Is the Rideshare Industry Overcrowded? Is It Worth Driving for Uber or Lyft?

As the world braces for the post-pandemic era, questions arise about the viability of working in the rideshare industry, specifically for companies like Uber and Lyft. This article explores the factors that influence the decision to become a rideshare driver and whether the market is saturated.

Major Considerations for Drivers

Three key factors make working as a rideshare driver for Uber or Lyft less than financially rewarding:

Lower Demand Due to Remote Work: With many employees working from home, there has been a decline in the demand for morning commute surge rides. This has led to a reduction in ride numbers and consequently, the income potential for drivers.

Increased Driver Competition: Higher unemployment rates have prompted more people to join the rideshare workforce, which drives down earnings per ride. This increased competition directly impacts profitability for drivers.

Health Risks: There is a concern about exposure to individuals with COVID-19, especially during a period where viral transmission rates remain high in some regions.

These factors combined make it challenging for drivers to sustain themselves financially, especially during times when demand is lower and the market is oversaturated with drivers.

Global Context of Rideshare Services

It’s often said that just as there are too many convenience stores like 7-Elevens globally, other similar stores would struggle to survive. Similarly, with 2 million drivers on Uber alone, the global population of 8 billion people makes it abundantly clear that the rideshare market is not lacking in potential customers.

The core issue lies in the for-profit model of rideshare companies, which continually seek to maximize their profits at the expense of drivers. For example, driving at a rate of $1.25 per mile would likely benefit both drivers and riders, but this is not universally implemented.

Motivations and Market Dynamics

Some markets are intentionally overpopulated with drivers to exploit the referral bonus system. This strategy ensures continuous competition, which, in turn, drives down prices and profitability for drivers. The companies continue to extract more value from the system, as they earn commissions regardless of market saturation.

However, in certain markets, such as the author’s experience with Lyft in some areas, earning more is challenging due to local competition. The author notes that Uber drivers sometimes win rides first, showcasing the competitive nature of the market.

Passenger and Driver Perspectives

Passengers often assert that having a larger number of drivers is beneficial, as it helps meet the demand. In contrast, drivers frequently argue that the market is overcrowded, leading to low earnings. This dual narrative emphasizes the subjective nature of the rideshare experience.

The decision to drive in the rideshare industry depends on individual expectations and the amount of time one is willing to commit. While the per-mile earnings may not be financially lucrative, rideshare driving can serve as a supplementary source of income, much like other side hustles such as lawn mowing, snow shoveling, or pizza delivery.

Australia's Unique Scenario

One specific region that has seen a large number of drivers is Australia, with nearly 100,000 registered drivers for Uber. This scarcity of rides and abundance of drivers has undoubtedly brought down the advantage of the rideshare industry in Australia.

While the rideshare industry may offer some flexibility and supplementary income, the financial viability and the health and safety concerns prompted by market saturation and increased competition are important factors to consider when deciding to become a rideshare driver.