While there is reason to be optimistic about the overall economics of using EVs in ride-hailing as I discussed in my last post, the transition will occur too slowly without concerted actions by ride-hailing companies to support a driver transition to EVs, which I will cover in this blog post, or direct intervention by policymakers at the city and state level, which I plan to cover in my next post. With ride-hailing trips being shown to emit more emissions than trips in personal vehicles, and carbon emissions from the transportation sector proving hard to reduce, there is no time to waste.
Even in California, the leading EV market in the U.S., electric ride-hailing is less than 1% of ride-hailing miles, and is well behind the market as a whole. This is likely because drivers face barriers to buying or leasing EVs, charging infrastructure constraints can limit the attractiveness of switching to electric vehicles, and until relatively recently, there were few vehicle options with long enough range to be attractive for drivers. Charging and vehicle options are becoming more available. However, ride-hailing companies have a critical role to play in accelerating the transition and helping make EVs an attractive and affordable option for their drivers, without placing additional financial risks or burdens on individual drivers.
As we think through what a transition looks like to electric ride-hailing, the other important thing to keep in mind is that there are several different types of drivers, and the solutions don’t need to be one-size-fits-all. Not every driver is going to be a perfect candidate for an electric vehicle in the near term, and different types of approaches are likely needed to address different situations. Some may be eager to buy an EV if the economics and logistical barriers can be addressed, while others may be interested to try one on a short-term lease. Others may just drive on a ride-hailing platform occasionally and find that a hybrid suits their needs at present.
I’m often asked, “How can ride-hailing companies electrify when the companies don’t own the vehicles?” Here are a few strategies, some of which ride-hailing companies are currently exploring, that if scaled up, can help accelerate electrification.
1. Subsidize vehicle leases and charging
It appears more and more ride-hailing drivers are opting to lease vehicles to drive for these companies rather than buy a new vehicle or use their current vehicle. This is mostly anecdotal based on conversations with drivers and the growing options to lease vehicles through services like Maven Gig, Lyft Express Drive, and others. Uber and Lyft need drivers with cars to make their business run, and not everyone who wants to drive has a vehicle that qualifies, or a vehicle that they want to use for ride-hailing. Leasing programs aim to fill the gap by providing an easy way to get access to a car for drivers. These programs typically allow drivers to lease over short time periods of days, weeks, or months as opposed to years like a traditional vehicle lease.
Leveraging these leasing programs to make EVs accessible to drivers is one strategy that Lyft and Maven Gig have been exploring. For example, Lyft announced in Fall 2019 a program in Denver to provide 200 Kia Niro for short term leases through its Express Drive program and is partnering with Electrify America to provide charging, which is included in the lease price. Maven Gig has made the Chevy Bolt available in several markets as well and also includes charging with EVgo.
An important component of these leasing programs is ensuring that drivers, who may only be leasing the vehicles for a short time, have access to reasonably priced public fast charging. This is where partnerships with charging companies become critically important. Including fast charging costs in the lease price is one model that helps assure drivers they will have predictable or fixed fueling costs. And it also helps increase utilization of existing charging assets which can be beneficial to charging companies.
EV lease and charging programs like these appear to be one effective way to encourage a segment of drivers to use an EV in ride-hailing. Learning from these current programs and scaling them up could be an effective near-term strategy for accelerating electric ride-hailing miles. The scale-up needs to be coordinated, however, as charging infrastructure availability needs to grow as more EVs are leased in a market. Ride-hailing companies can play a leadership role here in working with charging providers to build out fast-charging networks that support ride-hailing.
2. Provide direct incentives to drivers
Another approach is to provide a direct incentive to drivers who use an EV on the ride-hailing platform through a per trip or per mile bonus. This could broadly help encourage more EVs in ride-hailing and could encourage drivers who are considering buying a new or used vehicle to choose an EV. This approach doesn’t directly address upfront cost barriers to acquiring an EV or provide access to charging, so may be best suited to those drivers who have access to some combination of home and public charging. Providing some certainty or guarantee that these incentives will stay in place for an extended period of time is likely necessary for them to affect driver vehicle choices, however, as vehicle purchases require a more significant investment and are longer term than a weekly or monthly vehicle lease.
Uber announced an incentive of up to $20/week in EV ride-hailing credits in some U.S. markets with their EV Champions Initiative, along with education and outreach efforts. It is unclear how this program is performing, or if the relatively minimal incentive offered is sufficient to motivate drivers to switch to EVs or if it is mainly supporting drivers who would have brought an EV on to the platform regardless of the incentive. Learnings from this effort could inform future programs.
Alternatively, companies could also directly incentivize vehicle purchases or charging infrastructure. In London, Uber is demonstrating another approach where they have committed to electrify their entire fleet of vehicles by 2025. A £0.15 per mile fee (about 20 cents) on all trips is being used to provide funding to support drivers’ EV purchases and operation. This company commitment and subsequent fee was driven by clean air policies by the City of London. So far the fee has raised a total of £80 million. Similar programs could be established in the U.S. market to support EV adoption by drivers or to facilitate home-charger installations.
3. Driver education and outreach
A survey of drivers in Seattle by the Puget Sound Clean Air Agency found that, not unlike most Americans, “most drivers are aware of electric vehicles, but are not familiar with how they work or their benefit to ride-hailing services.” Increasing the awareness of ride-hailing drivers about electric vehicles, vehicle models available, and state, federal, and local incentives for vehicles or chargers is a role ride-hailing companies can play. There are also drivers today using their electric vehicles in ride-hailing who can offer their own insights and share their experiences with other drivers. Ride-hailing companies can clearly communicate with drivers the companies’ commitment to electrification and provide the information needed by drivers to understand the cost and benefits of driving an EV in ride-hailing. The Rocky Mountain Institute illustrated a while back that providing this information is an important step to raise awareness among current and potential ride-hailing drivers.
There are examples of education efforts like this happening, like one effort led by Forth, as part of the EV Shared Mobility Project, and supported by ride-hailing companies. Efforts like these could be scaled up, made more widespread, and improved upon as best practices are better understood. Increased partnerships with utilities may also be an effective approach for ensuring drivers have the information necessary to make decisions about home charging and to navigate utility incentive programs that may exist. Hydrogen fuel cell vehicles, as they become more widely available, are also another opportunity for future ride-hailing electrification efforts and would require similar outreach and education efforts.
4. Tapping consumer demand for EVs
Another option Lyft is exploring in some markets is allowing riders to request a “Green” ride. “Green Mode” allows riders to request an EV or hybrid for their trip in cities like Seattle. This type of request feature could help leverage consumer demand to benefit drivers who use an electric vehicle. However, there are some potential challenges with this feature, particularly if there are only a small number of vehicles available in a given market. Longer distances driven between rides (and longer wait times for riders) could result as there are fewer drivers to match with riders. Learning from early deployment of these features could help inform how best to implement them to maximize emission benefits and ensure they are providing benefits to EV drivers and encouraging EV adoption.
5. Buy EVs or invest directly in DC fast charging
Owning vehicles and charging infrastructure isn’t part of Uber or Lyft’s current business model, but it doesn’t mean that will remain the case. There could be opportunities for the companies to invest directly in charging infrastructure and electric vehicles. Automated vehicles may be a catalyst for a shift in this direction. For example, Lyft made a commitment to provide 1 billion self-driving electric rides by 2025. While wide-spread deployment of self-driving technology is still yet to materialize, ride-hailing companies are continuing to look at the technology as a means to lower operating costs. Uber and Lyft will likely need to take a different approach with self-driving cars compared to the current practice of relying on drivers to bring their own vehicles to the platform. They may own fleets of self-driving vehicles or perhaps partner with companies operating self-driving car fleets to run on the Lyft or Uber platforms. In either case, introducing self-driving cars into ride-hailing is an important opportunity for expanding ride-hailing electrification – whenever the self-driving car revolution arrives.
New mobility companies like Uber and Lyft are continuing to evolve and innovate, adding new app features, getting creative with rider incentives, and developing various driver-focused strategies to attract and retain drivers. Some of the examples noted above demonstrate that these companies can develop innovative strategies to solve the challenge of electrifying ride-hailing vehicles. Making electrification a clear corporate priority, and committing the resources to it, will inevitably lead to new ideas and strategies being developed to tackle the increased pollution from ride-hailing trips that we see today. The last 10 years of ride-hailing has seen tremendous innovation and there is no reason to think the next 10 years won’t bring similar changes to this fast-growing industry.
What do you think? Do you have ideas on what other steps ride-hailing companies could take to accelerate electrification? Please share your thoughts in the comments below.
Ride-hailing companies have a critical role to play in accelerating the transition to EVs
Company actions are going to be critical to address climate pollution from transportation, and ride-hailing companies need to step up. Both Uber and Lyft have made stated commitments to support EVs in ride-hailing and taken some important steps exploring different strategies. The next step is for ride-hailing companies to ramp up these efforts so that they can make real impact on the growing emissions from ride-hailing trips.
Policy makers have an important role to play as well. So in my next blog post, I’ll look at some of the ways policy makers can support a transition to electrification of ride-hailing and ensure ride-hailing is on track to be a low carbon transportation solution.