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Uber and Lyft have a problem with a shortage of drivers and it costs them a lot of money

Uber and Lyft have a problem with a shortage of drivers. As the number of US-based drivers for both applications fell by about 40 percent, the two companies pledged to spend hundreds of millions of dollars to get people back into the driver’s seat.

Uber announced on Wednesday that it was launching a $ 250 million “incentive” for drivers in hopes of speeding up their return to the platform.

“In 2020, many drivers stopped driving because they couldn’t count on enough travel to make time,” Dennis Cinelli, Uber’s vice president of mobility in the United States and Canada, wrote in a blog post. “In 2021

, there are more riders who want to travel than there are drivers available to give them – which is a great time to be a driver.”

Lyft, meanwhile, covers car rental costs by offering $ 800 bonuses to drivers to return to the app and handing out extra money to drivers when the trip lasts more than nine minutes, according to Financial Times.

The hope is that these incentives can help persuade those drivers who have left after being discouraged by the lack of riders to eventually return. A major challenge to these efforts, however, is that COVID-19 continues to be a huge force for the respective businesses of Uber and Lyft.

As the number of cases increased during the winter, both companies lost a significant part of their customer base. People stayed at home or when they went out, they decided not to use greeting apps. In the last quarter of 2020, Uber said there were only 93 million “active platform users per month”, a deadline for users who embark on at least one Uber trip or buy at least one Uber Eats dish – a discount of 16 % compared to the year. Meanwhile, Lyft reported a 45% drop in monthly active users, from 22 million in the fourth quarter of 2019 to 12.5 million in 2020.

Uber says demand is “coming back”, although we won’t know how long until the company reports its first earnings report for 2021. It seems logical that as vaccination rates continue to rise, more people will start using Uber and Lyft again. But it will depend on many factors, including the opening of offices, the return of leisure activities, the resumption of business travel and people who are beginning to return to their daily lives.

According to Apptopia, the number of US-based drivers entering Uber in the first three months of 2021 has decreased by 37.5% compared to the previous year. Lyft reported a decline of 42.3% over the same period.

Last year, both companies focused on reducing costs, and this often meant actively limiting the supply of drivers. In its latest profit report, Lyft said it should block new drivers from joining the application in some markets, while reducing its marketing and other incentives. “Given the effect on demand, we were able to reduce the cost of acquiring drivers and incentives, which had a positive impact on our financial results,” said Lyft CEO Logan Green in a call for profit.

With increasing waiting times in some cities, companies will now have to reverse the course and spend money to encourage drivers to return to the app.

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