Is this a worrisome trend within Uber and Ridesharing industry
Let me start this article by saying I am the greatest fan of Uber. I like their service, I like their drivers and best of all I trust them with my family.
However, as a fleet management consultant my concern is about vehicle usage and ultimately mechanical condition. Uber uses vehicles with a record of reliability and safety, no problem here, but quite simply these vehicles are driven a lot. From my experience their annual usage is in the range of 80- 100,000kms per annum. Those with fleet management experience know that the useful life of this class of vehicle is in the range of +/- 200,000 Kms, approximately 2 years of service, but this is dependent on applying a strict maintenance policy.
I am starting to travel in vehicles which display signs of mechanical deterioration. The drivers appear to be unaware of it and of course there are questions about their ability to pay for service and repair.
My primary concern is the ability of owner / drivers to replace these vehicles at the end of their useful life. This is largely influenced by the finance method used by the owner.
There is a temptation to use a longer period of finance to reduce the monthly cost but this of course increases the bank settlement at time of replacement. Assuming the vehicle is replaced after 2 years with 200,000 Kms, the settlement if financed over 60 months without a deposit is approximately 67% of the initial vehicle cost, if financed over 48mths settlement is approximately 56% and over 36mths settlement is approximately 38% of original cost.
It is most unlikely that the resale value of a working vehicle will exceed 50% of original cost after 2 years of usage. The only option is then for the owner to continue usage to reduce the bank settlement value, if a longer period had been selected. An extended period of usage will result in higher Kms, which in turn will increase the risk of major mechanical repair. Unless this is addressed through strict maintenance controls the end result will be old vehicles in poor mechanical and safety condition.
This deterioration of condition plagues our taxi industry and I can only hope that it doesn’t reach what is today an outstanding service. I believe it is incumbent on Uber itself, those who finance these vehicles and regulators to ensure that vehicle condition and safety is maintained by ensuring regular replacement which is not restricted by inappropriate finance methods.
Published by Nigel Webb, Latitude Fleet Services (Pty) Ltd, March 2018. nigelw@latitudefleet.co.za. Cell 083 381 3054