Uber and Lyft, the two leading ride-hail companies in the US, are back in Austin, but some ride-hail drivers say their return is cutting into drivers' earnings.
But within just a few weeks of their departure, half a dozen companies — Get Me, Dryvrs, Fare, Fasten, Ride Austin, and Arcade City — stepped in. While these replacements didn’t always work perfectly, drivers were pleased with the fact that the ride-hail newcomers charged much lower commissions than Uber and Lyft.
Fast forward a little over a year, however, and drivers are greeting Uber and Lyft’s return to Austin at the end of May with almost as much consternation as greeted the companies’ departure. While the rest of the tech world was focused on Uber’s very public unraveling during the first half of 2017, the $69 billion ride-hail giant was aggressively lobbying Texas state legislators. That effort, along with the support of Gov. Greg Abbott, led to a legislative victory that allowed Uber and Lyft to resume operating in Austin without fingerprinting drivers. On May 29, both companies turned their apps back on in Austin, and the ride-hail economy there was once again turned on its head.
In order to regain the edge they’d lost during their yearlong absence, both Uber and Lyft reentered the market at lower rates than their competitors. This has forced prices down across Austin, and ultimately — despite short-term incentives and promotions — made it more difficult for drivers to earn as much as they used to.
Drivers who spoke with BuzzFeed News estimated that their pay has been cut between 5 and 35% since Uber and Lyft came back to Austin. In the first week after they came back, the nonprofit Ride Austin estimated that driver earnings per trip fell from an average of $14.43 to about $12.70.
“Where before I was making $30 to $35 an hour, now I’m making $15 to $20 an hour, and that’s not necessarily net,” Austin driver Terry Garrett told BuzzFeed News. Garrett said that before Uber and Lyft came back, the money he was earning on Fasten was helping him support his family while he took certification classes in hopes of a more lucrative career. Ride-hail was “like a blessing,” he said, until the return of Uber and Lyft lowered fares, raised commission, and reduced surge pricing. He estimates his overall income has decreased by at least 35%.
Ride Austin driver Annabel Knight said the price cuts are less of an issue than a sudden decrease in the volume of rides. While some of that is the result of the natural summer slump that happens in Austin when tens of thousands of university students and state lawmakers clear out for the summer, the simultaneous reintroduction of Uber and Lyft has exacerbated the problem.
“I’m not getting nonstop pings anymore,” said Knight, who typically drives the bar crowds during weekend evenings. “There’s more of a lag.”
Since Uber and Lyft came back, “things have been very different,” Martin Galway, who drives exclusively for Ride Austin, told BuzzFeed News. “Ride Austin doesn't surge like it used to. So even when I'm giving a ride, there is less earned.” He said that because of Uber and Lyft’s attractive pricing and promotions, as well as the fact that tourists are more familiar with those companies, there just aren’t as many people trying to get a ride with Ride Austin, even though it lowered its per-minute rate by five cents to match those of Uber and Lyft.
Another driver, Evaristo Ramos, once commuted 150 miles from Houston to Austin every weekend to drive for Fasten, Ride Austin, GetMe, and Fare, earning up to $200 a day. But after Uber and Lyft came back, he told BuzzFeed News he quit driving in Austin altogether because he “knew it wasn't going to be very long before the locals would have to lower their rates.”
Vlad Christoff, cofounder of Fasten, the company that’s currently doing the most rides per day in Austin, estimates that the drop in his company’s driver earnings has been close to 4%. Fasten cut its per-mile rate by 10 cents just three days after Uber and Lyft came back online. “If they drop the rates, we drop rates to match them,” Christoff said.
In the three weeks since Lyft and Uber came back, competitors have taken major hits. Ride Austin, a nonprofit ride-hail app that charges no commission, lost 55% of its ride volume in just one week. In the same time span, Fare, another competitor, had to abandon the city altogether because it was “unable to endure the recent loss of business."
Some drivers, like Galway, who are trying to drive exclusively for Ride Austin, are frustrated by how quickly other drivers capitulated to Uber and Lyft. “If the Austin-based drivers didn't do this, there would be hardly any drivers [on Uber and Lyft], and riders would see long wait times, and they would seek out alternatives, just like they did before,” he said.
Knight, another Ride Austin loyalist, saw it the same way. “Drivers are the supply. If the drivers don’t drive for these terrible rates, there won’t be any supply, and people will go where the supply is,” she said.
Even with lower fares, Ride Austin and Fasten are technically still better deals for drivers. Uber and Lyft both charge a 25% commission per ride, while Fasten only charges a flat 99 cent fee and Ride Austin charges nothing.
But both Uber and Lyft have been running aggressive promotions — a $350 sign-on bonus from Lyft, an extra $75 for every 30 rides from Uber — that are hard for drivers to resist, especially when every company has started cutting prices. In the long term, the cost of those incentives will be hard to sustain for Uber and Lyft, but that won’t matter if they’re able to crush the competition in the meantime.
“It plays to their strengths to do this type of pricing war,” said Ride Austin CEO Andy Tryba. “We have no desire to engage in a pricing war because it's not one we can credibly win. They've got 12 billion dollars between the two of them. We don't.”
Both Uber and Lyft said that they’re making the driver experience a priority in their return to Austin.
“Uber offers a stable, reliable opportunity for partner drivers to earn money,” the company said in a statement. “And that’s what we are focused on: helping ensure Uber is the best end-to-end experience for drivers.” Three weeks after reentering the Austin market, Uber raised rates by six cents per mile in order to allow drivers there the opportunity to buy accident insurance, a program it’s now offering in eight states.
Lyft, meanwhile, said it’s offering drivers a number of incentives, including a Power Driver Bonus program that includes commission-free fares. “Since our relaunch in Austin we've been focused on two things — making sure passengers can get an affordable, reliable ride, and drivers can earn extra income by driving when and where they want," a company spokesperson said in a statement.
Todd, who asked to be referred to by his first name only, said he fundamentally disagrees with the way Uber does business, and that he prefers to drive for Fasten. But that hasn’t stopped him from picking up an Uber passenger when he’s got a good promotion.
“Invariably, once I start moving, going to pick up that Uber ride, I get a Fasten ride. It’s a weird choice — I’m engaged in an Uber ride, and I don’t want to cancel it, because they'll ban you if you do that too much. But here's a Fasten ride I could have gotten, and, all things being equal, you're going to get paid more on that Fasten ride,” he said. Competition is a good thing, Todd said, but at the moment it feels like drivers are getting caught in the middle.
Caroline O'Donovan is a senior technology reporter for BuzzFeed News and is based in San Francisco.
Contact Caroline O'Donovan at email@example.com.
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