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PostPosted: Wed Aug 14, 2019 7:36 pm 
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Joined: Wed Sep 03, 2003 6:30 pm
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Location: 1066 Country
Interesting article from the Wall Street Journal. In fairness it could well be a universal situation throughout the globe, in that very few drivers actually know the true costs of working in our trade. ... 1565737028

How Uber Makes Its Drivers Pay

Uber lost $5.24 billion in the second quarter this year and seems to have no clear path to profitability. But even that loss is understated, because a substantial part of the expense is not included in Uber’s income statement and is instead pushed onto drivers: the wear and tear the job puts on their cars.

Most Uber drivers seem unaware of how their job costs them when it comes to the value of their cars. We spoke with more than 50 Uber drivers in Los Angeles, Portland, Austin, Dallas, Houston and Charleston, S.C., in recent weeks and asked them to tell us their revenues and costs. The revenue—the payments Uber made to them—are recorded in detail, but the costs aren’t as clear. The drivers all included gasoline. Some noted the price of water or candy for riders, and a few included maintenance—but only one detailed the loss in value of the car he was driving, and even then only after we inquired about it specifically.

That driver has an accounting background and wanted to make a little extra money over the holidays. He drove a few-years-old Mercedes M Class SUV, which was worth about $20,000 when he began driving for Uber. He kept meticulous records of his total costs, which he netted out against income. He drove for Uber for a couple of months.

When he stopped driving, he had made about $5,000, but the value of his SUV had dropped from $20,000 to about $15,000. Reviewing his records, the driver found that at least 80% of the miles he drove during that period were for Uber, making about $4,000 of the decline in value attributable to his work for the firm. He was going to have to pay for two service visits, higher insurance rates, and new tires sooner than if he hadn’t been an Uber driver—which all added up to somewhere north of $3,000 in additional costs. In short, he was worse off financially than when he started.

For drivers who depend on Uber to make a living, their cars’ loss in value is serious. If a driver carries passengers for 40,000 miles a year and incurs depreciation of 29 cents a mile—the average reported by the American Automobile Association in 2018—the annual expense is $11,600, or $967 a month, $223 a week, $5.58 an hour based on 40 hours a week.

For Uber, this cost transfer to drivers is worth billions of dollars. Uber reported about 1.7 billion trips on its platform during the second quarter of 2019. If, as has been reported, the average length of a trip is 6.5 miles, Uber drivers would have provided more than 11 billion miles of rides. Using the depreciation rate of 29 cents a mile—which Uber used in the registration statement it filed with the Securities and Exchange when it went public—drivers incurred nearly $3.2 billion that quarter in costs, many without realizing it.

It gets worse. Drivers are allowed to expense the miles that they drive, which offsets some of the loss, but Uber reports only the mileage incurred when riders are in a car, which may be far less than the total miles driven. The drivers we spoke with only reported the miles reported by Uber and are thus underreporting their miles driven on the job.

Not all of Uber’s reported trips were in cars. Some were on scooters, but let’s assume that 90% were car miles, as that’s roughly how much ride-sharing and UberEats account for in Uber’s business. Not accounting for growth, drivers would absorb more than $11 billion in annual costs.

Once drivers understand that they are liquidating the value of their vehicles, in effect receiving payday loans with their cars as collateral, the effects may be significant. Companies like Uber, Lyft, Grubhub and DoorDash may find it more difficult to recruit and retain drivers unless they raise prices and pay drivers more.

Restaurants that rely on delivery will find their revenues under pressure. Even Tesla, which recently announced that it plans to have a million robo-taxis on the road next year, may find it more difficult, since the company doesn’t plan to own the taxis and instead wants owners to make their cars available for rides.

If these services were profitable, these companies would want to own the vehicles. They don’t, and we know why.


PostPosted: Thu Aug 15, 2019 8:33 am 

Joined: Sat Aug 04, 2012 10:17 pm
Posts: 2395
Knowing the cost of running your vehicle has a point I've tried to make on here several times over the years. so many drivers really haven't got a clue as to how much their car costs to run, hence many do "airport runs" where they actually lose money.

a few years back I was talking to the local hack driver, he had a bill for tax of about £3k. I aked him a few basic details about his running costs, run it through my spreadsheet formula and told him if he worked less by cutting out the dead runs such as airport stuff he wouldn't have to work extra hours to pay the tax bill as he'd be below the threshold for that tax band.

I know that my tyre costs for instance were something like 0.02p per mile, miniscule but essential to know on the scale of things.

Multiply that over the taxi/ph fleet and it's a huge cost to drivers.

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