Ten years after the taxi revolution, how can Uber and others achieve self-breakthrough again?

It has been 10 years since Uber started the revolution in the online ride-hailing market. This year, they successfully IPOed and set various records with ease.

Unfortunately, only the fish knows whether the water is hot or cold. Although Uber seems to have achieved many small goals this year, it is actually having a very bad time. Their crazy expansion story can no longer satisfy investors' appetite, because after the listing, everyone's attention has shifted to profits, and huge losses are still the daily routine of Uber. Under such circumstances, Uber not only failed to set a super high issue price as expected, but its stock price has also been steadily falling after the listing, looking lifeless.

As for Uber's main competitor, Lyft, its development trajectory is almost exactly the same as Uber's.

In addition to falling stock prices and increasing losses, regulators have not spared them. Under high pressure, these ride-hailing platforms not only have to solve sustainable development issues, but also have to shoulder social responsibilities. Earlier this year, the New York government announced that it would limit the idle rate of drivers, while the California government required ride-hailing platforms to establish a formal employment relationship with drivers (in terms of cost, California's new law may cost Uber and Lyft an extra $10,000 per driver per year).

In addition, the New Jersey Department of Labor also asked Uber to pay the $650 million in employment taxes it owed. This is not the most terrifying thing. As one of Uber's main battlefields, the city of London announced that it would no longer issue new operating licenses to Uber in the future due to safety issues.

In other words, the law of too big to fail may not apply to ride-hailing platforms in the future.

In order to regain the trust of regulators and highlight their irreplaceability, the online ride-hailing industry must reposition itself, such as becoming the mainstay of solving traffic congestion and public problems (reducing the waste of resources and carbon emissions of single-occupancy bicycles). If these problems can be properly solved, hundreds of billions of dollars of value can be created, so ride-hailing platforms must work with local governments to unlock this value.

With this fulcrum, the ride-hailing platform can also go a step further, because social responsibility and profit are always closely linked. According to the established roadmap, Uber's goal is to achieve an EBITDA margin of 15-20%, so that drivers' wages can double. Obviously, it is time to put an end to the gig economy and get rid of the original barbaric growth model of asset appreciation.

Review of the first decade

Looking back, we must admit that Uber is the initiator of this "new mobility revolution" (which is still ongoing). In the past decade, this company has completely changed the landscape of urban transportation. With the help of smartphones, the ride-hailing giant has not only expanded and strengthened shared transportation, but also lowered the threshold for people to travel. It can be said that online ride-hailing, which facilitates people's access to economic and social centers, has had an absolutely positive impact on urban travel, especially in those areas where public transportation is not efficient enough. In addition, from a quantitative perspective, the online ride-hailing industry has also brought a lot of jobs.

However, these positive effects have not been widely recognized, and it’s all Uber and Lyft’s fault. In the past few years, academics have proven through research that online ride-hailing has a negative impact on traffic congestion and urban air pollution. In terms of job creation, online ride-hailing has been criticized for creating a large number of low-level freelance jobs, which not only pay little but have long working hours and no social security. In short, Uber and Lyft have expanded wildly without taking on corresponding social responsibilities.

Return to the original intention of the sharing economy

In 2016, Uber once shouted the slogan "Let more people use fewer cars". Looking back now, this slogan is still not outdated, and even more important. At present, Uber's carpooling service UberPool has been tepid. The reasons are that the subsidies given to drivers are too small and the route optimization algorithm is not in place. In general, drivers can't make money by carpooling.

In order to keep the original intention of the sharing economy, the taxi platform must hire some drivers with KPIs as employees, so that the vehicle management can fully optimize each trip to maximize the fleet revenue and better meet user needs. Under the employment model, drivers will no longer be picky about the work assigned to them, thus solving the problem of low efficiency of the existing operating model.

On the basis of optimizing dispatch, the taxi platform should promote carpooling and rethink how to serve more users with fewer cars. To achieve this, Uber must first correct its attitude and make UberPool its largest business. Studies by many experts in the field of travel show that optimizing dispatch from the perspective of the fleet and assisting users in carpooling can reduce the size of the existing fleet of the taxi platform by 5-7 times.

According to calculations by experts, this is the best solution for online ride-hailing companies to achieve a profit margin of 15-20%. Given that drivers are no longer tied to a particular vehicle under this model, ride-hailing platforms can optimize asset utilization and make money from the scale effect of vehicle access and potential fleet service providers.

Change in demand paradigm: Ride-hailing services replace public transportation

To achieve such an optimization effect, the platform needs to manage a fleet of critical size and limit competition to a certain extent. In this case, the ride-hailing platform becomes a transportation service operator and solves two most important problems: partial optimization of assets and waste of subsidy funds. Under the new model, the ride-hailing platform can make money while taking on social responsibilities, such as reducing urban traffic congestion and exhaust pollution.

It’s important to note that there are more opportunities to be unlocked by changing the paradigm. Ride-hailing companies can go a step further and license their technology to municipalities to help them modernize their travel and transportation management systems (or even unify all travel modes into one app to seamlessly manage travel and payment), which will put them at the center of greater success.

In addition to their existing core services, ride-hailing companies can also provide services for the design of MaaS platforms or simulation tools to optimize the city planning capabilities of the government. They can also play an important role in implementing congestion charges and providing additional services (such as installing air pollution sensors on operating vehicles). Clearly, ride-hailing companies can work with city governments to achieve a win-win situation.

Of course, if they want to achieve in-depth cooperation with local governments, ride-hailing platforms must make major adjustments to their organizational structure. After all, in this regard, the municipal government needs to formulate policies based on the city, and the current one-size-fits-all approach is simply not effective. In other words, online ride-hailing companies must establish strong local teams in the future and give them independent decision-making power. A change in thinking is the first step.

However, what good is our plan? The final result still depends on whether Uber and Lyft can complete the transformation in this fleeting window.