Technology Stocks

Uber Technologies Inc. (NYSE: UBER) And Lyft Inc. (NYSE: LYFT) Facing Driver Shortage As Demand Recovers

The ride-hailing market seems to be improving, with Uber Technologies Inc. (NYSE: UBER) and Lyft Inc. (NYSE: LYFT) reporting earnings that topped expectations. Ride-hailing demand is outstripping labor supply putting drivers in control, and the strengthening economy could achieve what activists failed to attain, which is benefits and better pay. 

Uber and Lyft report better than expected earnings. 

Although the ride-sharing companies reported exceptional earnings, they indicated that driver shortages were a serious concern limiting operations. The company has resorted to temporary financial incentives hoping that more drivers will return as COVID-19 pandemic concerns wane. Unfortunately, considering the possibility of hotter labor markets, it is unlikely that this will be adequate to build the required workforces. Therefore, instead of employing stop-gap strategies, ride-hailing companies should capitalize on this chance to find a permanent solution. 

Interestingly, Wall Street focused more on the driver shortages during the earnings calls of the two ride-hailing giants. Analysts’ concerns were the plans that Lyft and Uber were willing to implement to attract more drivers and impact demand-supply imbalance. Most importantly, demand is likely to remain strong as countries lift loo9cdown restrictions and economies reopen. 

Demand for ride-hailing services recovering 

Demand is high, and Lyft pointed on how airport trips had increased by 65% in April while Uber mentioned continued demand it witnessed in cities.  The companies are optimistic that more drivers will get back since more people are receiving the COVID-19 vaccine and unemployment benefits are likely to expire later in the year. Lyft added that ride-sharing would attract food-delivery workers since they will want to the in-person interactions with passengers. 

However, this appears to be wishful thinking considering the hiring market has been shrinking.  Most corporations have got the message and take action for them to remain competitive.  Besides the labor shortage, ride-sharing companies also face the problem of rising regulatory scrutiny. Despite the victory in November last year to allow drivers to continue working as contractors, the companies could face other regulatory setbacks. 

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