber has been actively experimenting with innovative electric vehicle programs in select local markets, including pricing its own fleet to fund its electrification, working with charging providers to deploy home and public infrastructure, partnering with utilities to offer free charging, conducting outreach to drivers about electric vehicle benefits, and creating in-app features to notify electric vehicle drivers of long trips to avoid running out of charge.
Ride-hailing companies have a real opportunity to go way beyond their early pilots and make electrification a core part of their business. With the companies about to go public, the opportunity is even greater. It’s even conceivable that these ride-hailing companies could use the infusion of their new IPO capital to jolt them to the leading edge of global efforts to electrify vehicles.