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Gig WorkersModern ShipperNews

EVs for all: What Biden’s executive order means for gig economy

Uber and Lyft account for nearly all U.S. rideshare trips, but maybe not for long

President Biden on Thursday announced an ambitious new goal for the automobile industry – for EVs to make up half of all U.S. vehicle sales by 2030. The president signed an executive order declaring the nonlegally binding milestone a priority, while also proposing new vehicle emission standards to cut pollution by 2026.

But what does this mean for the gig economy, much of which is composed of rideshare companies and drivers? It could spell trouble.

Automakers Ford Motor Co., General Motors Co. and Stellantis NV – the maker of Chrysler – released a joint statement announcing their intent to at least come close to the president’s goal, aiming to achieve “40% to 50% of annual U.S. volumes of electric vehicles … by 2030.” Uber (NYSE: UBER) and Lyft (NASDAQ: LYFT) also expressed a willingness to comply, setting the goal of transitioning entirely to EVs by 2030 in North America and Europe. The automakers are on board, the ride-hailing giants have signed off – so what’s the problem?

The paradox of EVs

Here’s a crazy stat: EVs make up a tiny 0.7% of U.S. passenger vehicles, but an even more miniscule 0.5% of ride-hailing vehicles. What’s more, for Uber and Lyft to reach the goal of their ridesharing fleets transitioning to all-electric by the end of the decade, they’d have to catch up to the pace of the larger U.S. market – and surpass it by 10 times.

The reason for this is actually quite simple; Uber and Lyft don’t pay their drivers enough to be able to afford EVs. An electric car is expensive – 10% to 40% more expensive than a gas-only model of comparable size and make – and while it can ultimately save users thousands on gas, it’s near impossible for most Uber and Lyft drivers to get their foot in that door.


Read: GM to bring electric cargo van, medium-duty truck to market

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By and large, drivers have been left high and dry when it comes to the all-electric switch. In a 2021 study conducted by Gridwise, a popular companion app for rideshare drivers, data showed that Uber drivers made about 75 cents per mile in December 2020, the most recent month for which data is available. But that same study also found that the combined costs of fuel, insurance, maintenance, repairs and depreciation add around 30 cents per mile to drivers’ expenses, a figure that was later verified by Uber’s own chief economist. And while the IRS offers some reimbursements for fuel-related costs, the company itself offers none.

Of course, EVs would help drivers offset those expenses, most of which relate to fuel. But drivers will need to be able to afford EVs in the first place, which is where the paradox lies – they’re cheap to operate but expensive to buy. Uber is taking some small steps to help drivers with the transition, such as a bonus on Uber Green trips, a zero-emissions incentive and discounts on vehicles and charging stations, but that won’t be enough to bring about the type of shift the company wants. Lyft, meanwhile, hasn’t even done that.

Uber and Lyft’s road ahead

Back in May, the companies were ordered by the California Air and Resources Board (CARB) to have EVs account for 90% of their ride-hailing mileage, but they complained that they would require more public tax subsidies to reach the milestone, despite pledging to meet a similar goal just a few months prior. Having shown an unwillingness to subsidize the cost of an EV fleet, the companies could turn to other forms of funding, but they’ll come at a steep price – it’s estimated that to meet the CARB regulations alone, Uber and Lyft will need almost $1.73 billion in funding, even when accounting for government subsidies and EV depreciation.

So if Uber and Lyft are unwilling or unable to fund a full-on electric transition, then what does the road ahead look like? Depending on how the rest of the country’s transition goes, the companies’ hesitancy to accelerate a transition could mean that they get left behind, victims of a carbon-free future. Already, passenger vehicles are skewing electric at a higher rate than rideshare vehicles. And that’s before Biden’s executive order and the anticipated billions of dollars of government funding really start to come into play.

While the companies claim to be behind the idea of an all-EV fleet, they’ll need to walk the walk. It appears that Uber and Lyft are facing yet another reckoning – either pay their drivers more or go extinct.

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One Comment

  1. This viewpoint has a number of incorrect assumptions.

    The most glaring one is that EV’s are too expensive for ride-hailing. The truth is, recent EV’s have lower total costs of ownership that is less than gas powered cars. Cars like the Tesla Model 3 have resale values that crush the resale values of gas competitors. This is important for ride hailing because the cars must be sold before they become too worn to be allowed in a ride hailing fleet. No one wants to ride in old, tattered cars. A brand new Tesla Model 3 has lost very little value after three years, that saves the fleet money. They also save huge on re-fueling expense and avoid the cost of oil and filter changes altogether.

    As an added bonus, ride-hailing customers love to ride in a Tesla. This is good for repeat business.

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