The Tesla Hertz Deal Never Made Sense For Rideshare Drivers
We aren't sure if anyone thought this deal through.
Recently, Hertz, Uber, and Tesla announced a partnership, which sent stock prices at all three firms soaring. The proposed arrangement would see 100,000 Tesla Model 3s injected into Hertz’s rental fleet, starting as soon as this month. A separate deal with Uber would make 50,000 of those Teslas available for use by Uber drivers through its rental program. The deals have been praised as some great steps forward to battling climate change and building a more sustainable future. As the resident former rideshare driver; I just want to ask: How is this supposed to work? The Model 3’s higher price and the nature of electric vehicles only exacerbate the absolutely terrible proposition that is renting a car to drive for a rideshare company.
Of course, then Tesla frontman Elon Musk went ahead and shook things up on Twitter announcing that no deal had been inked anyway, so who knows what’s really going to happen. But assuming people do get the opportunity to rent Teslas from Hertz to drive for Uber, they probably shouldn’t.
Hertz and Uber say the Model 3s will start at about $335 per week, with the ability to drop down to as low as $299 per week. This includes insurance and maintenance, but the driver will have to pay for the electrons. It doesn’t take an economist to see that the roughly $1,200 per month spent on a Model 3 rental is a hefty chunk of change, but I think the greenwashing and the sort of neo-utopian futurism associated with a shift to electric cars has calcified everyone’s pineal gland.
When I was still a driver, folks in economic binds with cars that were too old or too rough to drive for Uber and Lyft would tell me that they were thinking about becoming drivers. They saw the rideshare advertisements stating, “You can drive for us, even without a car,” and they thought, “Hm, well, how can I get in on this?”
This is where things get murky. These advertisements often propose a generic monetary number, either a fixed dollar amount or hourly wage equivalent, with the infamous claims of “up to” or “more.” Even in the application, approval, and onboarding process, the information about pay is buried in the fine print, if it’s mentioned at all. Uber and Lyft drivers are paid per mile and per minute for passenger dropoffs. Uber delivery is a standard flat rate fare based on a completely proprietary (and opaque) algorithm that takes travel distance into account. This means you’re only paid when you have a passenger or delivery.
At $335 per week (Uber and Hertz do not explain the criteria for the $299 per week rate), the Tesla’s cost is a slight premium over its advertised $260-299 weekly cost for a gas-powered car, at least in the Columbus, Ohio, market. Different markets may have different prices.
Using my loosey-goosey math skills, it would take about 300-350 miles worth of driving with a passenger to hit the roughly $335 needed to pay for the rental itself. As of right now, the Columbus rate is $0.87 per mile and $0.13 per minute. This does not include tips or surge pricing, which isn’t guaranteed. To compare how these numbers differ in other locations, the Cleveland market runs at a cheaper $0.69 per mile, and roughly $0.11 per minute. In that market, it will take longer and further to reach the rental cost.
Hertz has said it’s mostly renting single-motor, standard-range Model 3s, which are rated for a maximum range of 262 miles on a single full battery charge. A driver’s mileage will vary, but when I was full-time Uber driving, I averaged 750-900 miles per week over about 45 ish hours for rideshare driving alone. I’d estimate that about one-third to one-half of those miles were deadheading, which means an empty car moving and not earning money.
Because you’re essentially always on the clock, time is money, and the large chunks of time it takes to slowly charge an EV is relevant here. If a gas car runs low on fuel, it’ll take only minutes to refuel and get back on the road and start earning money again. If an electric car runs low on charge, it’ll take hours to replenish. Assuming drivers are driving at around 850 miles, a Tesla Uber driver will need to recharge a minimum of three to four times a week. It will take 8-10 hours for a level 2 charger to fully charge the car. That’s 24 hours alone, wasted, just waiting on the car to charge. Granted, Hertz touts the supercharging network as the main reason for choosing Tesla, but I can’t imagine that rideshare ping demand will be completely fixed around maintaining a reasonable orbit around an empty supercharger. Oh, and back in 2017, Tesla added a “fair use” supercharger policy that means they reserve the right to revoke or limit your supercharger access if they feel that you’re overusing it, because of rideshare driving or other commercial use of your car.
Now, Uber’s rental program isn’t great, but Lyft’s is notoriously worse. It’s a common complaint that Lyft gives rental car drivers lower per mile/minute rates, which inherently makes it harder for drivers to earn enough to cover the rental cost. I reached out to Uber to ask if there is a difference in rates for rental drivers and those who use their own cars, but they didn’t respond.
These rentals have put folks in bad predicaments, as some drivers report driving well over 70 hours a week to put enough money in their pockets. One driver got stuck in a loop, living in his rideshare rental, not able to make enough to pay for the rental and save for an apartment. Other Uber and Lyft drivers have complained about poor-quality, worn-out rentals, ready for wholesale auction. And to top it off, rideshare drivers are legally not employees, they’re independent contractors, so they’re responsible for their own taxes and often have to pay out of pocket for benefits like health care that these companies do not provide. These rentals are ineligible for the IRS mileage reimbursement, which could leave the driver, who ain’t making all that much, on the hook for a hefty tax bill.
And once again, this could all be a moot point, as Elon Musk said that there is no Hertz-Tesla deal, and that Hertz will have to get in line like any other private customer. Will Uber drivers get the chance to drive electric? Who knows.
Sigh. If you must do ridesharing, just use the vehicle you have. If you insist on buying a vehicle, even a high-interest used car loan could net a better outcome than spending a huge chunk of change per month on a car you don’t own. I’ve even made handy-dandy rideshare buyers guide, here.
If you’re going to drive for rideshare, then do it. Let’s not pretend that this deal is somehow groundbreaking for anyone who isn’t a Hertz, Uber, or Tesla stockholder. For the little guy, it’s still raining shit. From my vantage point as an ex-driver, there was little to no thought put into how any of this stuff will work, logistically. The greenwashing and low recharge costs don’t seem like they’ll offset the inherently high cost of using a rental to drive for Uber.
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