COVID-19 Impacts on Shared Mobility: On-Demand Rides Shifting to Delivery Services
Four Potential Scenarios for the Future of Transportation Network Companies
Transportation Network Companies (TNCs, also known as ridehailing and ridesourcing) generate a significant percentage of their gross bookings from trips in large metropolitan areas, including trips to and from airports. For example, in 2019, Uber generated 23% of its ride gross bookings from five metropolitan areas — Chicago, London, Los Angeles, New York City, and the San Francisco Bay Area. Because the COVID-19 pandemic has disrupted operations in large metropolitan areas and demand for air travel, income for drivers and the financial performance of the for-hire ride sector are being adversely impacted.
In mid-March, Uber announced that rides were down 60 to 70% in Seattle, an area impacted early by COVID-19. Vehicle miles traveled (VMT) can be used as a conservative indicator to estimate the drop in TNC demand. For the above five cities, average VMT is 37 to 50% less than it normally was for the week ending April 13, 2020 based on INRIX data. However, TNC demand has probably dropped much more due to the drop in demand to access bars/restaurants and airports. COVID-19 has caused an unprecedented decline in commercial aviation traffic. United Airlines forecasts that it will fly fewer people during the entire month of May 2020 than they did on a single day in May 2019. Traffic on U.S. carriers was down 97% year-over-year during the 7 day period ending on April 12, 2020, according to Airlines for America (A4A).
In response, both Lyft and Uber are working with the public and private sectors to help expand delivery opportunities for drivers such as: food, groceries, medical supplies, and retail items.
Last week, Uber announced two pilot programs: Uber Direct and Uber Connect. Direct is a delivery platform for retail items, while Connect is a peer-to-peer package delivery service for sending goods to family and friends. Uber Direct is currently offering grocery and convenience store deliveries in New York City and medication delivery in South Africa. Uber Connect is available in 25 cities across the U.S. The service is also available in Australia, Costa Rica, the Dominican Republic, Mexico, New Zealand, Panama, and Paraguay. These new services will augment Uber Eats: a food delivery service available in more than 500 cities around the world. Uber has also set up a hub that includes additional job opportunities, such as Uber Freight and Uber Works. Uber Freight is a delivery service that requires a commercial driver’s license, and Uber Works is a site to refer drivers to additional shift work, such as food production, warehouse, and customer service in Chicago, Dallas, and Miami.
Lyft has also announced that it will be launching a meal and grocery delivery service. The service will be initially available in 11 U.S. cities — Atlanta, Austin, Dallas, Houston, Indianapolis, Orlando, Phoenix, San Francisco, San Diego, San Antonio, and Seattle. Over 120,000 drivers signed up expressing interest when the company began outreach in late March. Lyft has also paused hiring additional drivers and begun referring drivers to Amazon where they can apply for warehouse, shopping, and delivery jobs.
In New York City, the city is hiring 11,000 TNC and taxi drivers to deliver food to households with pre-existing conditions who are unable to leave their residence. The city will pay the drivers $15 per hour and reimburse for mileage, gas, and tolls.
These developments correspond with an overall increase in spending on meal deliveries.
According to credit card analytics from Second Measure, spending on meal deliveries increased 24% year-over-year through the end of March 2020. Second Measure estimates that DoorDash accounts for 42% of all meal deliveries, compared to 28% for Grubhub, 20% for Uber Eats, and 9% for Postmates. However, market share varies by region.
Given this growing demand for consumer deliveries, one question remains:
Will this represent a longer-term shift in business models for Lyft, Uber, and taxis?
The answer really depends on what consumer behavior looks through the post-COVID recovery. There are a few potential scenarios:
· Slow Return to Normalcy (U-Shaped Recovery): TNCs and taxis temporarily adapt to a new business model for the duration of the pandemic and its aftermath, slowly returning to pre-COVID services.
· Pooled Rides Go Away: Although Lyft and Uber have temporarily stopped offering pooled rides during the pandemic, there is a possibility that demand for pooled rides will not recover if social distancing becomes a cultural norm and/or consumer anxiety over infectious diseases persist.
· Adapting to a New Business Model: TNCs adapt to a new core revenue model, such as last mile delivery or providing subsidized services to public transportation (e.g., public transit replacement, first- and last- mile connections, low-density service, paratransit, etc.).
· Apocalypse Now: TNCs are unable to recover from the disruption of COVID-19 and the sector folds. This could be due to a drop in passenger demand (due to COVID-19 or a reduction in discretionary consumer spending, need to spend additional money on driver incentives, inability to raise additional capital and/or service existing debt obligations; and/or delays achieving vehicle autonomy due to a COVID-19 recession.
While the future is uncertain, what is clear is that the current pandemic is impacting consumer behavior and the economic outlook for the for-hire service sector. Depressed business travel, a long-term increase in virtual meetings, and continued social distancing all have the potential to significantly impact taxis and TNCs. However, with a vaccine or an effective life-saving treatment for COVID-19, the impacts of this pandemic on TNCs and taxis could be shorter lived.
About the Authors:
Susan Shaheen is a professor in the Department of Civil and Environmental Engineering and a research engineer with the Institute of Transportation Studies at the University of California, Berkeley. She is Co-Director of the Transportation Sustainability Research Center (TSRC) at the University of California, Berkeley. She also directs the UC Institute of Transportation Studies’ California Resilient and Innovative Mobility Initiative (RIMI).
Adam Cohen is a transportation researcher with TSRC at UC Berkeley. Since joining the group in 2004, his research has focused on innovative mobility strategies including: vehicle automation, smart cities, last mile delivery, shared mobility, smartphone apps, and other emerging technologies.
