How Lyft And Uber Are Creating Networked Consumer Car Fleets

ReadWriteDrive is an ongoing series covering the future of transportation. In December, this series is presented by Buick Regal.

The cabin of a private automobile used to be a sacrosanct personal space: an individual mobile arena that strangers might peek in, but to which they were seldom, if ever, granted access. On the other hand, cars meant for temporary use—such as taxis, rental cars, and carshare vehicles—are just generic fleet vehicles.

But thanks to shared transportation apps like Uber and Lyft, the dividing line between a private and fleet car is getting blurred. We are entering a new era of consumer fleets.

It’s a classic case of technology disintermediation. These apps put somebody who needs something, namely a ride or a car, directly in touch with somebody willing to give a ride or loan a vehicle—bypassing the taxi companies and rental agencies that used to control the transaction.

“The amount of time I’m driving around empty has gone way up, and I think most taxi drivers feel this way,” said Paul Gillespie, who has driven a cab in San Francisco since the late 1980s. He is also a former taxi commissioner.

Gillespie believes that regulations for private for-hire vehicle fleets should be firm—to make sure the cars have low carbon emissions, that they serve low income and disabled people are served, and to ensure that drivers can make a living. “But then maybe I’m just a cranky old anachronism who doesn’t get the new ‘disruptive’ economy,” he said.

Premium on Flexibility

Compared to Gillespie, Christopher Galbicsek is a newbie. He started driving a taxi in San Francisco in late 2010. About a year ago, he supplemented conventional rides in his taxi with Uber passengers.

“Before long, it seemed like more Uber customers were making up the bulk of my day. And I preferred them to rides dispatched from Yellow Cab or hails from the street,” he said. “With Uber customers, I can use the app to know the passenger will be there when I got there.” He sees the conventional taxi system as inefficient and “jerky.”

Besides, as a new father, Galbicsek wanted the flexibility to spend time with his newborn—rather than the 4 am to 4 pm shift required by the taxi company. “With Uber,” he said, “I just hop in my car, turn on my phone, fire up the app, and I’m on duty.”

Galbiscsek was also disgruntled by the gate fees he had to pay to use a car owned by a taxi medallion lease holder, which put him $125 in the hole before starting a shift. And then there was the unpleasant taxi culture that required non-stop tipping of dispatchers and car owners.

The Shift, One Car At a Time

So five months ago, Galbiscsek bought the 2010 Ford Fusion Hybrid taxi he had been driving, painted it black, and kissed the old system goodbye in favor of becoming a full-time UberX driver. He now shares 15 percent of the take with Uber, which nets out to about $25 an hour, on par with what he had been making.

And with his purchase, and his transition from employee to entrepreneur, the nation’s auto fleet has one less corporate vehicle and one more consumer car for hire.

Galbiscek shared his experience with two taxi-driving friends. They both bought cars and are now UberX drivers. Entrepreneurs are also buying cars specifically in order to offer them for rent via peer-to-peer car sharing apps like GetAround and RelayRides.

Why Fleet Cars Suck

The impact of this shift is having unforeseen ripple effects in the auto industry. Until recently, as much as 30 percent of auto sales went to fleets, including car rental companies, corporate, and government fleets.

“Auto companies have always looked at fleet sales as a safety valve,” said Walter McManus, an auto economist and principal of McManus Analytics. “If you offer incentives on a car at the dealership, all consumers benefit.  But if you can cut the price only on excess inventory, say for 10,000 units, that’s great.”

He explained that at any one time, as many as two million vehicles are sitting on dealership lots doing nothing. Historically, those cars have been essentially dumped en masse to fleets—explaining why car rental companies offer so many crappy cars. They’re the leftovers nobody else wants.

The monopoly enjoyed by taxi companies always had cracks in it. “Gypsy cabs have always existed,” McManus said. “But with distributed technology, we’re now talking about the same thing employed to completely re-organize how we get around.” In other words, the shift to smartphones allows people to use dumb assets—in this case, cars that are parked most of the time. 

A Friend with a Car

Deco Carter, a Lyft driver, echoed the same sentiment. “Lyft is a way for a person like me, just trying to provide for my family, to make money with my own car that would just be sitting there. Why not give a ride home from a bar that had a couple too many?”

Carter, a former security guard and for the past two years a stay-at-home dad, drives his Lyft car at night, after parenting duties are passed to the mother of his two-year-old son. “I never set out to be a driver,” he said. “I have a car. I live in the city. I just wanted to make some extra money.”

Carter doesn’t view his 2008 Honda Civic as a formal work vehicle the way taxis and limos work. “This is so not a taxi. Lyft is literally like a friend with a car,” he said. “Most riders just jump in the front. We do fist bumps and introduce ourselves.”

Carter lets his dynamic personality flow through to passengers, by branding himself as “HipHop Lyft.” That means a bumping soundtrack with Snoop, Tribe Called Quest and Wu Tang Clan. “I pretty much keep it classic.” Rides with HipHop Lyft might end with a shared meal, or an impromptu 3 am roadside Karoake jam.

“The number one question I get is, ‘How do I request you?” he said. At this stage, Lyft’s algorithm is designed for maximum efficiency, assigning the Lyft driver closest to you to minimize your wait. But riders can contact Carter him ahead of time via his personal Instagram and Twitter accounts, where he posts photos of his most memorable rides. A HipHop Lyft YouTube channel is in the works.

Same Laws of Business

Even if you don’t end up getting a ride from Carter, a growing number of other Lyft drivers employ themes, including LootLyft (trivia), Bat Lyft (Batman costume), and Chalkcar Lyft (art).  In this light, the car matters less than the experience.

The challenge for Uber, Lyft and other similar services is how to maintain this new value proposition even as their companies, flush with millions of dollars of venture capital, attempt to scale.

“These services will create disruption,” said Thilo Koslowski, an analyst of vehicle information and communication technology at Gartner. “But at the end of the day, companies like Uber will not change the laws of business.” Koslowski believes transportation fleets will eventually come full circle, where services like Uber and Lyft will oversee logistics in ways similar to traditional fleets.

In fact, late last month, Uber CEO Travis Kalanick struck a deal with Toyota and General Motors to offer discounts on vehicles purchases by new Uber drivers to help the company meet its goal of adding more than 200,000 vehicles to Uber’s network in the next two years.

Images by Brad Berman for ReadWrite

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