The Rapid Rise and Future Outlook of the Ridesharing Industry

Ridesharing services like Uber and Lyft have become fixtures in cities across the globe, transforming urban transportation and generating over $100 billion in market value. However, the industry remains relatively young, facing regulatory uncertainty, safety concerns, and an unprecedented crisis in the COVID-19 pandemic. Where is ridesharing headed next and how will emerging trends shape its future?

An Industry Disrupts Urban Transportation

Ridesharing took off in the early 2010s as smartphone apps allowed riders to conveniently hail rides from nearby drivers. By effectively operating as on-demand taxi services, companies like Uber, Lyft, and China‘s DiDi Chuxing (founded in 2012, 2015, and 2012 respectively) quickly amassed millions of users and billions in venture capital investment.

Uber alone has given over 10 billion rides worldwide since its launch, with an estimated global market share of 37.2% as of early 2023. In the U.S., it commands 71% of the rideshare market.^[1] The ease and affordability of app-based rides has made ridesharing many users‘ preferred transportation option for everything from daily commutes to late night trips home.

The rise of ridesharing reflects some key advantages over traditional taxis:

• Convenience: Rides can be requested instantly 24/7 via app with ease. No phone calls or waits required.
• Transparency: Apps provide details on driver ETA, ratings, vehicle, price estimates, and trip routing.
• Cost: Algorithmic pricing bases fares on supply/demand, making rides cheaper than taxis in most markets.
• Tracking: Apps allow riders to share trip details and GPS locations with friends for safety.

By 2017, ridesharing trips had overtaken traditional taxi rides in major American cities, disrupting a decades-old transport industry.^[2] And this was only the beginning…

Table 1. Ridesharing Market Size Data (Global)

Data sources: MarketsandMarkets, MMR

COVID-19 Pandemic Devastates Ridership

Ridesharing reliance on dense urban areas and social activities proved to be Achilles heel when the COVID-19 pandemic hit in 2020. Lockdowns, remote work shifts, and health concerns practically evaporated demand as personal vehicle ownership suddenly seemed safer.

Uber alone saw ridership plunge 80% in April 2020 compared to the same month in 2019.^[3] Uber and Lyft stock prices followed suit, falling 33% and 23% respectively from January to mid-March 2020.^[4]

Both companies resorted to large-scale layoffs of 14% (Uber) and 17% (Lyft) of their workforces that spring to offset losses. DiDi and other services faced similar crises globally.

Many questioned if app-based ridesharing could survive COVID‘s disruption of urban transportation habits. Some analysts projected that the industry could take years to return to pre-pandemic demand levels, if ever.

Figure 1. Uber‘s Decline In Rides During COVID-19 Outbreak

Data source: Uber Q1 2020 Earnings Report

Thankfully for ridesharing companies, however, signs of recovery emerged in 2021 leading to revised outlooks. Uber‘s gross bookings rose 57% year-over-year (YoY) and Lyft‘s ridership increased 44% over 2020 figures.^[5] While still below pre-COVID levels in many markets, demand has recovered more strongly than expected.

Business travel lagging perpetually likely caps growth projections, but observed shifts towards more varied post-COVID transportation mixes bode well for ridesharing‘s role overall. Strong signs of adaptation and resilience suggest this young industry could be past its biggest crisis.

Table 2. Pandemic Impacts on Major Ridesharing Companies

Data sources: WSJ, TechCrunch, Bloomberg

Signs of Recovery and New Directions

Adjustments during the pandemic may also strengthen future outlooks for major players like Uber and Lyft. For instance:

• Partnerships: With public transit agencies to cover first/last mile connections could make ridesharing a Levtransit complement rather than pure competition. Early data shows public transit ridership improves in cities with ridesharing availability.^[6]
• New offerings: Things like subscription passes (Uber One) and discounted shared rides could boost affordability and options for diverse use cases from daily commutes to weekend outings. Lyft‘s purchase of Motional‘s self-driving tech division also signals moves into automation (see more below).
• Delivery partnerships: With services like Cornershop, Uber Eats, and acquisitions like Postmates give companies alternate revenue streams outside pure ridesharing that could subsidize expansion.

Despite the crisis induced by COVID-19, ridesharing companies have shown remarkable resilience. Their continued recovery and adaptations signify an industry with staying power, though uncertainty still looms in the years ahead.

DiDi Dominates China but Faces Challenges Abroad

While Uber is the rideshare leader globally, China‘s homegrown Didi Chuxing actually provides the most rides worldwide across its platforms in China, Latin America, and Australia.

Valued at over $56 billion with 500 million users,^[7] DiDi gave 10.7 billion rides in 2018 alone. Its Chinese market share exceeds 95%, where it‘s essentially the default rideshare app integrated into other popular platforms like WeChat.^[8] DiDi Express, DiDi Bus, DiDi Designated Driving, and DiDi Enterprise services also showcase its versatility.

However, DiDi has faced setbacks internationally. Its 2021 IPO attempt in New York was thwarted by Chinese cybersecurity regulators. Concerns around data privacy, national security, and anti-competitive behavior have hindered expansion efforts into Europe and South America as well. Accusations of illegal operations forced DiDi to withdraw from the UK completely in 2022.^[9]

DiDi‘s size and influence in China itself remains formidable. But questionable business practices, government scrutiny, and protectionism all cloud its global ambitions. This leaves room for Uber to continue leading across Europe, the Americas, and Africa in the medium term.

Table 3. DiDi‘s Global Ride figures vs Uber (2021)

Data sources: Help Lama, Uber Newsroom

Lingering Regulatory and Ethical Concerns

Ridesharing‘s labor practices have stirred controversy since its inception, however. The contractor designation of drivers as independent workers rather than employees has drawn criticism from drivers and regulators alike.

With contractors lacking benefits and protections that employees receive, Uber and Lyft have battled lawsuits and legislation across North America, Europe, and Asia seeking to force reclassification.

For example, Italy‘s Supreme Court ruled in 2020 that Uber riders were employees under certain conditions, entitling them to greater benefits and rights.^[10] Germany, Spain, South Korea, and most recently the Netherlands have introduced similar rider reclassification bills and legal challenges.

Opponents argue the contractor model deliberately exploits people by avoiding paying minimum wages, leave time, healthcare benefits that full-fledged staff would receive. Supporters counter that the flexibility and independence afforded to drivers makes gig work preferable for many.

Beyond labor concerns, safety issues around passengers and drivers have also persisted, especially around sexual assault and harassment incidents in vehicles. High profile cases have led to calls for more thorough driver vetting and tracking improvements via apps to protect vulnerable groups.

How companies handle these ethical issues around labor rights and user safety may significantly impact future public sentiment and regulatory landscapes in key regions. Failure to address systemic concerns could further empower disruptive competitor services with alternative models.

Autonomy and Electrification Will Shape the Future

Ridesharing‘s future also depends heavily on adapting to emerging transportation trends like automation and electrification. Leader Uber bolstered its autonomous vehicle capacities by acquiring self-driving technology company Motional in 2020 for $4 billion.

Motional claims fully autonomous commercial operations at scale could emerge around 2025-2027 given latest advancements.^[11] Since ride hailing‘s proven popularity makes it an ideal early use case, Motional‘s robotic taxi services could someday displace significant personal car ownership – at least in urban centers.

Uber also agreed to a strategic partnership General Motor‘s self-driving car subsidiary Cruise in 2021 to eventually operate an autonomous ridesharing fleet.^[12] Alphabet‘s Waymo and Amazon‘s Zoox present rival challenges however, with both testing autonomous ridesharing features in Phoenix, San Francisco, and Las Vegas.

On electrification, Uber has committed to becoming a zero-emission mobility platform across North America, Europe, and Australia by 2030, and worldwide by 2040.^[13] Lyft made similar pledges to reach 100% electric vehicles on their network by 2030. Transitioning vast driver fleets to EVs in under a decade is daunting though, and will require substantial public-private coordination and investment.

Government partnerships and regulations around zero-emission transit will likely shape how "green" ridesharing can truly become. Given Uber and Lyft‘s ambitious timelines however, they will serve as key test cases for decarbonizing mobility systems worldwide.

Final Thoughts on the Future: Convenience is King

No matter what innovations emerge, the basic human need for convenient, affordable urban transportation underpins ridesharing‘s rise thus far. And with 60% of the world‘s population forecasted to inhabit cities by 2030 (up from 56% today), demand fundamentals remain strong.^[14]

Ridesharing has undoubtedly begun changing urban landscapes already. The billions of venture capital poured into this sector underscore investor confidence that disruption has only just begun.

Uber‘s potential to leverage its vast rideshare network for autonomous EV delivery could be a game changer, as just one example. And if subscriptions allow ridesharing to more directly displace personal car ownership, transformations of traffic, parking, urban planning norms could follow.

Legacy automakers also can‘t be counted out from attempting to compete in this space even as they partner selectively with ridesharing today. Volkswagen, Toyota, GM, and others have the resources and electric vehicle ambitions to launch rival mobility services.

The staying power of human behaviors and preferences should not be underestimated either. Ridesharing achieved scale and sticky user bases by appealing to convenience-seeking urbanites. While commuting declines or autonomous transitions could pose some threat to volumes, ridesharing‘s adaptability and anthropological value bode well overall.

Ridesharing is therefore likely still in the early stages when it comes to changing how cities move.

Table 4. Ridesharing Industry Projections

1. Ride Share Statistics 2023. Zippia. https://www.zippia.com/rideshare-statistics/
2. Schaller, B. (2017) Unsustainable? The Growth of App-Based Ride Services and Traffic, Travel and the Future of New York City. http://schallerconsult.com/rideservices/unsustainable.pdf
3. Isaac, M. (2020, May 7). Uber Sales Fell 80% as Pandemic Hit Ride-Hailing Business. The New York Times. https://www.nytimes.com/2020/05/07/technology/uber-rides-coronavirus-earnings.html
4. Feiner, L., & Novet, J. (2020, March 18). Uber stock drops below $20, a level not seen since its IPO day. CNBC. https://www.cnbc.com/2020/03/18/uber-stock-drops-below-20-close-to-ipo-price.html
5. Alejandro de la Garza (April 12, 2022). Americans Took Nearly 2 Billion More Uber and Lyft Rides Last Year as Travel Rebounded. Time. https://time.com/6169875/uber-lyft-rides-rebound-2021/
6. Walker, J. (2021). Early Evidence Suggests Uber Serves Transit Deserts. Manhattan Institute. https://www.manhattan-institute.org/early-evidence-suggests-uber-serves-transit-deserts
7. Yip, J. (2021, April 30). Didi Said to Look for $60 Billion-Plus Value in U.S. IPO. Bloomberg. https://www.bloomberg.com/news/articles/2021-04-30/didi-is-said-to-weigh-60-billion-plus-value-in-u-s-ipo
8. Kharpal, A. (2020, March 26). How Didi Chuxing became a $56 billion company. CNBC. https://www.cnbc.com/2019/03/26/how-chinese-ride-hailing-firm-didi-chuxing-dominates-uber.html
9. Lopez, M. (2021, August 26). Chinese ride-hail giant Didi to delist from UK stock exchange and cease operations. TechNode. https://technode.com/2021/08/26/didi-global-delist-london-stock-exchange/
10. Santini, G. (2020, May 29). Uber drivers are workers not self-employed, rules Italy’s top court. Reuters. https://www.reuters.com/article/us-uber-court-italy-decision/uber-drivers-are-workers-not-self-employed-rules-italys-top-court-idUSKBN2351D9?edition-redirect=in
11. Hawkins, A.J. (2021, November 10). Uber’s robotaxis expected to arrive in 2025 and undercut human drivers on cost. The Verge. https://www.theverge.com/2021/11/10/22769844/uber-robot-taxi-arrival-cost-human-drivers
12. Burgess, M. (2021, July 19). GM will provide the batteries for Cruise‘s all-electric robotaxis. TechCrunch.
    https://techcrunch.com/2021/07/19/gm-will-provide-the-batteries-for-cruises-all-electric-robotaxis/
13. Felix Richter (September 27, 2021). Uber Sets An Expansive Goal For Electrifying Its Fleet. Statista Infographics. https://www.statista.com/chart/25246/ev-commitment-by-ride-hailing-firm/
14. Ritchie, H., & Roser, M. (2019). Urbanization. Published online at OurWorldInData.org.
    https://ourworldindata.org/urbanization