How the Growing Convenience of 'Uberfication' Encourages One-Car Families
My auto-enthusiast wife balked when I told her I wanted to give up my car and become a one car family. As we got closer to our lease expiration, she imagined more and more extreme single car disaster scenarios. What if one car is in the shop and we both have to be somewhere? What if both kids are sick and need to go to separate hospitals?
Two cars had come to symbolize security and freedom for her. But for me, having a car was the opposite of freedom.
Ten years of navigating downtown traffic, weaving through shady parking lots, dealing with tire maintenance (San Francisco hills are killer) and paying for mystery parking tickets finally wore me down. Although I saw taking Uber to a meeting as a luxury, like a special treat I reward myself when I bring my lunch to work or skip the expensive coffee, increasingly it seemed a better option than owning a second car.
Nationally, 75 percent of working families have two or more cars, and 42 percent of all San Francisco households have two or more cars. Interestingly, in San Francisco bike commuters have increased from 2.1 percent in 2000 to 3.6 percent in 2012. Taxi and motorcycle commuters went from 1.6 percent to 2.4 percent during the same period.
Add to that Naval Ravikant’s tweet on selling his car in favor of using Uber, and the blog post “Uberdata: The Economics of Car Ownership,” both of which brought up the possibility that Uber could actually be cheaper than car ownership, particularly in urban areas. So I did some quick math and made a deal with my wife: She will have exclusive use of the family car, I will fend for myself and save money.
I had already tried to go carless back in 2005, but my early hours meant no public transportation options and spotty service from cab companies. It ended up being too stressful and difficult. But with the current availability of an army of ride-sharing services (and a later start time), I was ready to re-tackle the experiment.
I’m now three months in and I have a new life. I have more freedom, more time, less stress. I have rediscovered public transportation and parts of the city I never knew existed. While there are a few downsides, those are far outweighed by the positives. Most importantly, I’ve saved money and taken what was the fixed cost of car ownership and made it into a variable cost. So what does it boil down to and what does it mean for Uber and the ridesharing economy as a whole?
By the numbers. AAA’s 2013 study says that owning and operating a car cost the average American $9,000 a year. This is up 2 percent year-over-year from 2012 and based on 15,000/miles a year. Maintenance is up 11.3 percent year over year to $0.05 per mile; insurance is up 2.76 percent to $1,029 per year on average (with a clean driving record). Fuel costs are up about 2 percent with an average of $3.49 per gallon nationwide. Dreciation is up $3,571 per year.
A San Francisco SFMTA 2013 study shows that monthly downtown parking costs range between $180 to $700,with an average around $230 per month. The city issues 1.5 million parking citations each year, at an average of $57 per citation for a total of $89 million in revenue.
Looking back at our family finances, I realized we were averaging about six parking tickets per year, per car. This frustratingly included everything from forgetting to move the car to the opposite side of the street to wheels not being “curbed enough.”
AAA’s depreciation cost of $3,571 seemed high to me, with the average car on the road 11 years, but when you add $2,760 in annual parking, another $750 for parking tickets, registration, tax and everything else to the average US car payment of $450/month, you still come up with at least AAA’s $9,000/year.
After all the research, I decided to let my lease expire and set my annual transportation budget at $9,000 a year, or $750 a month. Lo and behold, after turning in my car, I got a rude awakening (and another potential cost savings) when I got the inevitable bill from the car company for “wear and tear.” More than $400 for miniscule dings and scrapes that are an inevitability in the city. I decided not to add it to my budget, but I have it in my back pocket in case the experiment goes wrong.
As for the experiment, here’s the breakdown.
Day 1. Woke up, pulled out my trusty phone and ordered up an UberX. $17.61 later and I was off to a good start. With two rides a day and 20 business days a month, I was on pace for $700/mos, which is $50/mos savings on my budget. This is going to be easy.
Day 2. UberX is 14 minutes away. A little bit unacceptable, so Uber Black it is. $23.21 later and I realize that two rides a day and 20 business days a month with Uber Black would have me tracking at $930 per month, which is well over my budget. That seemingly small $5 difference each way really adds up.
Day 3-5. Back on track with UberX. Surprisingly, four rides have all been in a tight range of $16.50-$18.00. I had expected much more variability based on traffic and the drivers who insisted that side streets were better than the Broadway.
Day 6. 3X SURGE PRICING!! No worries, I had prepared. Lyft it is. Hmmm…. Nearest Lyft, way across town. Note to self: Download Sidecar and Flywheel. Create Kayak for ridesharing. Walked a few blocks and caught a taxi (and, whoops! Tried to exit taxi without paying since I’m used to Uber). Twenty-five minutes and $20 later, and I head straight to buy a MUNI Clipper Pass.
Day 7. I was a little off pace at this point, and the surge pricing and longer UberX wait times were small inconveniences. Not major annoyances, but clearly required a little more planning than I had anticipated. To get back on track, I decided to take the bus for $2.00 and ~40 minutes each way.
Day 8-30. I managed to get a nice routine with Muni and Uber. If it’s a nice day outside and I have no meetings, I grab a seat in the back of the bus and answer emails. Roughly 40 minutes later and I’m at my desk with a clear inbox and head start on my day. On rainy days, or when I have time constraints, I use Uber. Sometimes, I Uber to work and Muni home or vice versa. Each Muni trip costs only $2.00, which helps me build up a substantial “Uber reserve.”
Observations from 90 days in. It is hard to save money relying 100 percent on ridesharing. However, ridesharing provides a safety net for those looking to reduce their household car ownership costs. Relying 100 percent on public transportation has its own frustrations but a mix of both can work like a charm.
The Uber brand name has become, to me, a catchall that refers to all ride-sharing services, ust like Kleenex or Xerox, or Coke in the South. The Uber brand is no longer a luxury to me and I no longer care about the distinctions between Uber, Sidecar, Lyft, Flywheel and so on. In fact, on “Uber days,” I routinely switch between ridesharing services, although Uber still maintains the best mix of pricing and availability and gets about 75 percent of my ride time. I have met more and more drivers who do the same as I and work for both Uber and Lyft.
I have met some amazing drivers. Despite its faults, Uber is giving drivers the same kind of flexibility and freedom that I value as a rider.
My transportation cost is now completely variable. With a car I was guaranteed to spend at least $9,000 per year (and maybe more if things went wrong). There was only downside, no upside. My transportation is now 100 percent variable. I had originally thought that $750 per month would be a bit of a stretch to hit but now that I’m paying attention, I realize I could cut that in half and still be stress free. In fact, after 90 days, I have spent $1,450 on transportation, which gives me a substantial reserve to Uber on rainy days or when I’m lazy. I’m well on pace to save at least $3,000 per year.
I leave my office everyday and have absolutely no idea how I will get from point A to B, but I know I will get there quickly and cheaply. Uber’s blog did not lie. My average ride is exactly in the range of $17-$23.
I have absolutely rediscovered San Francisco -- mostly by getting off at the wrong bus stops -- but it has been a great way to see things I haven’t seen before. Getting to work is now part of the fun, just like when I finally convinced my parents to let me ride my bike to school in the third grade. Whether its taking calls, listening to music and emailing, feeling like a baller in the backseat of a Black car or getting lost on the bus, getting to work is an adventure.
What does this mean for Uber and ridesharing companies? A lot has been made of Uber’s recent $18 billion valuation. Bulls and bears are lined up with arguments on either side. While my Venture Capital fund is not an investor in Uber, I am a personal fan of the service and have a vested interest in the growth of the sharing economy. As I continue my personal experiment, it seems clear to me that ridesharing is here to stay and will continue to grow.
Having spent 15 years trading on the public stock market, to me the question of whether Uber is worth $6B or $200B comes down to execution. The total addressable market and opportunity is certainly there to grow well beyond today’s valuation, but so are the challenges. Realistically, the number of commuters who could 100 percent rely on ridesharing is small and varies dramatically by country and state. In addition, Uber is unlikely to get 100 percent share of the increase for those who do make the switch.
The biggest advantages Uber seems to have are its aggressive leadership team, its cash hoard and its first-mover advantage. While in the past 90 days I have used other ridesharing services, Uber is the first place I check due to its superior availability. However, just like on movie night I check Netflix, HBO Go, Amazon Prime, etc. to see which is the best deal, I often check the rideshare competitors. I have also met multiple drivers who arbitrage between the services, checking for fares on both Uber and Lyft applications. So, while its true that I have potentially gone from spending ~$500/year on ridesharing to spending $9,000 a year, that $9,000 will most likely be split amongst Uber, public transportation and other rideshare companies.
The opportunity for Uber competitors lies in their ability to own individual markets as driver availability within six-to-seven minutes appears to be the “killer app” for ridesharing. Frequent Uber users, like me, tend to opt for UberX and the rapid onboarding of new Uber drivers means the gap between UberX, Lyft and others has narrowed. Now, I would be sold if someone made an app like Kayak that allowed me to quickly check availability of all ridesharing options and book one of the multiple services!
Downsides. While Uber Family has launched in New York, it has yet to come in San Francisco. We’ve been turned down by drivers who cannot pick up kids without car seats. Somehow, getting into a Luxor cab is safer for our toddlers than an Uber…go figure.
Surge pricing is a nasty detail that I have come to appreciate. From Uber, I get two options when I pull up the app during a surge. There is "No Availability'' or an available car that is going to cost me more than without surge pricing. As an everyday user, I would much rather see there is a car, even if I have to pay more for it.
I use Sidecar and Lyft less frequently, mostly because of the lack of availability of cars. After two days of no availability or more than a 15 minute wait, I don’t recheck for a few days. It’s like telephone latency or channel changing on your remote control. There’s an acceptable wait period for rideshare that I peg at around six or seven minutes. Anything longer requires pre-planning and that takes the fun out of it.
Much like getting comfortable putting your photos in the cloud or banking online, ridesharing takes some getting used to. Nonetheless, it’s great to have the option to give up car ownership which, unfortunately, is not even a possibility in many cities and for those who have a longer commute. Here’s hoping it becomes one.
Michael Harden is a co-founder and Senior Partner of ARTIS Ventures. Prior to joining Artis, Mike was with the CSFB Technology Group where he was one of the first mobile internet and device analysts. Mike graduated from the Lucent Technologies / Bell Labs Leadership Program and is the co-founder and chairman of Chefs Feed.