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Lyft Has Found A New Way To Light Money On Fire

Illustration for article titled Lyft Has Found A New Way To Light Money On Fire
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Lyft expects to be profitable by the end of 2021 but seems to be doing everything they can to push that date back by launching a rental car service in Los Angeles and the Bay Area for as little as $35 per day plus tacking on $20 in Lyft credits for getting to and from the car.

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The Verge reports that San Franciscans will be able to choose between a Volkswagen Passat and Atlas, while LA folks get a Mazda 3 or CX-5. The sedan option, The Verge says, will start at as little as $35 per day, but notes “Lyft says pricing may change based on things like when people rent.”

The goodies don’t stop there. Per the company’s blog post, renters will get unlimited miles, refueling at “local market price,” “free add-ons like ski racks, car seats, and tire chains,” and the aforementioned $20 credit to get to and from the facility.

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Much like ride-hailing itself, it’s easy to imagine this service being quite popular if it is this cheap and convenient. Also like ride-hailing, it’s difficult to fathom how Lyft can make money doing essentially the same thing rental car companies do—I once worked for one with the tagline “We’ll pick you up” and, indeed, I had to pick many people up—but for much cheaper.

There’s also the possibility Lyft has no intention to make money on this service. In their respective bids for profitability, Uber and Lyft are pivoting to platforms. They want to become apps non-car owners open every time they want to go anywhere for any reason, and those apps tell them how to do that, and then they will pay whatever the apps tell them to pay to make it happen.

In that vein, having cars available for rent within the app makes some sense. It’s another option, which platforms need many of so people aren’t tempted to open a different app, or type in K-A-Y-A-K on their phones and conduct a 30 second search for rental car prices.

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Maybe they’ll coax enough users into their ecosystem that they’ll transition to a membership program where you pay some number of hundreds of dollars a month for all-access passes to their various offerings (they have a trial version of sorts for that now). Maybe that will work, but forgive me if I don’t presume Lyft’s profit strategy is a good one, given that the company continues to lose hundreds of millions of dollars a month and has never posted a profit.

Or maybe, just maybe, Lyft is a company that launched a money-losing business during a peculiar era where businesses could rake in billions from private investors by merely being big and figured they could figure out how to make money once they were big, and now that they are big they are throwing everything at the wall and seeing what sticks, and the absurdly cheap rental cars is just another piece of spaghetti getting hurled at the wall, and they’re hoping this one doesn’t slide down to the floor like all the others did. Just a possibility.

Former Senior Reporter, Investigations & Technology, Jalopnik

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DISCUSSION

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Hmm. I wonder how much of the price of traditional car rental goes toward maintaining staff and a central facility and, in the case of airports, their share of a shuttle bus.

If Lyft can replace a lot (no pun intended and not much of one achieved) of that with an app, and maintain a level of customer accountability that doesn’t get the car destroyed within a year (there are definitely some implicit trust issues here) it might work.

There’s still the question of where they’ll park the cars when not in use, take care of maintenance and cleaning, etc., but another thing the traditional rental companies do that Lyft may not intend to is maintain a large fleet for maximum demand. They might be feeling out the “if we have a car...” market segment, or to convenience users whose times are flexible.

$35 a day (and up, presumably with surge pricing) is actually on the high side for a weeklong personal rental on a hard-driven bargain in the Bay Area, which I fly into pretty often. My pain point is somewhere around $20 a day; above that, if I don’t need a car because of work schedule or weather, I’m looking hard at public transit.

I’ll take a semi-informed horseback guess that $35 a day gives them a ten-buck margin over the cost of buying the car. If they keep the rental overhead low, and flip it before any major maintenance comes up, this just might work. (And it might work better if the price goes up after an introductory period...)