Startups Uber, Lyft, and Sidecar Are Revolutionizing Transportation

Joe Goldman |

The unstoppable duo of the smartphone and digital distribution app store opened up endless opportunities for companies to innovate and users to make their lives easier. With smartphone users able to do just about anything on their phones nowadays, consumers are always craving the next big thing.

Transportation on-demand, one of the app store’s more brilliant, lesser-known innovations, could be that next big thing. The concept is both simple and brilliant; smartphone users simply open an app, tap a button, and are picked up by a personal driver within minutes.

There are a number of exciting startups in this young, rapidly growing transportation industry, all of which present moderate distinctions of the same revolutionary concept.

Uber

The Product

Uber, a San Francisco-based startup, is “everyone’s private driver.” The Uber app, available on iPhone and Android, connects passengers with drivers of luxury vehicles. Riders simply open the Uber app, tap “set pick-up location,” and Uber sends a car from a driving service within minutes - no phone call required.

The transaction is entirely cashless because Uber stores credit card information and the pre-factors the tip into the price. The app also comes with a fare splitting feature, which enables passengers to evenly split a fare between multiple accounts, avoiding the hassle of IOU’s between friends and awkward “we don’t have enough to tip you” scenarios.             

Passengers can choose to get a ride in an uberX, which is comprised of fuel-efficient mid-sized cars and is the cheapest option, or opt to ride in style with UberBLACK (typically a Lincoln Towncar, Mercedes-Benz S-Class, and the like). Six-person SUV’s are also available. Uber rougly takes a 20-percent cut of the total revenue for each ride.

The Vibe

Uber is the ultimate way to get a fancy ride on a moment’s notice. UberBLACK and UberSUV drivers are formally attired, always polite, very accommodating, and professionally trained. The company is associated with both luxury and convenience, and presents unparalleled “cool” factor. Just ask rapper Wiz Khalifa.

Fares (excluding wait times and traffic delays, based on LA fares)

uberX: Mid-range cars

·      $3.50 base + $2.75 per mile

·      Minimum Fare: $8.00

UberBLACK: High-end sedan or SUV

·      $7.00 base + $4.00 per mile

·      Minimum Fare: $15

UberSUV: Seats up to six people

·      Base Fare: $15.00 + $5.00 per mile

·      Minimum fare: $25.00

By comparison, Yellow Cab in Los Angeles has the following rates:

·      $2.85 base + $2.70 per mile

·      Minimum fare from LAX: $15

A 10-mile trip in Los Angeles, for instance, would cost a passenger $31.00 through uberX or $47.00 through uberBLACK. Meanwhile, a yellow cab would cost approximately $36.00 including a 20 percent tip. Thus, Uber is not only competitive with taxis from a pricing perspective, but also offers convenience, luxury, and a superior overall transportation experience.

Growth

Uber has recently focused its growth efforts on international expansion. The service is now up and running across the globe; Uber is now Sydney, London, New York, Honolulu, Amsterdam, Los Angeles, Mexico City, Milan, Paris, etc.

However, now that Uber is basically everywhere, the company is exploring other, more innovative ways to grow. On July 19, the company launched Uber Ice Cream in a number of cities, empowering customers to order six ice cream sandwiches for $36, hand-delivered from a fleet of commissioned ice cream trucks.

Whether Uber Ice Cream was a one-time deal or a sneak peak at a new, delivery-based business idea for all things on-demand is entirely up for debate. Uber also offered UberCHOPPER for one day between New York and East Hamption for a flat rate of $3,000. Could private jets be next?

Finally, Uber has also revealed plans to move into ridesharing  For more on this concept, read below.

Ridesharers: Lyft and Sidecar

The Product

Lyft is a ridesharing startup that heralds itself as “your friend with a car.” Similar to Uber, passengers request a Lyft through their smartphone and are picked up at any given location in a matter of minutes.

The difference between Uber and Lyft, however, is that Lyft is a peer-to-peer ridesharing company that connects passengers who need a ride with drivers who have a car. Drivers are normal people looking to earn some cash and meet new people, and are entirely unassociated with driving or taxi services.

Anybody who is at least 23 years and owns a car (2000 or newer) can register to become a driver. Lyft drivers can make up to $35 per hour and are provided with up to $1,000,000 of liability coverage. They are also given Lyft’s signature pink mustache to wear on their car upon approval.

The Vibe

Passengers are encouraged to sit in the front seat of the car, change the radio station, adjust air conditioning settings, spark conversation, charge their phone, and have a more casual, personal relationship with the driver.

To sum up the difference between the two companies, Lyft drivers offer a fist bump to their customers while Uber drivers hold the door open and present a firm handshake. One necessarily isn’t better than the other, but is rather a matter of personal taste.

Fares

Lyft recommends a donation based on the length of the ride, although it’s completely up to the passenger how much to pay.

However, cheapskates beware. Both drivers and passengers receive ratings at the end of the trip. Thus, Lyft drivers may choose to avoid passengers who leave frugal donations.

Growth

It appears that Lyft’s growth strategy is centered on expansion into new cities. Currently, Lyft is only San Francisco, LA, San Diego, Seattle, Chicago, and Boston, but the company has had raging success in every market it has entered. Thus, national and global expansion is surely in the cards.

Sidecar

Sidecar, another ridesharing startup, offers a similar service, but prides itself on an entirely different mission. “Our vision is to build the largest social transportation network in the world.”

Sidecar distinguishes itself from Lyft, therefore, by matching drivers and passengers rather than dispatching assignments. Sidecar considers location, destination, peer reviews, and other factors when connecting drivers and riders. Think of it as Lyft meets Match.com.

Sidecar currently operates in San Francisco, Seattle, Los Angeles, Philadelphia, Austin, Boston, Brooklyn, and Chicago. Expansion into additional cities is currently in the works.

Startups Face Ongoing Legal Battle                                     

In June of 2013, the Los Angeles Department of Transportation issued a cease and desist order against Uber, Lyft, and Sidecar, claiming the companies are operating “unlicensed commercial transportation service in the City of Los Angeles in violation of Los Angeles Municipal Code.” According to CNET, the companies were ordered to halt all operations immediately. Other cities have taken similar action.

However, Uber, Lyft, and Sidecar vehicles are permitted throughout the state of California, so the companies opted not to comply with the cease-and-desist. The legal battle will likely continue to fight its way through municipal bureaucracy and, despite ongoing pressure from taxi companies, Uber, Lyft, and Sidecar are safe for the time being.

The Bottom Line

Uber, Lyft, and Sidecar are in the process of transcending transportation. They present disruptive technologies that could eventually dispose of the old-fashioned, outdated taxi system. Although legal hurdles persist, these companies are on tap for enormous, extended periods of growth as they expand into new markets and continue to innovate.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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