Business

Your next Uber could be a bus


People are thinking twice before opening that carpooling app on their smartphones.

This fact isn’t going anywhere, but the sluggish speed with which vehicle volumes have recovered from the pandemic depths is the latest sign that the industry may not be as ubiquitous as it once hoped. As the dream of world domination fades and investors see the bottom line, the cost of that ride could push some potential customers to more economical forms of transportation.

Recently, the market leader

Uber

UBER 0.47%

Technology has gone beyond service making its name a verb. According to the investor day rankings for 2022, Uber is present in 72 countries. It added Eats to food delivery, and later expanded to include convenience, alcohol, diapers and more. It is currently adding taxi and travel partnerships, among other things. Soon, you’ll be able to ride your very own party bus.

These supplements are externally presented as a way for Uber to actively build a super app from a position of strength. They are supposed to be defensive only. If investors used to want quantity, now they want quality. As CEO Dara Khosrowshahi wrote recently in an internal email: “In times of uncertainty, investors seek safety… we need show them the money. ”

The economics of ride-hailing has changed. Platforms like Uber and

Lyft

LYFT -1.14%

has for many years grown through subsidizing travel costs to gain market share from other forms of transport, as well as from other forms of transport. From 2016 to 2021, Uber burned an average of nearly $3 billion a year.

But with investors now focused on pocketing cash instead of splashing out, generous subsidies are no longer a winning strategy. And that discipline comes at a time of rising costs. Labor laws, competition and rising prices for cars and pumps mean that carpoolers need to be paid more. The combination of those costs with investors’ demand for returns and cash flow means that post-pandemic car rental may never be as affordable as it once was.

The average price of a ride-hailing service nationwide in April already up nearly 39% more than at the same time in 2019, YipitData shows. Some of that has to do with the longer trips consumers are currently taking. But even on a per-mile basis, prices have increased by more than 27%. In greater Phoenix and Atlanta, prices per mile for Uber and Lyft combined increased by an average of 40% and 50%, respectively.

SHARE YOUR THOUGHTS

How have higher ride-sharing prices affected the way you use Uber and Lyft? Join the conversation below.

The pandemic may be waning, boosting demand for more travel and tourism, but consumers are likely to consider cheaper options amid rising rates and prices of other goods and services. And prices can become more plentiful. Faced with a driver shortage, Lyft may need to make up for it with a higher percentage of riders to compete. Meanwhile, if Uber continues to drive strong growth in food delivery and other non-store businesses, someone will have to shoulder that segment.

Ride Hailers set out to free us from car ownership and provide us with more convenience and comfort than other existing means of transportation. What if the future of carpooling is… the bus?

Write letter for Laura Forman at laura.forman@wsj.com

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