Electric vehicle sales have enjoyed significant growth over the past decade, including a massive 81% increase from 2017 to 2018, and much of this growth can be attributed to Tesla, which currently owns about 60% of the US market. The problem is that many drivers cannot afford to purchase one of these luxury vehicles, and even lower-cost EVs still come with higher sticker prices than gas-powered cars. That may be about to change, however. With ride-hailing companies Uber and Lyft pledging to go fully electric, EVs should soon be made more accessible to a broader demographic.
On June 17, Lyft announced that it plans to electrify all of its cars by 2030, including the ones owned by Lyft and those privately owned by its drivers. Uber followed that unprecedented announcement on September 8, pledging that it too would shift to 100 percent electric vehicles in the US, Canada and Europe by 2030, and by 2040 in the rest of the world. These services have already provided 5.5 billion rides to more than 50 million people, and they are only continuing to grow. Making the transition to electric will eliminate millions of tons of greenhouse gases from the atmosphere, but the overall impact of this shift will be even more far-reaching.
Lyft has been exploring sustainable transportation solutions for a couple of years now. In 2018, it implemented a program to buy carbon offset for the rides organized on its platform. It then added a “green mode” to its app, which allows drivers to rent EVs and riders to request rides in EVs.
Uber has also taken part in the electrification movement since 2018, when it launched its “EV Champions” initiative to electrify its fleet in seven US cities. Additionally, the company committed to helping London drivers transition to zero-emissions vehicles by 2025.
This new promise from both companies to adopt fully electric power presents a significant new challenge, however. Most cars within their networks are privately owned by their drivers, many of whom operate at relatively low margins. Uber and Lyft will not be buying new cars for all of their drivers, so how exactly do they plan on getting 100% of them to purchase EVs within the next 10 years?
Uber hopes to incentivize its drivers to make the transition by offering them an additional $1.50 per trip if they drive an electric vehicle. Fifty cents of that $1.50 comes out of the passenger’s pocket, so Uber is not only relying on its drivers to make the transition, but also on the social responsibility of its customers, who must be willing to accept slightly higher prices to propel this shift to electric. To help facilitate this transition, Uber has committed to investing $800 million in resources, but will this be enough to compel its drivers to purchase vehicles that often cost 50 percent more upfront, even if they are cheaper to operate in the long run?
Lyft may have the solution to this high entry cost. The platform has not announced any plans to offer its drivers more money for trips completed in EVs. Instead, it is working with policymakers and partners, including the Environmental Defense Fund (EDF), to expand the EV infrastructure and make the transition more cost-effective and profitable for its drivers. The company does not plan on disallowing its drivers from using the Lyft platform without an EV, which means it is wholly confident that its drivers will see the value in transitioning themselves, and it plans to lean on the lobbying power of the EDF to lower the upfront cost of EVs and expand charging infrastructure.
Whether or not Lyft and Uber actually achieve 100% electrification by 2030 and 2040 respectively, which some are calling a lofty goal, their initiatives are a win for both the environment and the EV industry as a whole. Now, even people outside of the ride-hailing business who have considered making the switch to electric but have been deterred by the cost or the lack of available charging stations in remote areas may be able to do so. As new drivers both on and off the platforms adopt electric technology, lower-cost EVs should take increased market share, and Uber already has plans to work with General Motors and Renault-Nissan to offer buyers attractive deals.
Perhaps even more significant, however, is how many new people will be exposed to EVs by hailing rides who would not have been otherwise. Uber completes approximately 15 million rides per day and has 75 million active users, all of whom are expected to be riding in electric vehicles by 2040. Lyft provides over a million rides per day and has 30 million active riders. Considering there are currently just under 6 million electric vehicles worldwide, ride-hailing electrification will increase the number of people who ride in EVs by more than tenfold.
Widespread electrification is on the horizon, but it will require the collective action of major ride-hailing platforms, drivers, and patrons of these services. Lyft and Uber are taking initiative. The rest will rely on the social responsibility of customers and policymakers.