How Uber and Lyft Are Losing the Race to the Electric Future
When Curt Kinder bought a new electric Chevy Bolt three years ago, he wanted an excuse to drive it as often as possible. “It’s so smooth, quiet and agile,” he said.
So the 55-year-old electrical engineer and business owner in Jacksonville, Florida, signed up to become one of the first electric vehicle owners to drive for Uber and Lyft. Like any curious engineer, Kinder kept a meticulous spreadsheet of income and expenses for all of his 6,000-plus ride-hailing trips. He quickly realized an important truth: It's more profitable to operate an EV than a gas-powered car.
Kinder spends about $5 per day on electricity to charge his car. Paying for enough gasoline to cover hundreds of miles each day would cost about $18. That $13 difference amounts to over $3,000 per year that goes right into his pocket.
Uber and Lyft are hoping this favorable math, combined with small additional incentives, will draw hundreds of thousands of EV drivers into their service over the next few years. Under fire for their enormous carbon footprints, the ride-hailing giants last summer set a 2030 deadline to transition entirely to electric vehicles in North America and Europe.
But a close examination of early efforts to transform the ride-hailing fleets reveals a tentative and incomplete approach, with sloppy execution that’s on pace to fall far short of these goals. Today, a miniscule 0.5% of ride-hailing vehicles in the U.S. are electric, according to clean-energy research firm BloombergNEF, trailing the 0.7% of EVs in the country’s passenger vehicle fleet.
By the end of the decade, only a quarter of new car sales in the U.S. are expected to be electric. For ride-hailing fleets to be entirely electric by then, they’ll have to somehow go from lagging behind the broader U.S. market in EV adoption to outpacing it by a factor of 10.
A central challenge is that Uber and Lyft pay their drivers so little money: Most drive only part time and earn about $13 per hour after expenses. Few of them can replicate Kinder’s cost savings because they can’t afford to get into an electric car in the first place. Although plummeting battery costs and generous government subsidies have driven down prices, EVs still cost several thousand dollars more than comparable gas-powered vehicles.
Despite the heftier price tags, Uber and Lyft are putting little to none of their own capital into helping drivers afford the higher upfront cost of these cleaner vehicles. Uber announced last year that it would provide $800 million in support to help “hundreds of thousands of drivers” worldwide transition to electric cars by 2025, but this sum comes mostly from the discounts Uber negotiates with automakers and charging companies, as well as additional fees it charges riders in certain cities. Lyft, meanwhile, offers no financial incentives for drivers to switch to EVs.
“We’re seeing no evidence that the ride-sharing companies are making an investment in drivers to help fund a transition to electric vehicles,” said Sam Appel, a policy manager at BlueGreen Alliance, a nonprofit group focused on environmental and labor issues.
This raises a big question about ride-hailing companies, which were once celebrated as the on-demand future of transportation. Can an industry that emits more heat-trapping gases than entire countries such as Switzerland or Sweden thrive in a low-carbon future? With recent commitments from U.S. President Joe Biden and the European Union to halve emissions within a decade, there’s a growing risk that the ride-hailing companies will cement their status as climate culprits. “It’s a bit of a nail-biter moment here,” said Saul Lopez, e-mobility manager at Transport & Environment, a Brussels-based nonprofit that has pressured Uber and its competitors to cut emissions.
The ride-hailing companies readily acknowledge that economics will have to improve for their drivers to afford zero-emission cars. “Money is going to be required,” Adam Gromis, Uber’s public policy manager for sustainability said in an interview earlier this year. “There’s a financial gap that drivers face, so we need to put real resources on the table.”
The sums needed to nudge the ride-hailing industry towards electrification will be enormous. BloombergNEF puts the total at $14.6 billion in investment—by the companies, automakers and governments—just to make EVs the most economical choice for ride-hailing drivers in the U.S and Europe by 2025. That gaping need dwarfs the comparably tiny amounts promised by the ride-hailing companies.
Both Uber and Lyft describe their role as just one part of a broader push to spur more interest among drivers, with a need for automakers, charging companies and policymakers to step in. “We’re asking for help,” said Gromis. “We’re asking for partnership; we’re asking for governments and industry partners to wake up and say, ‘Look, this is possible, but it will take our utmost.’” Sam Arons, director of sustainability at Lyft, expressed a similar sentiment: “No one entity can solve the transportation emissions problem by themselves.”
The pressure on the ride-hailing industry has escalated in recent years, with mounting evidence that these companies create surprisingly outsized environmental impacts. Researchers from the University of California, Davis, found that about half of all ride-hailing trips fit into two climate-damaging categories: displacing cleaner forms of transport, such as public transit, walking or biking; or encouraging car trips that otherwise wouldn’t have happened at all. Meanwhile, ride-hailing drivers spend about 40% of their time motoring without passengers, adding to the industry’s pollution.
All told, each ride-hailing trip causes about 69% more greenhouse gases than the trips they displace, according to a report last year from the Union of Concerned Scientists.
Uber’s carbon footprint is only getting bigger. The company has built a booming food-delivery business whose gross bookings eclipsed passenger fares last year during the pandemic. The company is now expanding its deliveries from restaurants into supermarkets, pharmacies, parcels and other goods. As Uber Chief Executive Officer Dara Khosrowshahi told investors last year: “Consumers are quickly becoming accustomed to the magic of having anything delivered to their door in half an hour.”
This “magic” has a huge carbon footprint, of course, yet Uber excludes delivery trips from its 2030 goals. The company said it will reduce its delivery emissions to net zero by 2040 without disclosing its plans. “One hundred percent of their platform should be included in their EV goal for that goal to have integrity,” said Elizabeth Sturcken, managing director of the Environmental Defense Fund. (Lyft, by contrast, does not operate a delivery service, so its 100% EV target represents its entire operation.)
The ride-hailing companies have a history of making environmental pledges that later go unheeded. Uber set a two-year goal to eliminate diesel-powered cars from its network in London by 2019. That was also the time frame for electrifying 10% of its fleet in Portland, Oregon. Today, Uber still has diesel cars in London, and the company won’t disclose data on EVs in Portland. Lyft’s co-founders wrote in 2017 that it was aiming to “dramatically reduce carbon emissions from the transportation system,” and that it would provide 1 billion rides per year in self-driving electric vehicles by 2025—an increasingly implausible scenario.
While getting large numbers of low-paid drivers into pricier electric vehicles is a major hurdle, such drivers as Curt Kinder who manage the switch can make thousands of additional dollars each year. “It’s worked out great for me,” said Kinder, who concedes he’s one of the few ride-hailing drivers who could afford to spend upward of $40,000 on a new vehicle.
Uber took aim at these economics when it made its latest green pledge in September 2020, introducing a new year-long incentive that pays EV drivers an additional $1 per trip. But the company has struggled to execute this program and went months without paying some drivers the zero-emissions incentives. When drivers called the company’s driver-support center to inquire about the missing payments, they were rebuffed by staff members who seemed unaware of the incentive. As Bloomberg Green first reported in March, Uber blamed the missing payments on a “technical error” and said it impacted only a small number of eligible drivers. Uber went on to pay 110% of the owed money; in one driver’s case, the total exceeded $1,000.
But the problems weren’t over. More EV drivers subsequently reached out to Bloomberg Green over missing payments, setting off a further series of inquiries followed by payments from Uber.
This isn’t the first time Uber has faltered with a program meant to support climate-oriented goals. Beginning in 2018, it ran an 18-month pilot program with the Sacramento Municipal Utility District, which paid EV drivers an additional $2 per trip. According to the utility’s final report, obtained through a public records request, some drivers reported difficulties “signing up [for] and receiving the $2 incentive.” Once again, Uber’s staff appeared unaware of the EV rates.
Missteps like these were enough to alienate some drivers. Anthony Henry, an Oakland, California-based driver who used his Tesla to pick up Uber passengers, said he got frustrated calling and emailing customer support and has since decided to stop driving. “I won’t play their game. It’s simply too easy for me to do something else,” said Henry.
In January, Uber made another big announcement, expanding a program called Uber Green, which allows riders to choose an EV or hybrid with a press of a button—and payment of an additional $1. The company said this green option was now available in more than 1,400 cities in North America. That may sound like a lot, but Uber Green still isn’t offered in most U.S. markets, including major cities such as Atlanta, Baltimore, Las Vegas and Philadelphia. An examination of the 266 U.S. locations listed on Uber’s cities page in late April shows the green option is available in only 43 of these markets.
“We know these are big goals with lots of work ahead of us,” said Uber’s Gromis. “While we've made some good progress in the last seven months, we expect bumps along the way and will learn from them as we go.”
If anything, though, Uber’s commitment has sputtered just when it needs a boost. For the past two years, Uber’s most ambitious EV incentive program has been in London, where the ride-hailing giant vowed to transition all of its cars to electric vehicles by 2025.
To encourage this change, Uber began helping drivers save up for an EV. The company created its so-called Clean Air Plan, which initially charged all London riders an additional 15 pence (21 cents) for each mile. The funds went into an Uber-controlled account for the drivers, who could then put the accumulated money toward the cost of an electric car. Uber estimated a full-time driver would accumulate 4,000 pounds ($5,500) in just a couple of years. Uber said the program has raised 135 million pounds to help its drivers get into electric cars.
This additional cash came on top of a nudge from London regulators, who exempt electric vehicles from two hefty tolls charged to drivers entering the city’s center, saving them 27.5 pounds per day. The dual incentives appear to be having an impact. Uber said 1,600 of its 50,000 vehicles in London are now electric, more than twice its total from a year ago. While that increase is noteworthy, it badly trails Uber’s initial interim goal of putting 20,000 electric vehicles on London’s streets by this year.
Instead of ratcheting up its incentive even further, Uber has done the exact opposite. On May 4, the company slashed its London EV incentive by 80%, to just 3 pence per mile. In a press release, the company said it would now focus on helping its drivers use their accumulated funds to purchase an EV, but it didn’t explain its reasons for gutting the incentive.
Tom Millen, who bought an electric van last fall to drive for Uber in London, estimates the change will cut his pay by 70 pounds per week. "The 15 pence doesn't even come out of their pocket, so it's pointless why they dropped it," he said.
Even some Wall Street analysts believe the company could be far more aggressive, increasing EV bonuses to as high as $5 per trip over the next several years, while still turning a profit since much of that cost is shouldered by customers. “There’s definitely room to add incentives in the short term,” said Ygal Arounian, a research analyst at Wedbush Securities.
Despite Uber’s missteps, its efforts easily outpace those from Lyft, which offers no financial incentives for EV drivers. In 2019, Lyft announced a “green” option in Seattle and Portland, allowing customers to request a low-carbon or no carbon ride. But it has since paused the offering in Seattle and hasn’t expanded it to other markets because drivers with EV and hybrid cars are too few and would result in long customer wait times.
Lyft’s main focus remains on achieving a 2019 goal to ramp the number of electric vehicles that it rents to drivers on a weekly basis. Nearly two years later, the company still offers a total of only 300 EVs for rent at three of the 26 rental locations it operates around the U.S. Arons, Lyft’s director of sustainability, said the company is planning to add more EVs “soon.”
Uber and Lyft aren't alone in their struggles to green their fleets. Ola, one of India's biggest ride-hailing companies, pledged to have 1 million EVs on the road by this year; a spokesman said in an email that the company doesn't have enough EVs to provide an update. Cabify, which operates in Spain and Latin America, has vowed to move its entire fleet in Spain to EVs by 2025, but the company says the number is currently about 1%. And Grab, which operates in eight countries in Southeast Asia, has set no EV goals.
One major company has made the transition quickly. In China, a whopping 21% of the ride-hailing fleet is electric. Beijing-based Didi Chuxing Technology Co., the world’s largest ride-hailing company, has about 1 million EVs on its network, with a goal to hit 10 million by 2028, according to David Xu, Didi’s head of strategy. It’s achieved this without offering incentives to drivers. At least 22 major cities in China, including Shenzhen and Guangzhou, have singled out ride-hailing vehicles for much stricter requirements, often mandating that new ones be electric or use some other form of zero-emission propulsion.
Some policymakers in the U.S. are taking note. California recently began implementing its Clean Miles Standard, which will set yearly greenhouse gas targets for Uber and Lyft. The companies will have to eliminate virtually all of their California emissions by 2030.
State legislators in Washington are pursuing similar rules that would also mandate pollution cuts from the ride-hailing companies. Liz Berry, a representative from Seattle who has spearheaded the efforts, said Uber and Lyft have supported this legislation. But she’s trying to make sure the companies live up to their promises. “That’s really good you’re saying you’re going to do these things,” she said, “but let’s make sure you follow through on that commitment.”
©2021 Bloomberg L.P.