A woman driving a ride-hailing vehicle.
Will Uber and Lyft flop or fly on the stock market? Jeff Chiu/AP

Congestion pricing is gaining ground in New York City and Los Angeles. That could help turn around ride-hailing’s losses.

As Uber and Lyft race towards initial public offerings in 2019, the ride-hailing arch-rivals will face a stark reality: Neither company is profitable.

Uber’s IPO is expected to be the largest ever for a tech company—currently valued at $70 billion, the firm’s market cap is projected to swell to $120 billion upon going public. But while its revenues have ticked up on an annual basis, the company continues to shed money. In the third quarter of 2018, Uber lost $1.07 billion. It lost $4.5 billion in 2017, the year Travis Kalanick departed as CEO after months of negative press on a range of company practices. The smaller, U.S.-focused Lyft is also reportedly burning through cash. And with growth slowing at both companies, some market analysts warn that an early stock bonanza could fizzle in short order.

But the future of ride-hailing could be also bolstered by local policies and partnerships that reflect broader shifts on the transportation landscape, experts say. In particular, congestion pricing—attaching a user fee to roads in high-traffic urban centers, fluctuating at different times of the day—could be a boon for the companies, because surcharges on single-occupancy driving could encourage the use of less-expensive carpool offerings.

“I think it’s relevant to think about that strategy as a substantial game changer,” said Susan Shaheen, the director of UC Berkeley’s Transportation Sustainability Research Center.

London, Stockholm, Singapore, and other cities around the world successfully implemented congestion pricing plans to positive effect, but no U.S. city has followed suit yet.

New York City, the largest U.S. ride-hailing market, has tried, however. It has been mulling some form of traffic surcharge since 2008. That push, led by then-Mayor Michael Bloomberg, failed to muster the needed political support in outer-borough neighborhoods. Two more efforts in 2015 and 2017 also flopped, although the state’s 2018 budget did include a surcharge on taxis and ride-hailing vehicles entering the busiest parts of Manhattan. That tax, plus a cap on ride-hailing vehicle registrations, is considered another potential roadblock to ride-hailing’s IPO success, since other cities could follow New York’s lead.

But a broader-based fee on all types of vehicles has gained the support of Governor Andrew Cuomo, who recently called it the “only realistic option” to generate the revenue needed to fix the subway. Uber and Lyft both openly support the policy of congestion pricing as a means of getting the upper hand on their greatest competition: the private car. After all, if more people had an economic incentive to ditch their vehicles and split the cost of transportation, that would be good business for shared mobility offerings of all kinds.

Now, another congestion pricing proposal is building momentum in New York City for 2019. Observers believe that in 2019, outside of an election year, the concept could finally find success in America’s largest city.

“What if New York were to start to do this?” said Shaheen. ”What kind of signal could that send?”

Congestion pricing has recently gained traction in other cities with less of a history of engagement. Transportation leaders in Los Angeles support a plan to toll highly congested roads as a way to mitigate delays, reduce transportation-related emissions, and pay for transit ahead of the 2028 Olympic Games.

To that end, while growth may be slowing for Uber and Lyft’s traditional on-demand rides, both companies have invested in a range of other mobility offerings that go beyond that baseline service over the past year. Lyft purchased Motivate, the largest bike share operator in the United States. Uber has invested in (and is rumored to be considering acquiring) Lime, a dockless scooter and e-bike purveyor, after acquiring Jump bikes. It also has a partnership with Getaround, a car-sharing firm.

An expanded range of service offerings could not only boost commuter dependency on these two companies, but it could also improve their pitches to public transit agencies. Already, both Uber and Lyft have partnered with local transportation providers in cities around the U.S. to offer “last mile” connections in areas where bus service is scant or where routes have historically underperformed. They’re also seen as a cheaper substitute for paratransit services.

If these pilots could be scaled up in certain markets, tax dollars from public transit agencies looking to rethink their offerings could be a boon for the cash-bleeding companies. “That suddenly opens up a different way of getting funding,” said Sandra Phillips, a shared mobility industry strategist.

Thus far, ride-hailing companies have scored billions in round after round of venture capital funding. And they are leaving their marks on cities around the world—not all positive: A growing body of research implies that the rise of ride-hailing has contributed to increases in congestion and emissions on American roads, while their inexpensive fares and carpool services in particular are drawing riders off of public transit. Much as urban policy could influence the future of these companies, so will these companies continue influence the shape of the cities in which they operate.

Now, in the event of successful IPOs, at least one observer is anticipating an effect on real estate in the city where Uber and Lyft (in addition to Airbnb, which is also anticipated to make its stock market debut next year) are headquartered. “Think SF is expensive now?” Jeremiah Owyang, a tech industry analyst with a focus on the sharing economy, tweeted this week. “Both Lyft, Uber, and maybe Airbnb to IPO in 2019.”

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