End of the road for Uber?: Uber struggles to meet post-pandemic demand
November 25, 2021
3 min read
What's going on here?
Uber is facing a driver crisis as it struggles with competition and a collection of shortages.
What does this mean?
Following a spike in demand, Uber is under pressure to tackle a shortfall of 20,000 drivers ahead of the festive season. The severity of the crisis was highlighted by the Uber CEO, Dara Khosrowshahi, travelling to London to make a personal appeal to drivers. In a speech delivered to drivers, he said “we need more of you, so tell your friends!”.
Uber is often featured in the news for controversial pay and working conditions for drivers. Drivers whom Uber, until recently, consistently refused to recognise as employees. To see our article on the Supreme Court’s ruling click here. In an effort to tempt drivers onto its platform, Uber has raised driver pay in London by 10% and has stated it would hand out bonuses of £500 for drivers who refer friends on to its platform. However, drivers are not the only ones that Uber is failing to keep happy.
Not so long ago, Uber was held to be the future of transport. Yet, consumer complaints against the ride-hailing platform are beginning to stack up. Customers are complaining that Ubers cost more than the taxis they replaced, take far longer to arrive, and consumers are experiencing repetitive cancellations. As a result, Uber is beginning to lose the core features which first made it such a popular concept.
What's the big picture effect?
This story encapsulates the issues not only faced by Uber, but those ongoing issues currently relevant to a range of industries. To an extent, Uber’s crisis is a microcosm of issues facing the UK economy.
Demand in the industry has surged since lockdown restrictions have abated. Transport For London figures demonstrate that people are still cautious about taking public transport as travel in London is only back to 70% of pre-pandemic levels. People are also keen to make up for time spent indoors and socialise. In most cities, demand for ride-hailing services has exceeded pre-pandemic demand by 20%.
This increased demand for services seen in the aftermath of the pandemic has left Uber desperately struggling to hire more drivers. Since Brexit, many European drivers have returned home and this has severely impacted Uber’s pool of drivers. As we have seen, this has been an influential factor for a number of industries recently. Hence the introduction of temporary working visas for HGV drivers, poultry farmers, and pork butchers.
The pandemic had significant ramifications for the private hire industry. According to the Licensed Private Hire Car Association, 160,000 out of the 300,000 drivers in the private hire industry have left since the beginning of the pandemic. Not all of Uber’s one-time total of 70,000 drivers have returned to the platform. At least 10,000 of these drivers are inactive, many drivers have made permanent switches to food or package deliveries, and coronavirus restrictions have also prevented some drivers from returning to the UK. This has left the industry staggeringly unprepared for the spike in demand post-pandemic.
Additionally, operating costs only continue to increase. Certainly, the fuel crisis has made petrol dramatically increase in price. But the price of cars has also increased. This makes the entrance cost for becoming an Uber driver more expensive. Currently, the combination of these two factors makes becoming a driver uneconomical.
Although Uber has enjoyed dominance over the market share almost since its inception, competition is becoming increasingly fierce. Bolt, a similar ride-hailing platform, has recently let its drivers set their own prices. This effectively helps their drivers counter increasing operation costs. Whereas with Uber, the prices are based on an often opaque algorithm. James Farrar, a former Uber driver, said Uber is “offering fares at a price that the driver is not prepared to accept”.
Ultimately, Uber are at risk of losing the dominant market share that it has enjoyed for so long. Time will tell whether the incentives offered by Khosrowshahi are enough to address the driver shortage. Drivers are currently a finite resource. Past disregard for ‘employees’, alongside Brexit, the pandemic, and increasingly competitive pay rates will all continue to contribute to Uber’s crisis. The future for Uber is looking distinctly less promising.
Report written by William Sutcliffe
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