Higher gas prices have affected everyone, and drivers have responded in a variety of ways. This week, users will pay up to $0.55 extra per Uber ride and up to $0.45 extra for Uber Eats, and this money will go solely to drivers. This will be in place for about two months, and although Uber acknowledges that it won't completely cover the cost of fuel, it will "cushion the blow". Since prices have been increasing all across the economy (shipping anything anywhere requires fuel, which is more expensive now, so all products will be more expensive as a byproduct). However, New York City is a notable exception, since drivers there won't benefit from the surcharge because they're already receiving a 5.3% pay raise due to a 2019 law.
Uber is also doubling down on electric vehicle investment, incentivizing up to a $4,000 annual bonus, and a recent Hertz partnership makes 50,000 teslas available for drivers to rent by 2023.
This is all coming at a pivotal time for electric vehicles in general. Since drivers stand to profit far more off ridesharing with electric vehicles than gas vehicles, the choice for a new driver looking to enter the market is clear. Even then, for the average consumer, filling up a gas tank can cost easily cost over $60 dollars. Supercharging an electric vehicle ranges from $15 to $20. Gas cars require transmission maintenance, oil changes, engine repairs etc etc, an electric vehicles needs only tires, alignments, and (maybe) brakes. Electric vehicles have a significantly lower cost of operation than. gas vehicles, and the market reflects that characteristic. Passenger electric vehicle sales are projected to exceed 10.5 million this year, 4 million above last year. Anyone looking to purchase a Tesla Model Y (the hottest electric vehicle right now) has an estimated wait time of over 5 months. Although the bulk of these purchases are Chinese, the American government has incentivized EV purchases. does
While increasing the prices of Ubers $0.55 likely won't make a huge difference in user numbers, since the average Uber user probably isn't the most price sensitive, however increasing them further to accommodate for higher gas prices in the future possibly could shift riders to public transport. While somewhat distant, the market could eventually push more users away from using cars and into other forms of transportation. For a certain demographic, where buying/leasing a car (specifically an electric vehicle) is either too expensive or inconvenient (like a resident of New York City or many urban metro areas), they may be left with public transport as the only option. For certain cities with well-developed systems, this won't be an issue. However, in other cities, this may become a problem for some. Lack of urban infrastructure and efficient transit systems (think cities like Houston or LA, car-dependent) is going to become a serious threat to productivity in the coming decades, and raising Uber prices may be an early (possibly very early) sign that it's time to think about improving them.
Questions:
Is this Uber price increase going to affect your usage of the service?
Do you think EV sales will stall?
What do you think is next for transportation in America?
Sources:
https://www.cnn.com/2022/03/12/business/uber-gas-prices-surcharge/index.html
https://businessnewsanalysis.com/uber-is-rolling-out-a-fuel-surcharge/
https://www.axios.com/electric-vehicle-sales-expected-surge-2022-91bee1e9-6d82-4da8-b254-27a61eef17a4.html
2 comments:
I think that the Uber price increase would affect the usage of the service. I personally do not use Uber because I have a license and a car, so it would only be a waste of money for me. However, before I had my license I would often need a ride after volleyball practice as my parents were at work. I think that those Uber rides were already pretty expensive, but because I didn’t have any other form of transportation that would be as fast, I paid the money. I think that because the service has become so popular, widespread, and fast, the small increase in price will not affect most of the people who take uber. Just like Darshan said, I think that those who are less wealthy are not paying for the service in the first place because of how expensive it already is. According to gallup, Americans with higher incomes are more likely to use ride-sharing services. Therefore, I believe that few out of the many who use Uber will stop using the service as many have the money to pay the extra 55 cents. I also agree that further increasing the prices will cause many to dislike using the service, but places where we live and many other cities without great public transportation will probably bite the bullet and use the service anyway. I would like to improve public transportation in our area. While we do have a train and bus system, it isn't the best as it is often slow and often doesn’t take people close to their intended destination.
https://news.gallup.com/poll/237965/snapshot-uses-ride-sharing-services.aspx#:~:text=Forty%2Dfive%20percent%20of%20adults,likely%20to%20use%20the%20services.
Personally, I don’t use Uber, so my usage of the service won’t be affected. But, I do think that the rise in price (if it stays for a long time) will eventually affect the quantity of Uber services demanded. Like we’ve been learning in Econ, some goods and services are more elastic than others, but time also affects elasticity. Since there are some other options for transportation, such as public transportation, I would assume that Uber services are at least relatively elastic. Although the change in the quantity demanded might not happen right away as people will still be transitioning to using other cheaper services, I think the quantity demanded will eventually decrease with time if this surcharge stays or grows. I also do think and hope that electric vehicles will be more common in the future. They’re more environmentally friendly than traditional gasoline cars and, like mentioned in the blog post, seem cheaper to maintain once someone actually buys the car. Especially with government incentives, I feel that people who are on the border of deciding to get a gasoline or electric car will opt for an electric car.
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