Uber and Lyft say they're ending services in Minneapolis over a city-mandated driver pay increase. The city council pushed through the measure to bring driver pay closer to the local minimum wage of $15.57 an hour.
As a whole, yeah, but top-line losses don’t mean each ride makes them less profitable. My understanding was their margins are slim enough they need a lot of rides to subsidize their fixed costs, so fewer rides means less profit, not less loss.
If Uber is actually profitable, stopping operations in Minneapolis really should make them less so. If this isn’t them taking a small loss now because they believe they’ll avoid a bigger loss later, I can’t make sense of it.
Yes, they could make a very tiny profit from a decently sized city, but then it might encourage other cities to follow suit.
The costs are not all fixed, covering another city means paying more support agents, having people signing up local drivers, etc. so after this change it might not even be profitable after all
If costs like support agents that scale with rides make the rides unprofitable, their business model is upside down. Especially for Uber, I’m counting costs that scale with rides with costs per ride, vs infrastructure and truly fixed costs. Maybe they’re so close to breaking even per ride that raising costs depresses demand enough to make them unprofitable, but it seems a lot more likely they’re doing this to send a message first and foremost.
As a whole, yeah, but top-line losses don’t mean each ride makes them less profitable. My understanding was their margins are slim enough they need a lot of rides to subsidize their fixed costs, so fewer rides means less profit, not less loss.
If Uber is actually profitable, stopping operations in Minneapolis really should make them less so. If this isn’t them taking a small loss now because they believe they’ll avoid a bigger loss later, I can’t make sense of it.
Yes, they could make a very tiny profit from a decently sized city, but then it might encourage other cities to follow suit.
The costs are not all fixed, covering another city means paying more support agents, having people signing up local drivers, etc. so after this change it might not even be profitable after all
That’s my point though?
If costs like support agents that scale with rides make the rides unprofitable, their business model is upside down. Especially for Uber, I’m counting costs that scale with rides with costs per ride, vs infrastructure and truly fixed costs. Maybe they’re so close to breaking even per ride that raising costs depresses demand enough to make them unprofitable, but it seems a lot more likely they’re doing this to send a message first and foremost.