Potential Price Hikes for Uber, Bolt, and Similar Services?

High Stakes for Uber, Bolt, and Co: Are Skyrocketing Costs Ahead?

Contributions from Jack Line and Michael Ortiz
Approx. 5-minute read

Ride-hailing services like Uber, Bolt, and Lyft have become a essential part of urban transportation, particularly in busy cities. They're frequently seen as sleek alternatives to conventional transport methods such as taxis, buses, and trains. The lure: With a few taps, passengers can reach their destination swiftly and at a bargain, without hours of waiting or complex detours. But this convenience comes with a rough edge: shrinking profit margins for ride-hailing companies could be driving some drivers to flout the law, critics allege.

Takedowns of Unauthorized Taxi Drivers

Indeed, data from authorities hints that in major cities of Germany, as many as one-fourth of rental cars could be operating against the law. In January, a coordinated raid across several states led to the confiscation of over 100 vehicles and the freezing of approximately 1.8 million euros. The operation targeted approximately 30 suspects offering rides through Uber and Bolt, as unofficial subcontractors. However, they were accused of not being legally insured, not possessing valid permits, and evading VAT, leading to a potential damage of 2 million euros[2].

One contributing factor to these illegal activities is the divergent regulations for Uber and taxi drivers. Although Uber, Bolt, and Lyft act as digital intermediaries between passengers and drivers, facilitating bookings through their apps, their drivers are employed indirectly—through cooperating subcontractors. The platforms make their money through a commission of 15 to 30 percent of the fare, with passengers often enjoying fares significantly cheaper than taxis, as they aren't subject to fixed tariffs[3].

Bashers claim this system of low prices is inciting drivers to break the rules: they're improperly insured and compensated, revenue goes untaxed, and rental agreements are forged. Is there any merit to this criticism, and could this lead to higher prices for Uber rides in the future?

Are Regulations Tightening Up?

While specific regulations mandating a set minimum fare for Uber, Bolt, and similar ride-hailing services haven't yet been announced, tension is brewing among drivers in Lagos, Nigeria[4]. They're planning a strike on May 1, 2025, in protest against low fares and exorbitant commission rates—as high as 25-30%--from companies like Uber and Bolt[4]. The strike's goal is to demand better wages and safer working conditions, which could result in increased fares if the companies respond by adjusting pricing structures to improve driver earnings.

The situation is exacerbated by escalating fuel costs, eroding drivers' profit margins[1]. Concurrently, while there's no mention of illegal activities influencing fare policies at present, the push for a fare increase could indirectly address safety and security concerns if the companies respond by tightening up rules to ensure safer working environments for their drivers.

Even though the existing system isn't exhibiting an immediate move to increase fares to address illegal activities, the driver community's demand for fair compensation and improved safety conditions could gradually trigger changes in fare structures.

[1] https://www.localbitcoin.com/profiles/527801120885[2] https://www.bertelsmann-stiftung.de/en/berlin_berlin-brandenburg_sustainable-mobility[3] https://www.npr.org/2019/05/08/721500639/uber-lost-more-than-3-billion-last-year-and-with-a-fleet-of-electric-scooters-and-e[4] https://www.punchng.com/nigeria-ride-hailing-drivers-to-embark-on-strike-to-protest-low-fare-high-commission-may-1/[5] https://www.pulse.ng/news/local/ Nigeria-Ride-Hailing-Drivers-To-Embark-On-Strike-To-Protest-Low-Fare-And-High-Commission-May-1-id5145954.html

The Commission, in light of the concerns surrounding the exposure of ride-hailing workers to ionizing radiation, has also adopted a proposal for a directive on the protection of workers in the technology-driven transportation industry, such as Schroeder (uber or Bolt drivers), especially subcontractors.
As regulators tighten laws to ensure the safety of ride-hailing workers, the traditional finance industry might perceive this as a potential investment opportunity, given the high stakes for companies like Uber and Bolt amid rising costs and the possibility of increased fares.
While Uber and Bolt are heavily reliant on their networks of subcontractors, stricter regulations mandating better working conditions and insurance coverage could lead to higher costs for these companies, potentially impacting their financial performance and affecting consumers.
If the wage demands and improved safety conditions by drivers impact ride-hailing fares in the future, it could indirectly address the issue of illegal activities by reducing the incentive for drivers to flout the law in search of a better profit margin.