Why Uber and Lyft Should Quicken Their Adoption of EVs

These days, 2030 corporate climate commitments are all the rage. Uber and Lyft have their own — both aimed at transitioning their North American ride-share fleets (with Uber adding Europe) to electric vehicles (EVs) within this decade. Lyft made its commitment a year ago in June, and Uber announced its version a few months later.

A year later, a study by BloombergNEF indicates minimal progress toward the duopoly's goal. In the United States, where ride-hailing activities are concentrated, only 0.5 percent of ride-hailing vehicles are electric — compared to the nation’s overall adoption of 2.8 percent, in part based on 2020 new car registrations.

Continuing to trail overall EV adoption in the U.S. won’t work, sister publication Bloomberg Hyperdrive notes, especially if electric car sales are expected to take another decade before they reach one quarter of the nation’s total new car sales.

Little support for drivers, few subsidies for companies?

One hiccup in the race to reach a 100 percent electrified fleet is that workers, being independent contractors, have little incentive to invest in a new car by their own volition and often don’t make enough money: an average of $12 an hour after expenses, to justify the initial payment, Bloomberg Hyperdrive explains. Of course, if a driver is able to purchase an EV, cost savings from operation can reach thousands of dollars over the lifetime of car ownership.

On that point, Uber and Lyft have been careful to call drivers contractors and not employees. The passage of California’s Proposition 22 is a good example of the stake companies in the shared economy have in keeping such workers as contractors. The ballot initiative exempted companies like Uber and Lyft from legislation that would have made drivers employees, thereby entitling them to benefits and protections such as unemployment insurance and even healthcare. The measure became the most expensive in California history, with companies spending $200 million to successfully sway voters to approve the message, bypassing a law the state’s legislature had previously passed.

Companies say they need help from governments. Reuters and the Union of Concerned Scientists have estimated that meeting the EV goal in just California would cost $1.73 billion, even when considering government subsidies and increased affordability over time. Reuters reports that Uber wrote a letter to the California Air Resources Board (CARB) last year, asserting that the board’s proposal for 90 percent ride-hailing EVs by 2030 would require “sufficient” subsidies to be feasible — even though CARB’s proposal is less ambitious than Uber’s own deadline. The rule was adopted unanimously on Thursday.

Investors aren’t budging on climate concerns, either

Not only do ride-sharing giants have incentives from California to fulfill their promises, but they have plenty of push from investors as well.

Despite Uber and Lyft’s potential to be part of a sustainable transportation system, some environmentally-conscious investors have been wary of buying in. The Union of Concerned Scientists’ February report on the industry’s climate risks revealed that ride-hailing results in 69 percent more climate pollution than the trips they otherwise would have displaced.

Investors don’t look to be letting up on their climate focus. Morrow Sodali’s 2021 Institutional Investor Survey found ESG (environmental, social and governance) issues playing an increasingly significant role in investment decisions, with climate change topping the list. Respondents report a direct connection between ESG performance along with financial success and a willingness to engage with companies on their progress.

Taking an indirect approach to the EV revolution

Thus far, Uber and Lyft aren’t making any down payments for drivers. They’re taking a more indirect approach to their goal. Uber CEO Dara Khosrowshahi told The Verge that his company may not have been the first to set this sort of goal, but his team intends to be the first to bring it to life. What Uber has been doing is implementing a surcharge for riders who request a hybrid or electric vehicle. As of now, drivers only gain an extra 50 cents per ride.

The company says it is also spending $800 million toward its own EV transition. Bloomberg Hyperdrive identifies this sum as mostly related to discounts the company negotiates with automakers and charging companies and additional fees it charges riders in certain areas. Uber has also been partnering with EV startups.

For its part, Lyft is also taking a more systemic point of view, negotiating with manufacturers and working with policymakers to expand tax credits and charging infrastructure in an attempt to make EVs more affordable and accessible to drivers. Through its Express Drive rental partner program, Lyft also rents out EVs in Seattle, Atlanta and Denver.

The company began offsetting the carbon impact of its rides in 2019, but decided to stop the program and focus on an EV transition this time last year.

Are Lyft and Uber able to live up to the promises of ride-sharing?

As Sam Arons, director of sustainability at Lyft, told TriplePundit in 2019, ride-sharing has the potential to help car-dependent societies transition to more sustainable, climate-friendly and human-centered transportation systems. He said, “We think that if we can help to remove the need for personal car ownership, we can start to see a reduction in the need for so many parking spaces, a reduction in the need for so many lanes. We believe that, over time, we can take these public spaces back from cars—turn those parking lots into parks, widen sidewalks and improve street life.”

While progress toward this vision was likely difficult to make during the pandemic, especially with a shortage of drivers, global commitment to climate progress has only strengthened. With California as an early indicator, it’s clear an EV transition will be coming. Will Uber and Lyft lead the way, or follow what has become a more noticeable trend across the U.S.?

Image credit: Robin Pierre/Unsplash