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How did taxis and mobility service providers in the United States shift their focus to moving goods as an impact of COVID-19?

By Susan Shaheen and Adam Cohen, Transportation Sustainability Research Center, University of California, Berkeley

Delivery person with dolly

Photo: Elvert Barnes

Taxis and Transportation Network Companies (TNCs, also known as ride-hailing companies) generate a significant percentage of their trips in large metropolitan areas, including trips to and from airports. However, the COVID-19 pandemic has disrupted standard operations in large cities and the demand for air travel globally. Cities such as Chicago, London, Los Angeles, New York, and San Francisco are experiencing a 37 to 50% drop in average vehicle miles traveled (VMT) than what it normally was for the week ending April 13, 2020 based on INRIX data. In response, taxi operators and companies such as Lyft and Uber are working with the public and private sectors to help expand delivery opportunities for drivers such as: food, groceries, medical supplies, and retail items.

An expansion in delivery services

In April 2020, Uber announced two pilot programs, in addition to UberEats services, focused on delivery: Uber Direct and Uber Connect. Direct is a delivery platform for retail items, while Connect is a peer-to-peer package delivery service for sending goods to family and friends. Uber Direct is currently offering grocery and convenience store deliveries in New York City whereas Uber Connect is available in 25 cities across the United States. Lyft has also announced that it will be launching a meal and grocery delivery service. The service is currently active in 14 cities in the United States. Over 120,000 drivers signed up expressing interest when the company began outreach in late March. In New York City, the city is hiring 11,000 TNC and taxi drivers to deliver food to households with pre-existing conditions who are unable to leave their residence. The city will pay the drivers $15 per hour and reimburse for mileage, gas, and tolls. These developments correspond with an overall increase in spending on meal deliveries. According to credit card analytics from Second Measure, spending on meal deliveries increased 24% year-over-year through the end of March 2020.

In addition to adding the delivery of essential goods to mitigate low ridership and lowered wages, companies are sharing alternative work opportunities with drivers. Uber has set up a hub to facilitate access to additional job opportunities, such as with Uber Freight and Uber Works. Uber Freight is a delivery service that requires a commercial driver’s license, and Uber Works is a site to refer drivers to additional shift work, such as food production, warehouse, and customer service in Chicago, Dallas, and Miami. Lyft has paused hiring additional drivers and begun referring drivers to Amazon where they can apply for warehouse, shopping, and delivery jobs.

Given this growing need for goods and deliveries, one question remains:

Will this represent a longer-term shift in business models for Lyft, Uber, and taxis?

The answer really depends on what consumer behavior looks like through the post-COVID recovery. There are a few potential scenarios:

  • Slow return (u-shaped recovery): TNCs and taxis temporarily adapt to a new business model for the duration of the pandemic and its aftermath, slowly returning to pre-COVID services.
  • Pooled rides eliminated: Although Lyft and Uber have temporarily stopped offering pooled rides during the pandemic, there is a possibility that demand for pooled rides will not recover if physical distancing becomes a cultural norm and/or consumer anxiety over infectious diseases persist.
  • Adapting to a new business model: TNCs adapt to a new core revenue model, such as last mile delivery or providing subsidized services to public transportation (e.g., public transit replacement, first- and last- mile connections, low-density service, paratransit, etc.).
  • Apocalypse Now: TNCs are unable to recover from the disruption of COVID-19 and the sector folds. This could be due to a drop in passenger demand (due to COVID-19 or a reduction in discretionary consumer spending, need to spend additional money on driver incentives, inability to raise additional capital and/or service existing debt obligations; and/or delays achieving vehicle autonomy due to a COVID-19 recession.

While the future is uncertain, what is clear is that the current pandemic is impacting driver health and livelihood, passenger and  consumer behavior and the overall  economic outlook for the for-hire service sector. Continued community spread and safer-at-home policies will lead to depressed global travel, even at the hyper-local level, which has the potential to significantly impact taxis and TNCs. However, with a vaccine or an effective life-saving treatment for COVID-19, the impacts of this pandemic on drivers, passengers and consumers as well as the broader TNCs and taxis industry could be shorter lived.

Additional questions

  • In the Global South, how are taxis, mobility service providers and other mobility platform companies addressing drivers’ challenges?
  • What are long term learnings of these mobility reactions?
  • What role should/did the public sector play in addressing companies and drivers’ resilience to the crisis?