Electrifying ride-hailing companies: strategies and models

 

inspiratia takes a look at emerging electric vehicle (EV) adoption and charging strategies sweeping across the US led by ride hailing giants Uber and Lyft. Join inspiratia in November as it brings together EV charging leaders from across the globe for key business insights at EVS Whistler 2019.

Transport network companies (TNCs) such as Uber and Lyft have made bold plans to electrify their platforms, with Lyft recently launching a “Green Mode” and EV rental schemes that work in tandem to drive the market in the US.

Theoretically, the dynamic between EV adoption and TNCs are complementary. In recent years, both have boasted significant growth rates. Uber and Lyft reported a combined valuation of over US$100 billion (£80.3bn €89bn) in their 2019 initial public offerings, while EV sales growth in the US rose year-on-year to 26.7% in June 2019.

However, the growth of EVs and TNCs are yet to converge organically. According to the International Council on Clean Transportation (ICCT), as of 2018 less than 1% of both Uber and Lyft vehicles were electric. Even despite Didi’s – a ride-hailing company active in China, Brazil, Mexico, Australia and Japan – fleet of over 21 million vehicles its share of EVs only stands at 1.3%, as seen below.

Estimated share of EVs in total ride-hail vehicles

Source: International Council on Clean Transportation (ICCT), inspiratia

Note: Total number of vehicles is assumed to equal the number of drivers according to the ICCT

On the other hand, the ICCT does believe that if more ride-hailing companies publicly commit to increasing their volume of EV fleets, this would send positive signals to governments and automakers, and pressure competitors to do the same.

Rationale

EV adoption

California, in particular, is aggressive in its strategy to increase the uptake of EVs via TNCs. As seen below, the Golden State is home to almost half of all EVs sold in the US.

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Source: Auto Alliance, inspiratia

California aims to decarbonise transport by reducing greenhouse gas (GHG) emissions from the transport sector. Light duty vehicles (LDVs) are considered the most effective way to reduce emissions, given the fact that LDVs comprises over 69% of total transport pollution.

2015 GHG emissions by sector (total emissions 440.4MMTCO2E)

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Source: California Public Utilities Commission, inspiratia

California’s legislators are currently considering Senate Bill No. 1014 which – if approved – would mandate that 20% of miles travelled by TNCs should be undertaken by zero-emission vehicles by 2023. In the long-term, targets are set for 50% by 2026 and 100% by 2030. The mandate includes all vehicles that are purchased, leased or contracted by TNCs.

Charger utilisation

As well as boosting EV adoption, increased use by TNCs could stimulate investment in charging infrastructure.

Studies undertaken by EVgo – a California-based operator of a network of DC fast-charging (DCFC) stations – revealed that the growing number of EVs in TNC fleets improved the utilisation rates of its top three charging stations in California.

The case-study involved Evercar, an all-inclusive EV rental service that rented cars to Lyft and Uber drivers in California by the hour. Evercar ceased operations in 2016.

As the chart below shows, Evercar drivers, on average, accounted for an additional charge of 716kWh per week.

Total kWh delivered to Evercar and non-Evercar customers at top three Evercar sites (August 2016 to October 2016)

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Source: California Public Utilities Commission, inspiratia

Note: 2 October 2016 marked the last week of Evercar operations.

Evercar rentals in particular improved hourly utilisation rates during off-peak hours between 10pm and 6am, even more so during the weekends.

Average daily DCFC charge session minutes by Evercar drivers/customers at top three Evercar sites on weekdays, by time (2016)

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Source: California Public Utilities Commission, inspiratia

Average daily DCFC charge session minutes by Evercar drivers/customers at top three Evercar sites on weekends, by time (2016)

https://www.inspiratia.com/Content/images/view.ashx?imageID=ce0a7793-e46d-4825-b94b-fca2e854f710

Source: California Public Utilities Commission, inspiratia

Despite the limitations of the study – timeframe, sample size, only one EV model evaluated – the California Public Utilities Commission reported that the data collected provides preliminary evidence of opportunity to increase the load factor of pubic charging stations, particularly during off-peak hours.

Strategies and models

In June 2018, Uber launched the EV Champion Initiative in the Californian cities of Sacramento, San Diego, Los Angeles and San Francisco as well as Austin, Texas, Seattle, Washington and Montreal, Quebec. The initiative is a pilot programme to incentivise EV drivers on Uber’s platform and indirectly raise awareness of riders to the benefits of EVs.

Lyft has taken an alternative strategy which encourages potential drivers to rent EVs rather than internal combustion engine (ICE) vehicles.

Launched in May 2019, Lyft initiated “Green Mode” on its app, giving riders in Portland, Oregon a choice to request zero-emission vehicles at no extra cost. Unique to Lyft however is that, via its “Express Drive” service, drivers will have access to plug-in hybrid EV (PHEV) rentals. Lyft’s goal is to expand EVs driven under its platform by 20%.

Lyft had been operating the latter service – a partnership it entered with automobile giant General Motors (GM) – as a third-party rental service for primarily ICE vehicle rentals up until this year [2019].

Battery EVs (BEV) and PHEVs are yet to reach price parity with ICE vehicles, so high upfront costs will continue to be a challenge in the short to medium term. But as shown in the following model, net present value (NPV) cash flow projections – using GM Chevrolet products – lease payments or costs could be considerably lower over the duration of the lease.

The Chevrolet Bolt EV bears steep initial losses in year zaero in comparison to Chevrolet Malibu ICE, but its annual discounted cash flow has a longer lifespan. In addition, the Chevrolet Malibu ICE accrues more losses during its lifespan whereas the BEV’s cash flow becomes more positive because it can be resold at the end of its useful life.

Model NPV annual cash flows

https://www.inspiratia.com/Content/images/view.ashx?imageID=9df29bd2-9a57-456e-a271-056b27961ae3

Source: Atlas EV Hub, inspiratia

Note: Positive cash flow values are a result of the sale of vehicles at the end of their useful life if fleet is the owner

Uber runs a similar EV rental scheme with Nissan and Chinese EV manufacturer BYD in London, UK, as part of its study with the Energy Saving Trust to evaluate the feasibility of large EV ride-hailing fleets in the UK. Depending on its success in London, the programme could potentially be launched in the US.

Utility partnerships

Both Lyft and Uber have strategic partnerships with utilities to implement their electrification plans.

From July 2019, Lyft will be providing free EV charging for Lyft drivers in Portland, in partnership with utility Portland General Electric (PGE).

Lyft drivers will be given access to PGE’s Electric Avenue charging network across the city. According to a PGE press release, Lyft will be responsible for subscriptions, typically priced at US$25 (£19.93 €22.19) per month.

In its 2017 report, Transportation Electrification Plan, PGE stated it anticipates its partnerships with TNCs to follow the results of EVgo’s findings, particularly in boosting utilisation rates during off-peak hours and on weekends.

In Sacramento, public power utility SMUD partnered with Uber in June 2018 for the EV Champions Initiative. SMUD is providing a per-trip incentive for Uber-drivers that complete trips in battery or hybrid vehicles, access to free charging on SMUD’s network of fast chargers.

Challenge of charging accessibility

The success of Uber’s and Lyft’s strategies in the US, and those in the wider market, is dependent on further charging infrastructure investments.

Although subsequent savings in fuel costs outweigh high upfront costs of purchasing an EV for a driver, a consistent challenge identified in worldwide TNC electrification pilots and municipal studies is limited driver confidence in EV charging station availability, particularly rapid chargers. Similar feedback was also given to Uber EV rental schemes in London.

Many drivers see the time spent charging as a loss of revenue which reportedly averages at between US$364 to US$377 per month (£292-£303 €303-€336). This lack of confidence could result in TNC EV adoption lagging behind targets, with the ICCT anticipating less than 5% EV share in TNC operations by 2025.

More of these challenges and models will be discussed at inspiratia’s Electric Vehicle & Sustainability Summit in Whistler, Canada, taking place 19-22 November 2019. Click here to register.