While Uber and Lyft may be ubiquitous in cities all over the United States, the companies are not only massively unprofitable, but they also increase vehicle usage and thus the carbon pollution that drives climate change.
What’s more, it seems increasingly likely these ride-sharing companies can’t become profitable without being even worse for the planet.
Last Friday, Uber became the biggest money-losing company to ever go public. The second biggest money-loser to go public was Lyft in March.
In the week after Uber’s IPO flop, the company’s shares are still struggling to hit their original target price of $45, and Lyft hit its lowest price ever. This suggests investors have not fully accepted that the companies’ current business model — trying to compete with taxis on price and convenience — is sustainable.
In fact, CNBC technology analyst Deidra Bowes said last week that Uber is “depending on some sort of autonomous driving that may never be commercially viable.” If you can have a car without a driver, then you have eliminated most of the cost of the ride — the driver’s pay — and the potential profit margin would be vastly larger.
But here’s the problem: ride sharing already appears to be hurting the environment. It increases the vehicle miles traveled (VMT) by cars in major cities, and it reduces the use of mass transit.
Worse, studies suggest driverless vehicles — assuming they ever become viable — would greatly add to VMTs and congestion, leading to yet more pollution.
So the question is: can Uber and Lyft make a profit without destroying the climate?
Right now, neither company has made a cent of profit. Lyft lost $1 billion last year. Uber, which operates on a much bigger scale worldwide, lost $3 billion last year and $4 billion the year before.
“The 2010s have been the decade of the subsidized ride,” as the L.A. Times put it last week.
Those subsidies came from venture capitalists and other private investors who have thrown billions of dollars at these companies. Now, with both companies publicly traded, the question is how long public investors will keep doing the same.
When something becomes cheaper, we tend to use more of it, as standard economics predicts. And studies do suggest that all of these subsidized, money-losing rides have led to vastly more car use than we otherwise would have seen.
Ride-sharing companies “have added 5.7 billion miles of driving annually in the Boston, Chicago, Los Angeles, Miami, New York, Philadelphia, San Francisco, Seattle and Washington D.C. metro areas,” according to a 2018 study by Bruce Schaller, former deputy commissioner for traffic and planning in New York City.
All of that extra driving likely means more than a million tons of additional heat-trapping greenhouse gases added to the atmosphere each year.
Unsurprisingly, at the same time car miles are going up, the use of public transit is going down. Schaller estimates that some 60% of Uber and Lyft users “in large, dense cities would have taken public transportation, walked, biked or not made the trip” if ride sharing hadn’t been available.
Another 2018 study, by three University of Kentucky civil engineers, found that after Uber and Lyft enter an urban market, “rail ridership can be expected to decrease by 1.3% and bus ridership can be expected to decrease by 1.7%.”
Worse, this drop in riders “builds with each passing year.” The engineers calculated that since Uber entered the San Francisco market in 2010, bus use has dropped 12.7%.
Environmental groups like Sierra Club have called on both companies to make greater use of electric vehicles (EVs) running on renewable electricity, which would certainly diminish the net increase in emissions from these app services.
Both Uber and Lyft have begun to pilot programs to boost driver EV use. But their business model classifies drivers as independent contractors and that generally means making use of their inefficient, gasoline-powered cars, so any transition will be slow. Also, EVs don’t solve the problem of increased road congestion or decreased mass transit viability.
Lyft goes further by attempting to offset the carbon pollution with so-called carbon credits that can go to purchase trees and other emissions reductions projects. But ThinkProgress and others have long argued that such offsets are usually of dubious value — and as the Atlantic pointed out last April, the credits “have fallen out of favor in the last few years.”
Finally, if Lyft and Uber do in fact need driverless cars to be profitable, that is likely to be even worse for the environment.
A February 2019 study warned that self-driving cars “could more than double” vehicle traffic in cities as they cruise around town rather than having to pay hefty parking fees. Even worse, this Transport Policy study noted that since cruising around is cheaper at slower speeds, driverless cars will have an incentive to go as slow as possible — and that means even more congestion.
Of course, many experts are skeptical we will see significant use of driverless cars for another decade or more. Whether Lyft and Uber can become profitable before then — or last that long if they don’t — remains unknown.