Uber V/S Lyft

The 21st century came with its own set of challenges, with inflation being a major one, especially in the past few years.

Because of this, people have looked for ways to reduce their expenses however they can.

This is where ridesharing companies come into play. The spread of the internet across the globe gave rise to a concept called “ride-hailing” where people could move between places cheaper and quicker. 

Several ride-hailing companies have come to the scene since the early 2010s but the two services that have stuck around for the longest period of time are Uber and Lyft.

This has also resulted in the two companies competing fiercely with each other to get the greater share of the pie, especially in recent times.

So, what exactly is the Uber vs Lyft debate? How do the two companies operate? And why have their stocks been going in the opposite direction in recent times?

Watch this until the very end to find answers to all these questions and discover interesting details about Uber and Lyft. Let’s get into it!

Uber’s History

Uber dates back to 2009 when the co-founder of StumbleUpon, Garrett Camp, came up with an idea to introduce a transportation solution that would help people move within a city.

Camp and his friends, Oscar Salazar and Conrad Whelan, built the prototype of the mobile app called Ubercab, and Travis Kalanick, another friend of Camp, became the company’s advisor.

After a beta launch in May 2010, Uber's services and mobile application became publicly available in San Francisco in 2011. 

Initially, the app permitted users to hail a black luxury vehicle, with pricing set at about 1.5 times that of a taxi fare. In 2011, following complaints from San Francisco taxi operators, the company rebranded from UberCab to simply Uber.

In April 2012, Uber launched a service in Chicago, through which users could request a regular taxi or an Uber driver using its mobile app.

Uber launched UberX in July 2012, a more affordable option that permitted drivers to use non-luxury cars, although they still needed to possess a California Public Utilities commercial license.

In April 2013, Uber added regular drivers with personal vehicles to the UberX platform instead of only commercially licensed vehicles. But those drivers were also required to have insurance and Uber did a background check before registering them.

This model was such a huge success that Uber had expanded to 65 cities across the United States by the end of 2013. 

Uber kept on expanding its services in the following months and years. In 2014, the company introduced a shared transport service in the San Francisco Bay Area and launched a food delivery service as well by the name of Uber Eats.

In 2014, the company launched its service in China under the name Yōubù but faced tough competition there. As a result, it sold its China operations to Didi in exchange for 18% of the Chinese company.

Similarly, the company merged its services with Yandex Taxi in Russia, Belarus, Armenia, Georgi, and Kazakhstan and with Grab in Southeast Asia in 2018.

Uber acquired Careem in 2019, another ride-hailing service for $3.1 billion and is currently the top ride-hailing service in the world with operations in 71 countries and 10,500 cities!

Let’s now talk about Lyft!

Lyft’s History

In 2012, three years after the successful launch of Uber, the American market saw another ride-hailing service in the form of Lyft.

Lyft was launched by two computer programmers, Logan Green, and John Zimmer, but it wasn’t the first ride-hailing venture they initiated.

Five years before Lyft, the two programmers had launched a long-distance intercity carpooling company by the name of Zimride, which mainly was a traveling solution for college students.

In 2013, the original Zimride service was sold by Lyft to Enterprise Holdings, the parent company of Enterprise Rent-A-Car.

Lyft instantly grabbed people’s attention because of its unique marketing strategy: furry mustaches.

Drivers linked to Lyft attached the pink mustaches to the front of their cars. Not only this, Lyft also encouraged the riders to sit in the front seat and fist bump with drivers. 

The pink mustaches were eventually changed by Lyft in January 2015 when it introduced “glowstache”, which was a small, glowing mustache meant to be put on the car’s dashboard.

The reason was that riders started complaining about arriving at their destination, especially business meetings in a car that had a giant mustache attached to its front. 

Lyft expanded its operations into Canada, mainly in the metropolitan areas of Ottawa, Hamilton, and Toronto in 2017 and partnered with Allscripts the next year to help healthcare service providers book rides for patients who couldn’t come to appointments on their own.

After cars, Lyft saw potential in bike renting and acquired Motivate, the operator of Citi Bike and Capital Bikeshare, in 2018 with a plan to add 28,000 Citi Bikes across various locations.

In August 2020, Lyft collaborated with the car rental company Sixt to offer users access to rental vehicles, in return for a commission. The majority of the rental cars are owned and managed by Sixt, which operates in 85 locations across the United States.

After acquiring Motivate in the United States, Lyft announced in April 2022 that it had reached an agreement to acquire PBSC Urban Solutions, a Canadian bike-share equipment and technology supplier.

In 2024, the company announced that it had achieved GAAP profitability for the first time in its history because of the highest-ever number of riders using the service and an increase in its market share.

Going Public

Although Uber started 3 years before Lyft, both companies filed paperwork to become public companies on the same day - December 6, 2018.

Lyft’s IPO of 32.5 million shares was priced at $72 per share, which would make the company gather more than $2 billion, the highest figure in the company’s expected range.

The IPO was held on March 29, 2019, and in addition to the shares of Class A stocks the company sold nearly 5 million stocks to underminers. 

Prior to submitting its IPO application, Lyft secured $600 million in a funding round led by Fidelity Management & Research Co. in June 2018, which increased its valuation to $15.1 billion. 

Lyft may have captured market share from Uber due to a series of controversies, many occurring in the months leading up to the IPO announcement. However, in the following years, its market share dwindled to approximately one-quarter of the total.

While the IPO listing was a huge success for Lyft, the company’s stocks have seen frequent fluctuations since that day, with prices mostly going down rather than going up.

Just a few months after going public, the company saw one of its lowest points in the stock exchange when its shares traded at $44 per share.

Let’s look at Uber’s IPO listing now!

Uber’s initial public offering was expected to be one of the largest IPOs of 2019. The company did make history but in a slightly different way.

Before the company went public on May 10, 2019, some investors and experts had predicted that Uber could reach as much as $100 billion following the IPO. But the company ended up far short of that figure and was able to raise just $8 billion.

As for creating history, Uber initially offered its stocks at $45 per share. However, as soon as the stock market opened, the share price dropped 11% which was the biggest first-day dollar loss in the US IPO history!

Financials

It’s now time to talk about the valuation and revenue of both these companies!

Despite being two of the most used ride-hailing services across the globe, interestingly, neither Uber nor Lyft had been profitable until 2019.

Although Lyft’s profit margins had increased to nearly 40% when the company went public, it was still facing challenges covering overhead costs, including those associated with growth.

In 2018, although Lyft was able to make a net revenue of $2.157 billion, it still faced a loss because the net income was negative by nearly $1 billion.

The story hasn’t changed much ever in the past few years. In 2023, Lyft made a revenue of $4.4 billion which was 8% more compared to what the company made in the previous year. However, it recorded a net loss of $340.3 million. Although this figure was 5 times less than the net loss of $1.6 billion in 2022, the company’s net income was still negative.

As for Uber, in 2018 its net revenue totaled $11.27 billion, but just like Lyft, its net income was also in negative and the company was in a net loss of $1.8 billion.

The company went into loss for the following four years until 2023 when it recorded a net profit of $1.9 billion for the first time since 2018.

Growth and Market Share

Let’s now look at how these companies have expanded ever since their launch!

A month earlier, Lyft disclosed market share statistics for the first time, which showed that the company held 35% of the U.S. ridesharing market and dominated several other markets in the country. 

In February 2019, according to a Reuters report, Lyft's estimated market share was closer to 40%.

By 2019, Lyft was giving on average 10 million rides per week to its 23 million active riders. However, the number of users have slightly decreased since then with the company providing services to 22 million active riders in 2023.

Lyft may have captured market share from Uber due to a series of controversies, many of which happened in the months leading up to the IPO announcement. However, in the following years, its market share price fell.

As for Uber, the company and its stock have had a bumpy ride ever since it went public. The company lost its market share during the initial months of CEO Khosrowshahi's leadership, who is also its top shareholder.

However, Uber’s market share has remained steady in the past few years. A survey conducted by Bloomberg Second Measure in 2024 revealed that Uber's market share is approximately 76%. 

According to the company’s quarterly reports, Uber facilitated 2.1 billion trips worldwide in the first quarter of 2022 which increased to 2.6 billion trips by the first quarter of 2024.

Cost of Services

Let’s talk about how much a trip with each of these services would normally cost you!

Uber's pricing structure includes a base fare along with charges based on time and distance. The amount of fare being charged also depends on the type of vehicle and the city in which the service is offered. During peak demand hours, the pricing increases which increases the fare.

Every vehicle category has a minimum fare to ensure that drivers are compensated for their time when picking up passengers, even for short distances. In certain cities, Uber does not provide fare estimates in advance but instead determines the total cost after the completion of the ride. 

Among the available options, UberSUV is the most expensive, while UberX offers the most affordable rates.

According to a study by MSN, an Uber ride that cost $30 in 2020 now costs $31.5, which is a 5% increase in average fare in four years.

As for Lyft, there was a jump in prices when COVID-19 restrictions were eased out in 2021. Between January 2020 and July 2021, the average costs for ride-sharing services rose by 50%, reaching an all-time high.

Like Uber, the fare in Lyft varies depending on location and the type or category of vehicle service selected. For instance, according to Lyft, the fare in New York City is $1.82 per mile or $0.78 per minute for its standard Lyft service.

Lyft fare includes a base rate for each ride, along with additional calculations for the total distance covered and the duration of the trip. If you book a ride in peak hours or if the rider makes any changes to their trip during the ride, it also affects the total cost of the trip.

Controversies

Over the years, both Uber and Lyft have found themselves at the centre of several controversies including disregard for local regulations, sexual harassment and safety concerns.

Starting with Uber, the company has been repeatedly accused of starting its operations in new cities without any regard for local laws and regulations. Whenever it was criticised for disregard for regulations, Uber played the victim card and sought public support for its services.

The company is also known for hiring lobbyists and initiating political campaigns to change any regulations that might become a hurdle in its operations. Wherever Uber has been asked to follow regulations for taxi services, it has argued that those regulations are non-binding because it’s a technology company.

In 2014, regarding picking rides from airports in California, Uber told its drivers to ignore local laws. Not only this, it also assured that if any driver received any citation, the company would pay for them.

Similarly, in 2019, when California Assembly Bill 5 was passed, Uber said that it would not abide by the law and then hired lobbyists to get the bill overturned through a vote. In the past 15 years, Uber has never lost any lawsuit in which taxi companies were the plaintiffs.  

Several sexual harassment incidents at Uber have also come to light in recent years. 

On February 19, 2017, former Uber engineer Susan Fowler revealed on her personal website that a manager had sexually harassed her, and another manager threatened to terminate her employment if she continued to report the incident. It was reported that Kalanick, the then-CEO of the company, was aware of these complaints.

On February 27, 2017, Amit Singhal, Uber's Senior Vice President of Engineering, was forced to resign after he hid a sexual harassment allegation against him when he was the Vice President of Google Search.

Uber has also been accused of violating different privacy regulations. 

In January 2024, the Dutch Data Protection Authority imposed a fine of 10 million euros on Uber for breaching privacy laws concerning the personal information of its drivers. According to the authority’s report, Uber’s terms and conditions didn’t clearly specify that time for which the company keeps personal data. 

Seven months later, in August 2024, the company was fined 290 million euros by the same authority for unlawfully transferring the personal information of European drivers to servers in the United States, violating the GDPR or General Data Protection Regulation.

Lyft has also faced several controversies since its launch.

In 2019, over 34 women filed lawsuits against Lyft in the United States, claiming they were raped or assaulted by Lyft drivers. They argued that the company failed to ensure their safety and that Lyft attracts drivers who are predators and harassers. 

Several women also claimed that even after notifying Lyft about their harassment and rape incidents, the company didn’t take any strict measure and continued allowing the involved assailants to drive with Lyft.

Over the years, Uber has also tried to make Lyft seem like a controversial ridesharing service, but the company has managed to avoid most of those controversies.

In 2023, Uber and Lyft reached an agreement to pay New York drivers a settlement of $328 million following an investigation by the state attorney general into a wage-theft allegation. According to the complaint filed, the companies were taking different taxes and fees from drivers instead of passengers.

Uber was to contribute $290 million, while Lyft would pay $38 million into two funds set up for approximately 100,000 current and former drivers in New York State. However, neither of the companies acknowledged any wrongdoing in the settlement.

Who is Winning?

It’s time to answer the big question now: Who between Uber and Lyft is winning at the moment and how does their future look?

Both Lyft and Uber announced that the companies saw significant growth in the second quarter of 2024. According to the numbers released by Uber, its ride-hailing delivery trips grew by 21% compared to the previous year. As for Lyft, the company said there was a 15% increase in its rides, including bike and scooter rides.

Despite coming into the market three years after Uber, Lyft has proved itself as a strong competitor of Uber. However, the company has failed to expand beyond the North American market compared to Uber that operates in dozens of countries and thousands of cities across the globe.

Uber has also expanded in terms of the services it offers. From food to package delivery, the company offers a more diverse set of services to its users. Lyft has also launched similar services in recent times but it has only been playing catch-up with its rival.

The companies have also been working on adding electric vehicles and robotaxis to their operations. 

On July 31, Uber revealed its plans to introduce 100,000 EVs to the global market in collaboration with BYD, an electric vehicle company based in Shenzhen, China. However, these vehicles might not be introduced in the American market because of a 27.5% tariff which might be increased to 100% when former President Donald Trump begins his second term in 2025.

Lyft plans to have 100% of its vehicles to be electric by 2030. The company also intends to use autonomous vehicles or AVs in future.

Currently, investors are likely to pay a higher price for Uber’s share compared to its competitor’s stock. The reason is simple: Uber is enjoying a bigger piece of the pie in the market and is considered the industry leader by many.

Having said that, Lyft’s potential should not be ignored either despite the current value of its stock, because the company’s shares seem to be undervalued at the moment.

Outro

So, which of the two companies would you invest in? Do let us know in the comments section below! And before you go, don’t forget to hit the like and subscribe buttons and press the bell icon. See you in the next video!