Dinner in Mestre. Amazing. #Italy – at Unico

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Yes. – at Seattle-Tacoma International Airport (SEA)

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Why UberX Is Not Sustainable

For nine years I fulfilled an obsession that began from childhood. I owned and operated a limousine service. To make a long story short, I subsidized and grew the business to a fleet of 8 vehicles, and had a mix of corporate accounts and music entertainment related clients. I closed the business in 2004 for multiple reasons, the main one being that costs to purchase/lease and insure, maintain, clean and store luxury vehicles is a very rich man’s tax write-off, at best.

I applauded a Company called Aces For Hire when they came up with a business model for towncars at taxi rates with realtime response by just making a phone call. They featured older vehicles and very casually dressed drivers, which we never allowed when we were in business. Our oldest cars were usually around 3-4 years. eventually, They had to increase rates in line with mainstream limousine businesses. So now you had a towncar service driven by artist types and alternative music people, at retail rates. Still cool though. 

Today we have apps.

Which brings me to today’s subject – UberX. I use their app constantly. Why? At an average of $9-$11 per ride in Seattle for what I do, it is fully half of anything taxis charge and I can get the car to arrive usually within 2-3 minutes. There is no “flag drop” minimum when the car begins the trip and the final charge reflects recent pricing Uber has actually reduced, in hope of adding more and more customers.

But here’s the problem. Uber has doubled drivers cost to 20% of fare. It’s the commission Uber charges for use of the service. Uber also has a maximum vehicle age inorder to participate as a driver and does not cover gas, insurance, time, etc. These things add up very, very quickly.

That $10 ride is net $8 to driver BEFORE expenses. Additionally, when that driver drops me off there is little guarantee that another customer will be there to jump into vehicle, hence a potential deadhead (empty car using gas) to get back into an area where there might be actual business to be had.

That’s a lot of driving $8 fares to cover the basics of a car’s overhead.

As a “ride sharing” concept, this could work casually as a civic minded practice. You’re going somewhere, I’m heading that way, let me pay you a little to join you. Except this isn’t what’s happening, at least in Seattle. Many UberX drivers are former or current taxi drivers who went out and bought a Prius for this gig. Some are actual limousine businesses with a couple of cars marked for UberX use.

It’s not sustainable unless millions more plan to join Uber and there are a constant stream of customers located exactly where the last customer left off to rinse and repeat. It’s not sustainable when drivers are expected to wait until you decide to come downstairs for that $8 ride.

I suspect that scale of the UberX business is taking place to show crazy number of app downloads and customer use that will appeal to Wall Street when this Company goes public. But it’s being done on the backs of these poor drivers.

Simple math and hard costs. It’s common sense. The current pricing plan is amazing for customers right now, to the detriment of Uber’s real customer – the driver.