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High prices spell no demand problem for resurgent Uber and Lyft

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November 8, 2021

By Tina Bellon and Nivedita Balu

(Reuters) – Uber and Lyft are emerging from the pandemic as leaner, lower-cost companies with a long-elusive operating profit and the unexpected power to raise prices without alienating riders.

Ride-hail fares have surged to unprecedented levels this year due to a driver shortage. Much to the companies’ delight, riders so far appear undeterred, flocking back to the platforms in ever-greater numbers.

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“I think there is generally more pricing power than anyone ever realized existed in the industry,” Lyft Inc Chief Financial Officer Brian Roberts said on Tuesday.

On Thursday Uber Technologies Inc Chief Executive Dara Khosrowshahi called the current environment a “giant pricing experiment.”

“Even with prices being up…, we’re seeing that as cities reopen, people start using the product, and they use it a lot,” Khosrowshahi said.

The shift marks a significant turning point for the former start-ups, which for years sacrificed profitability to add customers, undercutting each other with consumer discounts and driver bonuses.

According to an analysis by YipitData, which tracks email receipts, average per-mile U.S. ride-hail charges in the third quarter were nearly 25% higher than in the comparable period in 2019.

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(GRAPHIC: U.S. consumers keep paying more for ride-hail trips – https://graphics.reuters.com/UBER-LYFT/PRICING/mypmnknrnvr/index.html)

For airport trips, which rank among Uber’s and Lyft’s most profitable routes, price increases were even steeper. The average fare for a trip to and from Chicago’s O’Hare airport jumped nearly 50% in the third quarter compared to 2019, according to a Reuters analysis of city data.

(GRAPHIC: Rise in ride-hail prices at Chicago’s O’Hare airport – https://graphics.reuters.com/UBER-LYFT/PRICING/zdvxonownpx/index.html)

(GRAPHIC: Ride-hail trips at Chicago O’Hare still far down – https://graphics.reuters.com/UBER-LYFT/PRICING/egpbkakwxvq/chart.png)

Higher prices benefit the companies, which take a percentage cut from each ride. They also have resulted in record earnings for drivers, who also benefited from massive driver incentives paid by Uber and Lyft to lure them back, the companies said. Uber drivers and food couriers in the third quarter earned $8.6 billion, 60% more than the year prior, with driver pay growth outpacing that of gross bookings, Uber said Thursday.

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While total driver supply remains below pre-pandemic levels, the companies said they were confident more drivers would return without additional incentives. They said they would taper off additional driver bonuses in the coming months.

Lyft’s Roberts said the company would fund driver incentives during particularly busy times through elevated consumer prices.

“We will likely see elevated prices for some time, particularly given the inflationary environment we are experiencing now,” said Michael Erstad, an analyst at research firm M Science.

Uber’s delivery business, which emerged as a backbone during the pandemic, also has avoided a post-pandemic let down.

Uber on Thursday reported stable delivery bookings, even as more people resumed going out. Its core restaurant delivery business Eats even reported its first operating profit, driven by better cost management and fewer consumer discounts, Uber said.

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Higher prices combined with more efficient budgeting could boost margins in the coming year.

Both companies made drastic cuts during the pandemic to reduce their overall cost base. Those efficiencies, particularly in variable costs, will show as demand scales back up, the companies said.

But as inflationary concerns rise and ridership levels remain some 35% below pre-pandemic levels, Uber and Lyft need to strike a balance between price increases and consumer loyalty.

“There will always be a ride at today’s price point, which might be a faster pickup,” Lyft President John Zimmer said in a Reuters interview. “But it’s really about finding the right ride for the right customer at the right time,” he said, adding that consumers wanting a cheaper ride might have to wait longer.

(Reporting by Tina Bellon in Austin, Texas and Nivedita Balu in Bengaluru; Editing by Peter Henderson and David Gregorio)

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Canada’s Shopify records Black Friday sales up 21%

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November 27, 2021

(Reuters) – Canadian e-commerce company Shopify Inc recorded worldwide sales of nearly $2.9 billion on Black Friday, an increase of about 21% in comparison to last year, the company said Saturday.

New York, London and Los Angeles were among the top-selling cities, the company said, while apparel and accessories was the top-selling product category.

Shopify also said it funded 23,000+ tonnes of carbon removal to counteract emissions from the delivery of every order placed on its platform on Black Friday.

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(Reporting by Aakriti Bhalla in Bengaluru; Editing by Nick Zieminski)

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Xiaomi to open car plant in Beijing with annual output of 300,000 vehicles – Beijing govt

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November 27, 2021

SHANGHAI (Reuters) – Chinese smartphone giant Xiaomi Corp will build a plant that can produce 300,000 vehicles annually in Beijing for its electric vehicle unit, authorities in the capital said on Saturday.

The plant will be constructed in two phases and Xiaomi will also built its auto unit’s headquarters, sales and research offices in the Beijing Economic and Technological Development Zone, the government-backed economic development agency Beijing E-Town said on its official WeChat account.

Beijing E-Town said it anticipated the plant reaching mass production in 2024, a goal announced by Xiaomi’s Chief Executive Lei Jun in October.

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In March, Xiaomi said it would commit to investing $10 billion in a new electric car division over 10 years. The company completed the business registration of its EV unit in late August.

The company has been opening thousands of stores to spur domestic sales growth for its smartphone business but eventually intends to use these shops as a channel for its plans to sell electric vehicles.

(Reporting by Brenda Goh; Editing by William Mallard)

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Eni sells Snam 49.9% stake in Algeria gas pipelines for 385 million euros

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November 27, 2021

MILAN (Reuters) -Italian energy group Eni has agreed to sell gas group Snam 49.9% of its stake in strategic pipelines carrying Algerian gas into Italy for 385 million euros ($436 million), the two companies said on Saturday.

The pipelines will be jointly controlled by the two companies, they said in a joint statement.

Italy imports more than 90% of its overall gas needs and Algerian gas currently accounts for around 30% of flows.

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“This transaction allows us to free up new resources to be used on our energy transition path,” Eni Chief Executive Claudio Descalzi said.

Eni is working on spinning off a series of oil and gas operations into new joint ventures to help reduce debt and fund its shift to low-carbon energy.

Snam, which owns a 20% stake in the TAP pipeline that carries Azeri gas into Italy, makes most of its money from managing Italy’s gas transport grid.

It has pledged to spend more on new green business lines such as hydrogen and, like other gas grid operators in Europe, is upgrading its gas network to be hydrogen ready.

“In the future, North Africa could also become a hub for producing solar energy and green hydrogen,” Snam CEO Marco Alvera said.

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The pipeline companies involved in the deal posted net income of around 90 million euros in 2020.

($1 = 0.8836 euros)

(Reporting by Stephen Jewkes, editing by Giselda Vagnoni)

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