Social distancing has gutted the sharing economy, dealing a blow to Uber, Lyft, their employees and the millions of drivers around the world who depend on social closeness to earn an income.
Uber is cutting about 3,700 workers from its customer support and recruiting teams. That’s 14 percent of Uber’s 26,900 employees, CNBC reported. It’s the largest round of layoffs to date for a San Francisco company during the coronavirus epidemic, according to San Francisco Chronicle.
Uber’s ride bookings have fallen 80 percent from a year ago, The Information reported. Uber tried to compensate by expanding its delivery business, launching two new services — Uber Connect and Uber Direct. But rides have historically been the largest part of Uber’s business.
Just three months ago, Uber was projecting that it would reach first-time-ever profitability by the end of 2020. Not going to happen.
There are 3.9 million Uber drivers worldwide and 1.4 million Lyft drivers. Uber’s market share of the U.S. ride-hailing market is estimated between 65 percent-to-69 percent, according to Business Of Apps.
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Tom Millen, an Uber driver in London, stopped driving because he didn’t want to catch the virus. He was earning about £1,200 a week on Uber before the virus. Now he’s doing deliveries with Uber Eats and grocery chains. “I’m barely earning £100 (about $125) a week,” he told Wall Street Journal.
Uber’s main rival, Lyft is cutting 17 percent of its workforce, trimming salaries and putting some employees on unpaid furloughs.
Spending on Uber rides fell 85 percent the week of April 20 in the U.S. compared with a year earlier, according to research firm Edison Trends.
Uber was the most expensed vendor by U.S. business travellers in Q1 2019, accounting for 12 percent of the total transactions made.
An increase in the Uber Eats food-delivery business could soften the blow. Bookings of Eats deliveries are expected to increase 42 percent in the first quarter from a year ago, according to the average estimate of analysts surveyed by FactSet.
There’s more bad news for the ride-sharing business model in California, where the attorney general sued Uber and Lyft for misclassifying its drivers as independent contractors. If Uber loses the lawsuit, the company will likely be forced to give California drivers new benefits including minimum wages and reimbursement for operating costs.
The Ride Share Guy estimates there were between 1.5 and 2.5 million Uber drivers in the U.S. in 2019.
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“On the ride-sharing front, Uber and Lyft face Herculean-like challenges ahead as the new reality will likely change the business models of these companies (and competitors) for the foreseeable future,” Wedbush Securities analyst Daniel Ives said.
Uber was a disappointment when it finally went public in May 2019, Market Insider reported. Shares fell as much as 8 percent in the first day of trading, wiping out $655 million-plus in investor wealth. Investors worried about Uber’s inability to turn a profit and at the end of 2019, Uber had lost 34 percent.
Shares were up 17 percent year-to-date in early January, before coronavirus hit the U.S.
Uber shares are down about 3 percent and Lyft shares are down 4 percent.