(Bloomberg) – Uber Technologies Inc. is increasing the price of some of its attractions to encourage motorists to buy tickets for which Lyft Inc.'s competition is particularly strong, according to Brad Erickson, analyst at Needham & Co.
The company's already higher minimum rate in most Lyft-served cities is "an essential tool for keeping drivers active in the densest markets," the analyst writes in a note to customers. The issue of driver recognition and compensation has been a major concern for investors in both companies.
"We think the market does not really see what Uber's driver motivation efforts really aim to achieve in the long run," said Erickson. The downside seems to be focused on increased competition and lack of demand, forcing the company to encourage its drivers to provide. However, according to the analyst, mobility services are still competing with a formidable opponent, who owns more than 100 years of car ownership. "This makes the excess supply of drivers extremely important for imposing the initial behavioral change of potential drivers."
Drivers have always been an important and controversial part of the business model. Legislation regarding "worker status", such as the recent assembly law proposal in California, could also pose a long-term threat to Uber and Lyft's businesses, said Wedbush's analyst. Daniel Ives.
The California Senate Labor Committee on Wednesday passed the so-called Bill AB-5, which was referred to the Senate Credits Committee of California. The bill may make it more difficult for businesses to qualify workers as independent contractors rather than employees. However, Justin Post, an analyst at BofA, said surveys show that 70% of drivers prefer the flexibility of being an independent contractor and working simultaneously in multiple concerts.
Uber and Lyft both made their commercial debuts earlier this year, amidst the palpable enthusiasm of investors. However, the shares did not live up to this hype. Uber's shares remain 3.1% lower than its initial IPO in May, while Lyft shares are down nearly 15% since the IPO in March.
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