An Assessment of the Economic Viability of Uber with a Prius in San Diego: A Narrow Win Abstract: A financial experiment was conducted over the span of two weeks to assess the economic viability of driving for Uber using a fuel efficient and low-maintenance 2014 Toyota Prius with 68,000 miles. A financial model was constructed which factored in the cost the vehicle s insurance and per-mile operating expenses, such as (but not limited to) car insurance, oil and tire changes, general maintenance, vehicle taxes and registration, depreciation, and fuel. The total cost per mile, assuming 25,000 miles of commercial driving, came out to 0.25 US Cents per mile, or (0.16 US Cents per km). Driving for approximately 30.5 hours mostly during surge hours on the weekends (Thursday to Saturday morning) produced a net profit of 500.41 USD before taxes, or approximately 16.41 USD per hour. Introduction: San Diego and Los Angeles were the regions hit hardest by Uber s cuts. Hourly and per-minute rates in San Diego were cut 56% in 2016, down to 1.10 USD per mile and 0.15 USD per minute (1). The situation is even more grim in Los Angeles and the Inland Empire, where rates were slashed to 0.95 USD per mile and 0.15 USD per minute (1). This is before Uber s 25% cut and 1 USD ride fee. This is likely far below minimum wage. Worse yet, unless a driver is working part time and can write off the unused IRS mileage onto a second income, the business venture is likely to be unprofitable. The margins for most drivers in the market is razor thin. A successful driver will need a very low-maintenance, high fuel efficiency vehicle in order to make any meaningful kind of money. If a driver is not using a hybrid or a low-cost used vehicle, he or she is probably not making any money at all, or worse yet, is losing money! In order to assess whether the use of a Prius hybrid could profitably be used for ride-sharing, a mileage tracker, as well as a tabulated list of expenses was used to subtract the vehicle s fixed and variable operating expenses from the revenue generated after Uber s 25% cut. The calculation provides the net profit before taxes, approximately 16.41 USD per hour. Figure 1: Uber s current fare rates in San Diego, CA as of 30 th April, 2017 before Uber s 25% commission and ride safety fee.
Methods The operating expenses for the Prius vehicle were calculated by factoring in several fixed and variable expenses which the driver will likely experience at some point during the operation of the vehicle. Table 1: A per-mile breakdown of the operational cost of driving a 2014 Prius C. Fixed costs such as insurance were calculated assuming that annual commercial or ridesharing coverage would be purchased for at least 25,000 miles of driving. Taxes and Registration The cost of Taxes and registration were pulled from Edmund s True Cost to Own Calculations for a 2013 Toyota Prius C (2). Table 2: Edmunds.com estimate of the true cost of ownership for a 2013 base model Toyota Prius C (2) Although Edmund s financial model provides a reasonably good estimate, the model is not robust since it assumes the purchase of a brand new vehicle. In addition, many of the costs are
substantially inflated. However, for taxes and fees, 200 dollars for used vehicle registration fees (especially in California) is a reasonably good approximation. Assuming 25,000 miles of driving, this comes out to 0.01 USD per mile. Commercial Car Insurance This is probably one of the largest fixed costs that is experienced almost immediately. Currently, it costs me (the driver) about 1,600 USD to insure a 2013 Prius. However, It is advisable to get additional insurance to cover the gap period, or risk a catastrophic financial loss due to an accident or casualty not being covered by the insurance providers. It is a very controversial area, but assuming the worst, that TNC or commercial auto insurance will approximately add an extra 40% to an insurance policy, 2,200 USD per year is a reasonably conservative estimate, assuming that it is a robust policy with substantial coverage. Assuming 25,000 miles of both commercial and non-commercial driving, this comes out to 0.088 USD per mile. Engine Oil Changes According to the Toyota Prius schedule of maintenance (3), oil and filter changes should be performed every 10,000 miles. Most mechanics will likely perform this work for 120 USD or less. Based on a per-mile cost calculation, this comes out to 0.012 USD per mile. Cabin Air Filter Replacement The maintenance schedule recommends replacing the cabin air filter every 30,000 miles. Mechanics will likely not charge more than 100 USD to do so, so the per-mile cost is approximately 0.0025 US cents per mile. Engine Air Coolant Replacement It is recommended by Toyota to replace the engine coolant at 100,000 miles, and then every 50,000 miles afterwards. It should in principle cost no more than 250 USD to replace. This comes out to approximately 0.0025 USD per mile, assuming the vehicle is in the 100,000 mile cycle. Spark Plug Replacement According to the Toyota maintenance schedule, spark plugs should be replaced every 120,000 miles. They should cost no more than 200 USD to replace. The cost comes out to 0.00167 USD per mile. Inverter Coolant Replacement The Toyota maintenance schedule also recommends replacing the inverter coolant every 50,000 miles, which costs about 200 USD. The cost comes out to approximately 0.004 USD per mile. Transmission Fluid Replacement It is also recommended (though not required) by the Prius Chat vehicle owners to replace the transmission fluid every 60,000 miles in order to maximize the longevity of the vehicle s life (3). It is estimated to cost 200 USD for a mechanic to perform the service, so it is reasonable to estimate a cost of 0.00333 USD per mile.
Vehicle Depreciation Vehicle depreciation is one of the most difficult variable costs to quantify. Edmund s depreciation cost estimates are extremely high, and these numbers can be substantially lower if a driver possesses a used vehicle. In the financial model, the rate of depreciation per mile was calculated using the difference between the Kelley Blue Book value appraisal for a 2014 Toyota Prius C vehicle at 72,000 miles subtracted from the same appraisal at 100,000 miles. This generated a differential of 1,840 USD per 28,000 miles, or 0.0657 USD per mile. It is important to acknowledge that there are some limitations to this estimate. A true mathematician would also factor in the annual depreciation as a function of time in addition to the depreciation as a function of mileage to generate a more robust mathematical model. Fuel Expenses Last, but not least, the most obvious and short term variable expense is fuel. In San Diego, as of April 2017, prices hover around 3 USD per gallon. The Toyota Prius gets approximately 47 miles per gallon fuel efficiency, which equates to 0.06 USD per mile in fuel costs. Results Table 3: Hourly profit before taxes generated from working 30.5 hours mostly Thursday-Saturday evenings during surge. Table 4: A calculation of the net profit generated driving primarily during surge hours for 30.5 hours after subtracting the vehicle s operating costs.
Table 5: A sample of the logged deductions which accrued during the 30.5 hours, which amounted to 605 miles of deductions at the IRS rate of 53.5 US cents per mile, or 333 USD. Mileage was logged automatically and exported to Excel using the Rydar iphone application. Discussion The results of the following financial experiment indicate that driving for Uber in San Diego in 2017 using the most fuel efficient vehicle and only driving during peak hours (approximately 605 miles total) generates a net hourly profit of 16.41 USD per hour before taxes. Normally, there would also be a roughly 30% state and federal tax, so the earnings would likely end up being 9.84 per hour after taxes. However, the Prius has some of the lowest maintenance costs of any vehicle, as there is no drive belt, chain starter, alternator, or steering wheel fluid to repair or replace in a Prius. In addition, the regenerative breaks and the hybrid battery are extremely robust and are likely to last for the lifetime of the vehicle. Unfortunately, this analysis also paints a much bleaker picture for other drivers with less fuelefficient vehicles. These profit margins are extremely sensitive to the maintenance costs of the vehicle. It is not difficult to see how an ignorant Uber driver with a less efficient vehicle can be fooled into thinking they are earning a profit when in reality they are converting the equity of their vehicle into cash (sometimes at a lower rate than what the vehicle is actually worth!). In addition, Uber drivers are working without adequate insurance or worker protections, which means that if an insurer discovers that a driver in an accident was driving for Uber, they will drop the driver. Based on the data, is absolutely imperative that drivers organize and fight back against any further fare cuts, as even drivers using the most fuel efficient vehicles will be making well below minimum wage after factoring in vehicle expenses. Based on these findings, it is indisputably obvious that Uber is an unethical company whose business model relies on deceptive advertising practices to trick non-financially competent drivers into destroying the equity of their vehicles for free while putting regulated taxis and public transportation out of business. The people who have grown to rely on Uber need to unite and organize against this company and sue them for all of the pain and suffering they cause to the communities in which they operate.
Sources 1. Uber s List of Fares Cuts in 80 Cities to Start 2016 (2016) Rideshare Dashboard. 2. 2013 Toyota Prius c 1.5L 4-cyl. Hybrid CVT Automatic True Cost to Own Edmunds. 3. Prius c Maintenance Schedule PriusChat.