Last month, Rachael, a tech industry employee, was trying to get home from Leicester Square in central London at 4am on a Saturday. But what was once a two-minute wait for a reliable Uber cab was no more — four drivers cancelled before one agreed to her relatively short trip home. During the wait of more than 20 minutes, she was grateful that her boyfriend was with her.
A cursory scroll through social media shows this is not unusual: three girls left waiting for an hour and 20 minutes in Shoreditch, east London, before giving up, an Ontario man left stranded in the cold, and a Delhi customer suffering seven cancellations.
Across the world customers are finding Uber isn’t what it used to be. People are complaining that Ubers routinely cost more than the taxis they have so often replaced, that they cancel on customers repeatedly, and that they take far longer to arrive than they once did. The situation is often worse outside London, with no black cabs to fall back on and the traditional minicab industry in trouble.
When Uber started in 2010 — first with three cars in New York, and then officially in San Francisco, before spreading across the world — it was billed as the future of transport. And to its customers, it felt like the future: a £40 taxi trip cost £20 or even less, waits typically dropped to two minutes, there was no more waiting in drunken queues outside minicab offices, and the app let you check your route.
But in 2021 that future is looking distinctly less bright. The company has long been vilified for its pay and working conditions for drivers — whom it consistently refuses to recognise as employees — but it is now struggling to keep its customers happy too. And despite operating in more than 10,000 cities — including 19 in the UK, from London, Birmingham, Manchester and Glasgow to Stoke-on-Trent and Sheffield — Uber is still burning through investors’ cash. Could this be the end of the road?
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The pandemic has played its part, causing demand for taxis to plummet. As restrictions have abated, demand for Uber and similar services has returned with gusto — in most UK cities to 20 per cent or more above pre-pandemic levels — but not all Uber’s one-time total of 70,000 UK drivers have returned.
Many have switched to working in food or parcel delivery. Food, after all, doesn’t complain about the route and parcels tend not to throw up on the back seat. Fixed delivery radiuses mean there is no risk of a surprise cross-city journey just as a driver is hoping to go home.
“It costs money to [become an Uber driver], through licences, getting a vehicle and so on,” says James Farrar, a former Uber driver. “So once you’re out of [the job], you have to question whether you want to take those costs and risks again when the financial returns aren’t really there.”
Private hire firms, which are attracting drivers from Uber, are fighting back, but a lot of damage has been done. The pandemic has cut their workforce too. Last week the Licensed Private Hire Car Association revealed that an estimated 160,000 of Britain’s 300,000 drivers have not returned to the job. Number 1 Diamond Cars, in Middleton, Lancashire, now offers its own ride-hailing app, which has almost 10,000 registered users. “It’s very hard to compete against a multinational,” Kamran Rashid, the owner, says. “They’ve got an unlimited pot of money. It’s not a level playing field. Before Uber came, there was no way you could work across local authority borders, but laws got changed to accommodate [Uber]. What they can get away with, and the lobbying they can do — we haven’t got half of that. We’d get closed down if we tried what Uber gets away with. We’ve been crushed in the middle. Since we launched our app, we’re beginning to bring customers back, but it needs to be highlighted that local companies like ourselves are struggling.”
In many ways, the Uber model has always been based on unsustainable promises to drivers and passengers. From its launch, Travis Kalanick, the chief executive, promoted lofty visions first of the “sharing economy” and then of replacing private car ownership entirely. His brash attitude brought in the money — by 2011 Uber had raised $43 million. Just two years later, Google added an extra $250 million, at a valuation of $3.5 billion.
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When Uber arrived in a new city, it would attract drivers with a generous percentage of fares and introductory bonuses of up to $2,000 if they worked for a certain number of hours each week. Fares would dramatically undercut those of existing taxis, often by as much as half.
Uber cornered the market, convincing investors that its business would eventually become profitable, even if it wasn’t at the moment. In effect, billionaire and millionaire investors were splitting the cost of your ride with you. In the first six months of this year, it burnt through $952 million in cash. Uber won some rare positive headlines last week after posting its first quarterly profit — but there are multiple devils in the detail. The key to Uber’s apparent profitability is that it is “adjusted” profit — which includes debt interest repayments, tax, stock options and numerous other things. Even then its “adjusted” profit was just $8 million.
After a year or so of Uber being established in a city, drivers would notice the same pattern, as the ethnographer Alexandrea J Ravenelle sets out in her book Hustle and Gig. First the bonuses would dry up, then the pay rates for each trip would fall. Once drivers started to factor in the cost of hiring or buying a car (and with Uber increasing the standards it required for its cars), insurance and fuel, they often found themselves working for minimum wage or less. At the same time, customers saw introductory discounts disappear and prices increase.
Uber’s public image has hardly been a sympathetic one, either. A series of allegations about bullying, toxic culture and sexual harassment claims led to the departure of the company’s chief operating officer, chief technology officer and chief financial officer. Kalanick resigned in 2017 under pressure from investors.
More headaches for Uber came from a Supreme Court ruling in the UK this year that forced it to reclassify its drivers as workers, rather than independent contractors — meaning they became entitled to minimum wage, sick pay and holiday pay. Food delivery drivers — including those working for Uber, through Uber Eats — are still classified as self-employed.
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Farrar was one of the two lead claimants in the case. He says Uber’s model is fundamentally broken: “Uber is still disrupting the market, but it’s not letting the market function — they are terrified to put up prices because they’d lose market share.” Uber is still valued at more than $80 billion.
Where can stranded customers turn if they’re feeling let down by the company that revolutionised the way they travel? There is no shortage of rival apps. Uber has competed with Lyft since its inception; Bolt and Kapten have tried to take a slice of the pie. But users of those services have also reported a shortage of drivers.
There is no reason to think Uber’s rivals — which don’t offer a significantly different product from Uber — will hang around any longer. Your minicab office will be praying it can stay in business long enough to win its customers back.
Uber did have a big plan once to turn a substantial profit. Perhaps predictably, it involved betraying its drivers — this time, by getting rid of them. Uber bet big on driverless cars, launching a research and development effort to create its own driverless technology. But it turns out making cars operate safely without drivers is much more difficult than the optimists thought. True driverless technology is believed to be at least a decade away, and there was no guarantee that it would be Uber — rather than a bigger technology giant or a car manufacturer — that would nail it first. Uber eventually threw in the towel and sold its self-driving car research unit, leaving it with no magic bullet.
Uber has, for more than decade now, spoilt us. People have got used to being able to get home with a good expectation of safety, knowing their whereabouts are tracked by an app and registered online, with confidence it would be quick and cheap. Much of the misery experienced by customers is because they became used to that quality of service and now find it lacking — before Uber we would rarely feel sure that we could get a car at 4am without some serious planning.
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Uber’s era might prove a short-lived one. It is struggling to hire replacement drivers, and if prices stay higher it will find it has fewer customers. At some point, investors will start to notice.
Uber’s dominance of markets — and its dominance of ride hailing — has been the result of a mirage, a willing suspension of disbelief in the boring realities of the low-margin taxi business. But just like Wile E Coyote as he runs over a cliff, Uber and its investors will eventually spot there is no ground beneath them. The fall is going to come — and we’ll be left by the roadside, late at night, hoping a taxi with its light on comes by.
In response to this story, Uber said: “As the UK has opened up, demand for Uber rides has soared, with many cities now seeing demand 20-40 per cent higher than it was before the pandemic. The number of drivers working on the app today is similar to before the pandemic, however the growth in demand means that we need an additional 20,000 drivers to get service levels back to normal.”