Ridesharing companies Uber, Lyft, and Sidecar have dodged taxi lobbyists and overcome legislative hurdles to conquer the transportation industry. Although certain legal headaches persist, they remain full-steam ahead with their all-out assault on transportation.
Ridesharing’s next move is to tackle the very notion of car ownership, as Uber, Lyft, and Sidecar are all launching carpooling services in the coming months. Riders will have the option to be paired up with a complete stranger who is heading in the same vicinity, allowing the two people to share a ride and receive up to 40% off their fare.
All three companies already claim to offer cheaper fares than taxis, so the option to take off an additional 40% off could be genuinely game changing from a consumer perspective. Drivers will benefit as well, collecting an extra 20% for driving a carpool.
Ridesharing companies now have one penultimate goal: to create a world where individual car ownership is unnecessary. The marriage between the smartphone and the carpool is clever and will probably succeed, but that dream has a long, long ways to go before it can possibly materialize.
Potential Issues of Rideshare Carpooling
Carpooling could be an instant hit with consumers, as an extra 40% off of an already-discounted fare is too big of a deal to ignore. However, Uber, Lyft, and Sidecar will need to address these potential issues for carpooling to become a real hit.
Longer waits: Having to pick up and drop off an extra passenger could prove to be frustratingly time consuming. Travel times could become significantly longer, particularly for a passenger who gets picked up first and dropped off last. Unknown travel times could deter passengers from using the service.
Longer waits could also discourage drivers from willingly driving a carpool. The driver’s extra 20% only matters if it the drive time is about the same. This may be impossible if the two passengers are picked up and dropped off at different locations.
Cannibalization: Uber, Lyft, and Sidecar are steering away from their core business and complicating their entire operations. This isn’t to say that carpooling won’t be a hit, but it will surely take business from their single-rider operations.
This could be dangerous if one of the companies manages to launch a superior carpooling service than the other two. That particular company would emerge as the new leader in ridesharing, and the other two could fade into irrelevance having already diluted their core businesses.
Consumer experience: There’s also the awkward factor of sharing a car with a stranger, and Uber recognizes this as a potential issue. “This is also a bold social experiment,” said Uber via its blog post. “There’s the interaction between riders in an UberPool – should they talk to each other? When is that cool and when is it well, annoying? We’re going to find out how this brave new world of UberPooling works.”
Is Rideshare Carpooling it Actually Cheaper?
To figure out whether carpooling can be a legitimate alternative to leasing a car, let’s take a look at whether a 10-mile commuter from Daly City to the Financial District in San Francisco can save money by carpooling. Of course, these numbers are just ballpark approximations, but nonetheless establish a pretty strong point.
The Volkswagen Jetta, a fairly basic and popular car, currently has a lease special for $169 per month for 36-months, with $2,349 due at signing. This brings the total cost of the three-year lease to $8,433, or $2,727 per year.
The Jetta gets an EPA-estimated 24mpg in the city, but let’s bring that down to 22mpg given San Francisco’s hilly terrain and constant stop-and-go. On a ten-mile commute with gas at $4.00 per gallon and 250 workdays in a year, getting to work would cost $909 in gas annually, or $2,727 over the entire three-year lease. Let’s tack on an extra $1,200 for gas used on weekends and holidays, as well as about $120 per month in insurance.
Three-Year Lease Cost: $8,433
Three-Year Gas Cost (based on 10-mile commute): $2,727
Approximate Three-Year Insurance Cost: $4,320
Approximate Three-Year Lease Cost: $15,480
Per Year Cost: $5,160
For the exact same Daly City to Financial District commute, uberX would charge around $27 one-way. With the 40% carpool discount, an Uber carpool ride would cost approximately $16.20. At 250 workdays in a year, the total cost to commute to and from work would be $8,100 per year.
No more calculations necessary. Even without factoring weekends and longer trips, carpooling with Uber is significantly more expensive than leasing a car.
Approximate annual cost of carpooling everywhere: $12,000
$6,840 more expensive than leasing a Jetta
Great Idea, But Not Revolutionary
With these calculations in mind, it’s clear that the dream of replacing individual car ownership with carpooling is a long ways away, particularly from a financial perspective. However, this isn’t to say that carpooling won’t succeed.
People may enjoy the social aspect of sharing a ride with someone, and the 40% discount is a huge selling point. If ridesharing companies can pull off the logistical problems associated with carpooling, they could hammer the final nail in the taxi industry’s coffin. For now though, car ownership remains a necessity in most commuter cities.
What is Ridesharing, Again?
For those unfamiliar with ridesharing, the concept is simple, innovative, and cost effective. Users simply open the app, request a ride to any location, and a car arrives within minutes. Rates are usually cheaper than taking taxi, and the GPS feature of the app makes hailing a cab the old fashioned way a thing of the past.
Ridesharing companies have also become quite creative with the services they offer. Uber has tested ice cream on-demand and offered on-demand helicopter rides from New York City to the Hamptons. On Halloween in 2013, Lyft requested all of its San Francisco drivers to dress up in zombie costumes and hand out candy to passengers.
Uber is the most popular of the bunch, recently earning a $17 billion valuation based on its previous round of financing. It has also received the brunt of legislative backlash, having been served numerous cease and desist orders, as well as an outright ban from LAX earlier this year. For the most part, however, ridesharing companies have successfully dodged most of the legal hurdles thrown their way.