How to manage your ride sharing fleet
Efficiently managing and optimizing a ride hailing fleet is a crucial part of establishing a successful ride hailing startup. Read on for tips on acquiring, preparing and maintaining your fleet for success.
This is a great time for ride sharing entrepreneurs. While large Transportation Network Companies (TNCs) like Uber and Lyft may tower over the ride sharing market, there remains lots of fertile ground and areas where regionally-specific or smaller service providers can thrive.
Efficient and optimized fleet management is an important component of an emerging ride sharing startups business model, and in this post we break down how to go about choosing the fleet that works for you, and the steps you should take to properly maintain your fleet.
What to keep in mind when acquiring and preparing your fleet
All matters of managing a ride sharing fleet will circle back to a company’s business model: will drivers be independent contractors or employees, and will they supply their own vehicles or will they be company-provided?
As you go through the following key considerations of acquiring and preparing your ride hailing fleet, circle back to that model to help steer you in the right direction.
Will your fleet be electric-powered, run on fossil fuel or be a mixture of both?
A pillar of Nashville ride sharing company Earth Rides’ business model is its all-electric fleet which mainly consists of Teslas and Mach-e Mustangs but also other zero-emission vehicles.
Earth Rides’ electric fleet does more than just support their green mission, it sets their company apart from other TNCs by giving potential riders a reason to use their services. Choosing between Uber and Lyft may often come down to which service is cheaper (or available, in areas where both aren’t present). But environmentally-minded riders will go with Earth Rides because they support the company’s green business model.
There are a number of reasons to incorporate electric vehicles into your ride sharing fleet, in addition to brand differentiation and customer loyalty. However, an important consideration when deciding between propulsion systems is the cost.
While electric vehicles are currently more expensive in terms of capital costs, and time and money spent on charging vehicles should be considered, they are significantly lower in operating costs as they need less maintenance and eat less money via fuel. In addition, some governments have started establishing credits for ride sharing companies using electric vehicles. For instance, San Francisco has ride sharing taxes that are meant to mitigate congestion—but while combustion vehicles pay 3.25%, electric vehicles pay a discounted 1.5%.
Some ride sharing apps have also integrated fees meant to fund the acquisition of electric vehicles into their services: in London 2019, Uber implemented a clean air fee of $0.20 per mile, charged to riders in order to upgrade combustion Uber vehicles to electric.
Thanks to other programs meant to improve the financial outlook of electric ride-sharing vehicles, such as congestion charges that exempt electric vehicles, discounted public charging programs and vehicle purchase subsidies, taxes and fees, a 2019 ICCT study found that battery electric vehicles (BEVs) will be the most economical solution for ride sharing around 2025, depending on the annual mileage driven.
In addition to BEV vs. combustion engines, fleet costs include size considerations. The larger the vehicle, the higher the acquisition and operational costs, in terms of fuel. However, a larger vehicle also allows for more trips per revenue hour in addition to ride pooling, which drives down operational costs as you can serve multiple riders with one vehicle and in one go. At the end of the day, the vehicle choice should match up with the business model or service being provided.
Buy or Lease
Whether buying or leasing vehicles is the better option for a ride sharing company will go back to their business model: are they hiring independent contractors or employees? Do they expect drivers to provide their own vehicles or will the company be providing vehicles? Or will it be a mix? Buying versus leasing considerations will also depend on how much capital funding the company has.
Cost is a huge component of fleet acquisition. Buying vehicles comes with higher upfront capital expenses, but lower operating costs. In addition, monthly payments result in asset ownership, and if faced with funding or budget changes, companies can recoup costs by selling or trading in the vehicle without being stuck in a leasing contract. That said, if it takes a while to sell the car, they may still be stuck in a financing contract for a bought vehicle. Finally, there aren’t mileage restrictions, or excess mileage penalties when you buy, and you retain independence over vehicle maintenance.
In contrast with buying, leasing a vehicle comes with lower upfront capital expenses, but higher operating costs. That said, oil changes and other such maintenance requirements are typically taken care of by the leasing company and because the cars are newer, the manufacturer's warranty is usually still in effect. In addition, ride sharing companies don’t have to deal with fluctuations in the car’s resale or trade-in value. Finally, one of the biggest pros of leasing is that it often allows companies to provide drivers with more expensive vehicles, with the most up-to-date and enhanced safety features, than they could otherwise afford.
New vs. Used Vehicles
For companies that provide their drivers with vehicles, another consideration is the fleet acquisition process: new or used?
In general, used cars come with smaller price tags. They also depreciate slower than new cars, which is something to keep in mind in terms of resale value.
Buying a new vehicle will cost more, but long-term costs can be lower due to fuel efficiency, lower insurance rates, and manufacturer warranty. Fleets composed of new vehicles also allow ride sharing companies to brand themselves as offering a top-of-the-line rider experience.
Once you’ve acquired your fleet, it’s time to decide if you intend to add branded customizations that will advertise your services on the road, and also make it easy for riders to identify their drivers when waiting for pick-up.
Spare partner, Whistle!, uses a minimal branding approach ideal for companies that require drivers to provide their own vehicles: a badge that clearly displays the company's logo and says “Whistle! Ride” in the rear window.
Another Spare ride sharing partner, La Wawa, uses vehicle wraps to brand their fleet, which is a great way to advertise services but is also a more long-term commitment and therefore a better option for companies that own their fleets.
Upfitting a vehicle involves adding extra features not installed by the manufacturer. While it hasn’t been a prevalent practice among ride sharing fleets, the COVID-19 pandemic has introduced a common form of upfitting: a plexiglass screen installed between the front and backseats, meant to provide additional separation and protection between drivers and passengers.
Whistle!, for instance, has upfitted all their vehicles with “Driver Bubbles,” which provides up to 90% surface coverage between drivers and passengers and covers the majority of the usual contact points between drivers and passengers.
A less common but burgeoning example is upfitting vehicles in order to conduct in-car advertising: interactive tablets, LED billboards or car wraps are purchased by external companies in order to advertise to ride sharing passengers during their trip.
How to manage your ride sharing fleet's maintenance
As with all the other points covered so far, managing fleet maintenance will depend on your business model: drivers that work for TNCs like Uber and Lyft are considered independent contractors, so it’s up to the drivers to take care of and pay for their own car maintenance.
Whereas companies that provide drivers with vehicles are responsible for maintenance and should consider signing an agreement with a third-party fleet maintenance provider—and perhaps eventually incorporate in-house maintenance systems as they scale.
Here are some maintenance management tips for companies that provide their own fleets:
- Ensure you’re up to date on all insurance and other legal requirements. In most of North America, it's mandatory for ride sharing companies to purchase an insurance plan that covers all drivers when they’ve accepted a trip, while they’re on their way to pick up a passenger, and that covers both the driver and passenger while a trip is in process.
- Sign up for a roadside assistance program. Investing in roadside assistance can help ensure that a flat tire, dead battery, empty gas tank or other unexpected emergency doesn’t result in unserved passengers and lost revenue.
- Invest in preventative maintenance. Properly and proactively maintaining vehicles will help prolong its durability and reliability and avoid money wasted on repairs that could have been prevented. In addition, certain vehicle manufacturers require preventative maintenance, and failure to do so could void warranty coverage.
- Keep drivers in the loop with maintenance policies. This should be part of driver onboarding, and they should be kept on top of any maintenance changes or updates. Drivers should also clearly understand what to do in the case of a vehicle emergency.
- Outline expected fleet usage ahead of time. Understanding the demands, usage and carrying load for each vehicle allows companies to predict and plan for maintenance routines, ensuring the correct budget is allocated and unexpected costs are avoided.
- Have an established holding period for vehicles. If you’re leasing a vehicle, how long do you intend to lease it for? For either leasing or bought vehicles, at what point of the vehicle’s life cycle will it be in use? These kinds of considerations will help you determine what’s necessary to keep your fleet well-maintained.
Efficiently managing and optimizing a ride hailing fleet is a crucial part of establishing a successful ride hailing startup. Read on for tips on acquiring, preparing and maintaining your fleet for success. For more information about how Spare helps power ride hailing companies of all sizes, check out our ride-hailing page or drop us a line at firstname.lastname@example.org.