Can Ride Sharing Survive Huge Losses and Lockdowns?

jeffrey lee funk
8 min readDec 7, 2020


The sharing economy was supposed to change the world. Driven by the diffusion of smart phones and new services, many expected that cars, rooms, bikes, scooters, and household items such as musical instruments, designer bags and sporting equipment would be shared at a huge level, thus reducing private ownership, and wasteful production, logistics, and energy usage[i]. But this future has not emerged, despite phones getting cheaper, somewhat better, and much more widely used.

Consider ride sharing. It was supposed to reduce ownership of private cars as people find it more economical to rely on ride sharing services, particularly as driverless vehicles reduce the cost of these services[ii]. However, urban car ownership increased between 2011 and 2017 in all surveyed cities[iii], more Americans have access to cars than in the past (percent without access fell from 9.3% in 2011 to 8.7% in 2018)[iv], and MIT does not expect driverless vehicles to be deployed on a wide scale for at least 10 years[v].

A second problem is that suppliers of ride sharing vehicles are incurring huge losses even as they have received huge amounts of venture capital funding and high valuations. As shown in the below table, none of the startups are likely profitable. Only two, Uber and Lyft, have gone public and thus regularly report income. Despite having huge losses, both exceeding Amazon’s cumulative peak losses, with Uber’s more than eight times larger, anonymous sources suggest the other ride sharing startups are also losing large amounts of money, they have huge valuations.

Uber’s share price now exceeds its share price at IPO, despite the lockdown. One headline says, “Uber shares surge to record as investors look past mounting losses and toward vaccine,” a headline that assumes Uber was profitable before the coronavirus led to lockdowns in America and elsewhere. Uber’s stock has done better than Lyft because revenues for its food delivery business have risen, yet food delivery continues to lose money.

Ride sharing startups in other countries also likely have big losses, according to anonymous sources for China’s Didi[vi], India’s Ola[vii], and Singapore’s Grab[viii]. More importantly, the large amounts of VC funding obtained by these startups suggest they have big operating losses and thus continually require new funding. For instance, Didi Chuxing has received $23.2 Billion and Grab has received $9.9 Billion in funding. Why would they need so much funding when they are doing an asset-lite business model, an oxymoron even for business models? And Grab has continued to receive funding with $6.5 Billion in late 2019[ix], $856 Million in early 2020[x], and $200 Million in mid-2020[xi], funds that are likely being used to cover losses. All total, these startups have received $77 Billion in VC funding, not counting the public funds raised by Uber and Lyft for these asset-lite business models, for a total purported valuation of $187.8 Billion.

A third problem is that ride sharing has increased congestion. best described in a February 2020 WSJ article entitled “The Ride-Hail Utopia That Got Stuck in Traffic[xii].” According to research summarized in this article, “traffic speeds in San Francisco downtown core fell 21% to 13.7 miles an hour in 2016, from 17.4 miles an hour in 2010. Over 60% of this slowdown was due to ride-sharing companies. Second, for every mile of personal-car driving ride sharing companies remove from roads in large U.S. cities, they add 2.5 miles of driving to a ride-hailing vehicle. Third, ride-sharing cars are driving with no passengers 39% of the time. Fourth, surveys in numerous cities found roughly 60% of riders in Ubers and Lyfts would have walked, biked, taken public transit or stayed home if a ride-hail car hadn’t been available.

Should the losses and congestion surprise us? Ride sharing uses the same vehicles, drivers, and roads as did previous taxi services with the major change being the replacement of dispatchers with smart phones. Thus, ride sharing does not have a productivity advantage over taxis in terms of vehicle miles per driver[xiii], a situation very different from successful technologies such as computers and e-commerce services that had huge productivity advantages over previous technologies. For congestion, transportation experts have known for decades that putting more cars on the roads of crowded cities always leads to more congestion. Even building more roads doesn’t help because the bottleneck will move to a different place. For instance, after more above-ground highways were constructed in the 1950s, 1960s, and 1970s to bring more cars into downtown areas, the downtown surface streets became more congested thus reducing the benefits of the highways providing access to downtown areas.

This emphasis on building more roads to alleviate congestion is why roads[xiv] and parking[xv] use 30% to 50% of surface space in most large cities and thus the real challenge for city managers is to reduce the need for this space. Cities have invested heavily in trains and buses, bringing some benefits, but not to the extent that probably can be achieved. One problem is the large number of regulations that cities implement. For instance, each train station, apartment, or office complex requires a certain number of parking spaces, thus defeating the original purpose of train systems.

Proponents of ride sharing argue that it and driverless cars[xvi] (and perhaps scooters and bicycles) will eventually reduce private car ownership and thus reduce the need for parking spaces and that driverless cars will allow cars to travel more closely together thus increasing the capacity of roads. Although there is some truth to these arguments, these proponents miss the fact that people will not sell their cars until ride sharing and driverless vehicles reduce congestion and become cheaper, and driverless vehicles will only enable cars to travel more closely together once most cars are driverless.

Proponents of ride sharing and driverless vehicles have distracted cities from the key issue, how to reduce congestion, travel time, and travel costs. Ride sharing should do what its name implies and increase the number of shared rides thus complementing the shared rides of buses and trains. Whether cities increase the number of people sharing a bus, van, or sedan, this type of sharing reduces the number of vehicles on the road and thus reduces congestion and travel time, important benefits to city residents.

The key is to reduce travel times for users of shared vans, sedans, and taxis below those of buses and trains while maintaining costs lower than single passenger taxis and private vehicles. Reduced travel times are necessary for convincing more people to share rides because without reduced travel times, people will probably not change their behavior.

Ironically, data is one way to do this. Although many of today’s startups, including ride sharing, food delivery, and peer-to peer loans, have built businesses on the backs of data analytics, the world’s bus companies have ignored a valuable means of choosing routes, frequencies of stops, and sizes of vehicles. For instance, the below figure shows an example of such data, highlighting the density of taxis in Singapore, and thus the likely densities of starting and ending points for rides, and where better fixed-route services can be introduced. Better is defined as shorter travel times than buses while maintaining much lower costs than taxis and private vehicles. Shorter bus, van, or sedan travel times can be achieved through both better routes and fewer stops. For instance, intermediate stops can be eliminated when there is sufficient demand for travel between two points. A full sedan (4 people) or van (6 to 8 people) easily qualifies as sufficient demand and there are probably tens of thousands of such routes in cities that have yet to be targeted. Achieving these shorter travel times will increase the number of shared rides, thus reducing congestion while lowering costs for many riders.

Bicycle and scooter rentals have also been huge failures partly because few attempted to think about how they might be integrated with public transportation. Although many cities were gradually integrating bicycles with train services in the mid-2010s, once Chinese suppliers began “throwing” them on the streets, the previous successes were disbanded, and the industry literally descended into chaos that has steadily become worse. Two of the three largest Chinese bicycle companies went bankrupt[xvii], and a third is incurring heavy losses, leaving people with useless accounts and cities with bicycles to clean up. Although the failed services have been acquired by new owners, the problems are much more complex than originally thought. For instance, bicycles must be properly maintained, they must be returned to proper docking locations, and users must be prevented from attaching locks to the bicycles.

Scooters have done better, but not by much. Accidents and maintenance problems have proliferated, partly because they are often used for pleasure more than transport, and the high speeds and tricks cause accidents to be often worse than those with bicycles. Users are forced to endure defective brakes and steering failures, problems that discourage people from becoming repeat users. Although many operators have introduced more durable scooters, this has increased the logistical problems with maintaining them as few parts are common to the scooters, thus causing the repaired scooters to be barely better than previous ones[xviii]. The results are rising costs, increasing customer dissatisfaction, a rapid decline in cities served by Bird and Lime[xix], and significant downward revisions to their valuations[xx].

In summary, today’s ride sharing startups face an uphill battle, along with car, bike, and scooter sharing, for which a total of $120 billion has been invested over the last 10 years (and $100 billion in last four years)[xxi]. Huge losses, no declines in private car ownership, and increases in congestion. Just disrupting the taxi business is insufficient; new transportation technologies must reduce the cost or increase the performance of the transportation system. Transportation experts should begin focusing on the right targets so that performance of transportation systems is improved. These targets include reduced congestion and thus shorter travel times, more person-miles per road area travelled while keeping travel times short, and/or decreasing the amount of space dedicated to roads and parking while keeping transportation times low.




















[xx] Lime’s Valuation May Fall 80% In Emergency Fundraising, Cory Weinberg · Wednesday, March 25, 2020.