Austin ridesharing companies did not succeed where Uber and Lyft fail

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Photo Credit: Chelsea Purgahn | Daily Texan Staff

Following a yearlong absence stemming from a fight over Austin’s background check requirements for ridesharing companies, industry giants Uber and Lyft returned last week after those rules were overturned. Multiple ride-hailing services have filled the void left in their absence, including Fare, Fasten, and  RideAustin. It remains to be seen whether our city’s experiment with alternative ride-hailing startups will remain viable now that those services compete with Uber and Lyft.

That experiment has taught us that ride-hailing, even with a local focus, is not a sustainable business model. We live in a ridesharing bubble, and we can’t be sure that the service, regardless of the provider or how popular it is, will continue to be enjoyed by Longhorns and Austinites in the years to come.

Uber and Lyft’s unprofitability is well-documented. Last Thursday, the Wall Street Journal reported that the company lost $708 million in the first quarter. The reason: Uber burns cash to keep fares low enough to attract consumers, but far too low to be profitable. “Uber’s growth to date is entirely explained by its willingness to engage in predatory competition funded by Silicon Valley billionaires pursuing industry dominance,” writes Yves Smith for Naked Capitalism.

Lyft is also losing millions, and despite narrowing losses, analysts suspect the company will also remain dependent on heavy subsidies to attract riders and drivers. “Once Lyft gets the legal green light to enter new markets like upstate New York, Houston, Austin (...) it will also likely see a corresponding increase in losses as it works to both ramp up its supply of drivers and attract riders in these new cities,” Johana Bhuiyan, a transportation reporter for Recode, said.

The ridesharing model has not fared much better in Austin during the city’s brief year as an incubator for quirky new players. In February, RideAustin admitted that it had lost $4 million on fares alone since its inception. Streamlining its operations and raising fares would theoretically allow RideAustin to break even on trips, but even that additional revenue would not come close to covering the company’s marketing, administration, and engineering expenses.

Eventually, investors will realize that the jig is up — ride-hailing in its current form does not actually make money. While Uber and Lyft hope that self-driving and flying cars might change that economic calculus, those technologies face obstacles of their own that may not be surmountable in the foreseeable future. The ride-hailing bubble is going to burst. Tomorrow’s Longhorns will not be able to summon a ride that is as cheap as the one Uber or RideAustin offers today.

Ride-hailing hasn’t disrupted urban mobility, and driving from point A to B is still inherently expensive. When planning for the future of our campus and our city, we must realize that it cannot depend on $5 Uber rides. Mediocre technology is no substitute for good urban planning. To move people equitably and affordably, invest in alternative modes like walking, bicycling, and public transit. Not an app.