An electric Uber cruises in Kiev
Last week, Uber
The problem of course, is that Uber doesn’t own the cars in its fleet. It has to convince Uber driver/owners to switch to electric cars. In my earlier article, “Why isn’t your Uber electric?” I outlined some of the barriers to this. After all, electric cars are much cheaper to operate — cheaper energy, lower maintenance — than gasoline cars, so people driving all day get an obvious financial win by driving the lowest operating cost cars around, even though the cars today are expensive. Here are some of the problems and what Uber might be able to do about them.
One of the dark secrets of Uber/Lyft is that many drivers are not fully savvy on the math of operating their car. They may make about $1.50/mile they drive, but some of them only look at the raw operating cost — gasoline — and figure they are getting good pay for their time. The problem is that fuel can be just a quarter or even less of the cost of running a car. They might figure, “sure the car is depreciating and maybe I have to take it in for service more often” but they don’t see those costs while they drive. It’s a win for Uber to have drivers think they are better paid than they are. It’s also partly true, in that some of the depreciation is just by the year, and the owner/driver is already taking that upon themselves even if they don’t drive.
All of this goes away if the driver has to rent or lease a car just for gig-driving. Then they get a monthly bill for the car that includes everything and will compare it to what they made and how many hours they worked (or sat idle waiting for rides.) As many studies have pointed out, that’s not so nice a number, though it’s still a job.
That makes it challenging if Uber hopes to get around the barriers to entry that come from having to get a new electric car by renting cars to drivers. They won’t see it as a win, even if it is one.
New, expensive cars
One of the biggest problems today, which goes away in time, is that electric cars today have expensive purchase prices, and the long range cars are all new — ie. not available cheap in the 5-year-old used market. Even though the operating costs justify this higher purchase price, for lower income people this is a classic problem — they can’t always afford to pay extra now to save money in the future. Uber can fix that with financing plans and other incentives. In addition, by 2025, we should see new electric cars that compete with gasoline on initial purchase price.
The related problem is that EVs are new. Your Uber is rarely a new car. In fact, the smart thing to do is have a richer person eat the first four years of depreciation on a car, then buy it used for the sweet spot of 4-10 years of age. (After that, repair costs can start to climb, though maybe not on electrics.) Uber could help by creating a used market in sweet-spot EVs just for electrics. By 2025, there will be lots of 5 year old Teslas and tons more by 2030.
Unfortunately, EV buying comes with some risk. It’s a rapidly changing technology. The hot EV of 2021 may be viewed as obsolete in 2025. Still perfectly serviceable but greatly diminished in value compared to the hot new models that, unlike gasoline cars, are radically different from their 5 year old cousins. That’s good for buying on the used market, but makes purchase of a new one come with a risk that only higher income people can take.
As I outlined earlier, many Uber drivers commute into cities from quite some distance away. That’s not a great option in an EV, even if you do have charging at your distant home. You arrive for work with a low battery.
No charging at home
Sometimes there is EV charging on the street, but it’s rare, and what if you don’t get it one night?
One huge barrier to EVs is that ride-hail drivers, again in the lower strata of income, often don’t own a parking space where they can have home charging. Home charging is essential to cheap operation of an EV. If you charge only at pubic high speed charging stations, you pay 3 to 4 times as much — more than the cost of gasoline in the Prius which is one of the most popular cars for ride-hail. Today, a cost conscious EV drive needs charging at home or the office. The other big advantage of home charging is it happens while you sleep — in other words, it takes zero time from your day. If you have to charge while on the go, you have 30-60 minutes of downtime. It’s true that everybody needs a break, so they can handle that, but not the price of expensive daytime electricity at a high-cost fast charging station. Even drivers who can charge at home may need a recharge mid-day if they are doing lots of highway rides.
What needs to change? More charging stations for people who don’t own homes or parking space, located in the apartment blocks they live in. Lower cost fast charging stations, subsidized by ride-hail companies for those top-ups and breaks. Uber could put money into that. In addition, if things go as many expect, by 2030 there may be so much solar power in some places that daytime electricity becomes cheap rather than expensive. (Electricity from 5pm to 9pm will still be very expensive but cars can avoid charging then.)
The sweet time to charge will be 9:30am to 11:30am — lots of solar, low power demand on the grid and low ride demand, with a similar period from 1:30 to 3. But that’s a pretty short window. Fast charging stations need to operate on a more balanced schedule. Nobody wants to charge at peak ride demand times like rush hours and lunch rush.
Extra fee for EV ride
It will be interesting to see how many people elect to pay the $1 extra for a Green Uber. I suspect it might be common on long rides, less common on short $7 rides. While EVs are quieter, they are not that different for passengers, so this is more of a feel-good fee. (They are much more fun to drive, which can actually be distressing to the passenger.) Having a per-ride incentive is backwards. The EV costs much less to operate, that’s the per-ride incentive to the driver. It’s the purchase and above logistics where the barriers lie.
Self-driving
Of course, by 2030, many companies — including Uber — have plans to have wide deployment of robotaxi fleets. The lower total cost of electric is a win here which needs no incentives. Fleet operators care about only total cost. While robocars can be built on gasoline powertrains, most expect they won’t be by this point. This replaces the current model of owner/driver, of course. Fleet vehicles will recharge themselves at fleet stations, probably with some automatic plug-in or failing that, plug jockeys.
The robotaxi price won’t start out super cheap, but it should be heading there by 2030 once there is competition in a city between two large robotaxi providers. Only a few cities will have that in 2030, however.
When it comes to the robotaxis, it will be much easier to keep the promise to go electric.
