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February 16th, 2019

ridehail math

Ridehail being a more accurate name for Lyft and Uber than 'rideshare'.

Some people talk as if ridehail is the wave of the future, to become a dominant transit mode, despite neither company reporting profits yet. Let's see what that would be like.

The average American driver drives 15,000 miles a year. Ridehail cost per mile component is around $1. Total cost of urban trips (based on a sampling of the apps in Boston and LA) is $2-4/mile, going down the longer the drive is, maybe around $2/mile for 10 mile trips. If you replaced your car with ridehail, you'd be paying $30,000/year. Trés affordable! /s Now, maybe a lot of those miles are longer road trips you wouldn't use ridehail for, so your local driving might be 10,000 miles; that's only $20,000.

Different approach: the app prices are more constant in time units, about $1/minute. The average commute to work is 30 minutes; if you ridehailed to work, you'd be paying $60/workday, or $15,000 over 250 workdays (a year). That's just for your commute, never mind groceries, taking kids to school or things, going out...

That's all for the original product, single person on demand. If you do the Lyft Line/Uber Pool approach, that can halve costs. A mere $7,500 for your work commute! ...assuming no rush hour surge pricing. And car pooling has more time variability, of course. For the 10,000 miles of local driving, $10,000/year. Not that far from estimates of total cost of car ownership for 15,000 miles/year.

Urban car trips tend to be 15-30 MPH, I figure; 10,000 miles is 20,000 to 40,000 minutes, so $20-40K/yeared, or $10-20K pooled.

Competition is fierce, neither company is profitable, and there's doubt as to whether it's really profitable for drivers if they accounted for all costs, so prices are more likely to go up than down.

My T pass is $1014/year. Granted it's often slower (not at rush hour!) It's also 90-99% less likely to mangle or kill me, but most people don't worry about that.

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Damien Sullivan
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