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You are here: Home / entrepreneur / Uber surges further ahead of rival Lyft in ride-share race

Feb 09 2023

Uber surges further ahead of rival Lyft in ride-share race

Uber is quickly cementing its rideshare dominance as rival Lyft acknowledged it would have to accept lower profits to keep from falling further behind.

Lyft shares plunged 30 per cent in after-hours trading following the results, which highlighted the growing gap between two longtime competitors that popularised ride-hailing apps and have fought one another for years over market share.

On Wednesday, Uber said that for the first time it surpassed 2bn trips globally in a single quarter, an average of almost 1mn trips per hour. Gross bookings — the total value of fares paid — in the mobility unit grew 31 per cent year on year. It has also benefited from its expansion beyond its core business into things such as food delivery, which exploded in popularity at the peak of the coronavirus pandemic and helped prop up the company while the rideshare business recovered from lockdowns.

“The pandemic’s impact on our mobility business is now well and truly behind us,” chief executive Dara Khosrowshahi told investors, saying he expected “growth and profitability” in the year ahead.

By contrast, Lyft’s first-quarter outlook on Thursday indicated it would need to eat into its own margins to match lower base fares on offer from Uber.

Forecasts for profitability, on an adjusted basis, were placed at between $5mn and $15mn for the current quarter, well below Wall Street’s expectations for around $85mn, according to S&P Capital IQ.

“This is obviously not the level of growth, profitability we are aiming for or capable of,” said Logan Green, co-founder and chief executive, speaking to investors on Thursday. “And we are laser-focused on driving additional growth and managing costs.”

A reduction in base fares was necessary to defend market share and “remain competitive”, Green said.

Seeking positives, Green drew attention to the final quarter of 2022, in which the company beat analyst expectations “We had 20.4mn active riders, which was the highest level in nearly 3 years, and revenue per active rider reached a new record,” he said.

But that performance has been heavily overshadowed by an uncertain future for the company that went public in March 2019 at a value of $24bn, but was worth $5.9bn as of Thursday’s close, before it was battered in after-hours trading. Uber is also trading well below its IPO price, 14 per cent lower than at the time of its debut two months after Lyft.

Lyft’s struggles are the most significant signal yet that a bitter rivalry, one that once defined the aggressive Silicon Valley start-up culture, has now become heavily one-sided.

Lyft’s smaller geographic spread has made its post-lockdown emergence far slower. Its strongest market, the US west coast, is still far from a full recovery, noted Truist analyst Youssef Squali.

“Lyft’s California rides business is only back to 60 per cent of Q4 19 levels, whereas Uber, in aggregate, is almost back to pre-Covid levels. That’s a huge difference,” Squali said.

These geographical limitations, plus a lack of a delivery business and other failed diversification efforts, has Lyft looking vulnerable, Squali added.

According to market research group YipitData, based on a panel of approximately 1mn US-based passengers, Lyft’s average price per mile is now in line with Uber’s. In the past it was significantly cheaper.

Seasonality will be a significant factor in the current quarter for Lyft, which operates only in North America. In the January to March period, company said it typically sees shorter trips and fewer airport rides. Its bikes and scooter businesses are also less popular due to cold and wet weather.

But that drag is only expected to account for one-third of the headwinds in the quarter, the company said. The real strain will come from the need to lower fares. And, having provided large incentive payments to lure more drivers back to the roads after the peak of the pandemic, greater supply means there are fewer opportunities to implement the higher-price “surge” pricing.

“It’s a hard position for them at a time when their biggest competitor is shining through, with a model that has proven superior,” Squali said.

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Uber surges further ahead of rival Lyft in ride-share race Republished from Source https://www.ft.com/content/7bf1364c-8bd8-4e68-b0bb-1c020a476351 via https://www.ft.com/companies/technology?format=rss

Written by Dave Lee in San Francisco · Categorized: entrepreneur, Technology · Tagged: entrepreneur, Technology

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