I don’t know about you, but I drive rideshare as a business. It is not my only business, but it is a business. I don’t do it for fun, I do it for profit. With that in mind, I need to make the most amount of money for the time/money/energy I spend earning it. You do too or you would not be reading the article. I am going to describe some of my experiences using a Tesla Model 3 to drive Uber, Lyft and Uber Eats.
If you don’t know (crawl out from under that rock), a Tesla Model 3 is a 5 passenger all electric sedan built by Tesla. Ours gets about 325 miles per charge. On most days (or single driver shift), the car is driven between 150 and 250 miles. Most Uber/Lyft drivers can expect to earn about $1/mile. Some make more, some make less, depends a lot on time and place but that is an easy number to use in calculating your costs benefits. The car is a luxury car in Lyft but not in Uber. I don’t know why other than Tesla and Uber hate each other.
The cost basis used in this article is from my personal experience with this specific car. Other cars will have different calculations, so if you are using say a Bolt or some other EV, change the numbers used for that car.
Earning Per Hour
If you judge IF your business (Rideshare driving) is worth doing by using the metric of “Earnings per hour”, you need to stop reading here. This is like not working at McDonalds. You are not being paid by the hour, you are paid for what you do and that is true of any Gig business. It is up to you, and you alone, to maximize your results. No one ‘makes’ you do this. You want to have a guaranteed paycheck and per hour income? Go work at Walmart.
You should judge your business by 1) how much money does it put in the bank (cash flow) and 2) how much taxes do I owe on what I keep (profit/loss statement). Never by how long did I work. That is a lifestyle question, not a business one.
Nothing. Else. Matters.
Model 3 Rider Experience
I can tell you this. Every single rider loves the car. They love the Tech. They love the sound system. They love the glass roof. They love the silence and smooth ride. They love the performance. They all need to be shown how to use the doors. Nobody walks up to a Model 3 and just opens the door. Be prepared to get out and assist.
If you need to raise your ratings, this might help. On Lyft, riders can select to have an electric vehicle and pay a premium for it (that goes to you). Also on Lyft, this car qualifies for luxury status. That too goes to you.
Income
In the big picture, having an electric car will not increase your overall income. That is determined more by where and when you drive then what you drive. For my calculations I am going to assume that you make about $1/mile driven so that we can get a calculation of what the benefits/risks are. You may make more, you may make less. If you make less, find another place to drive. No kidding. I make only about $.80/mile when I do Uber Eats, but I drive less miles per dollar. If you take this route, the Frunk (the trunk in the front) is perfect for putting food into so that it never gets in the car (smells).
Costs
This is where the rubber meets the road so to speak. Any car you own as part of your business is a business asset. If you borrow money to buy it or lease it, that is a business liability. You are in essence converting your asset into money by using it to transport people from point A to point B. You incur expenses to make this happen. This is called wear and tear, maintenance, repairs, fuel, and replacement costs. The US Government gives you $.58/mile of deductible expense to cover these business losses. This is no matter what you drive. EV or Monster Truck, makes no difference to them.
So: You earn $1/mile and can deduct $.58/mile. This leaves you with $.42/mile profit. Profit is what you pay taxes on and the lower the better. If your costs to own/operate are below $.58/mile than that is un-taxed income to you.
Wait you say! I rent a car for $250 a week, pay insurance, maintenance and gas is $4/gallon and I drive an SUV. That does not cover my expenses! And you would be right. You also probably complain about how much you make an hour and blame Uber for it. In your case, you need to track every single expense, miles, and keep receipts cause you will need to itemize your deductions to get to your correct profit number.
But what if your costs were BELOW $.58/mile? You can still claim the full deduction and the difference is essentially un-taxed. You might want to look into that. How can that be done? You do that by reducing your running costs and asset costs (purchase price – resale price + replacement price). You can remove the replacement price if you never plan on driving another car after this one is used up, and honestly, that may be true for all of us! Stay with me!
I am going to make the case that the Electric Car, specifically the Tesla Model 3, is the best UberMobile you can buy. Here goes:
Purchase Price
Your assets initial value is the purchase price. It always has a value after that and that is what you can sell it for today. With any new car that is about 40% less as soon as the wheels leave the car lot. As a business owner, you just lost 40% of your business right there so you only want to buy a car that has a decent resale profile.
A brand new Tesla Model 3 SR+ costs $39,900. That includes premium everything, leather, stereo, alloy wheels, etc. It has a 240 mile range.
They are cheaper to buy then say my 2018 Long Range RWD with Full Self Driving version which I paid near $60k for. I would only sell it for near $60k. Same with everyone else who has one. I will let you decide what a 5 year resale value is on your own. Subtract your resale estimate from your purchase price and you have what the asset cost value is that you are trying to convert into money.
Lets say this car is worth $20,000 in five years. I think this is low, you may think it is too high. Wait till the end of this article to decide.
$40,000 – $20,000 = $20,000 asset cost.
200 miles per day * 5 days a week = 1000 miles a week.
1000 miles * 50 weeks = $50,000 a year in income. Don’t give me that bull about this being high. That is just full-time driving about 8 hours a day with 2 weeks off. You may only drive 2 hours a week, I don’t know, just adjust the number for your situation.
Your cost for this asset = $20,000 / 250,000 miles = $.08/mile to own the asset.
As a comparison: If you lease a car @$250/week, that is a $1000/month. You will drive 4000 miles a month. That comes to $.25/mile to lease that asset. But that includes maintenance, repairs, wear and tear.
Owning an ICE car is nearly the same in the end: Your asset value at the end of 5 years is basically $0. The car will have driven 250,000 miles in this scenario. It is a write off. That is purchase price / 250,000 miles. Example : $35,000 / 250,0000 miles = $.14/mile to own this asset not included maintenance, fuel, etc. Just to own it.
Maintenance
Your car will need maintenance over a 5 year period. What that includes is very is important.
The 5 year owner maintenance required by Tesla is 1 interior air filter and windshield wiper fluid. No kidding. Say $200.
You will need tires. Brakes are not an issue, but eventually wheel bearings might need to be replaced. We are talking 50k miles per year, for 5 years, or 250,000 miles on the asset life of this car. That is at least 5 sets of tires. Say $5000. Bearings another $2000 and that’s a maybe.
Leased cars usually include maintenance. So for them this is $0.
Other cars will need brakes, pads, oil changes, battery replacement, tires, and engine work by 250,000 miles. And, the car will be basically worthless. Don’t care what make or model. You will have paid the full asset cost ($40k) plus the cost to get it to 250,000 miles and probably about another $15k – $25k dollars to keep it running and tires.
5 year ownership cost:
Tesla: $7,200 or $.03/mile
ICE Car that you own: $25,000 or $.10/mile. With the $.14/mile for owning it, that comes to $.24/mile. Funny how that works out. Why? Because the lease company has done the math, has volume discounts, sells cars way before 250,000 miles and they make money at it.
Cost for fuel
To move the car for 250,000 miles you will need to pay for fuel. To compare ICE to EV you need to come up with a cost/mile number that fits in with your income and ownership costs.
Electricity.
USA average $/Kilowatt to purchase is about $.11/Kwh. Yours may vary, but that’s what I will use, since that is what I pay. If you do not know what you pay per kwh, you should. Look it up on your last bill.
325 miles / 80 Kilowatt (battery size) = 246 watt hours/mile. I actually average about 220. Way better that advertised, but we will use the 250 to be fair.
250,000 miles * 250 watt hours/mile = 62,500 Kilowatts of juice. Multiplied by $.11/kwh = $6,875 in fuel costs for this entire 5 year period.
This equates to less than $.03/mile to fuel the car. You will get better than that. You will get free charging from time to time. It is not hard. In one year of driving (about 15,000 miles so far), I think I have paid $50 so far. This calculation is actually the worst case scenario. Charging at your house using a 220v charger is more than adequate, but you can also install a home charger for about $1500. That will let you charge faster if you want to drive even more. Put in solar panels and price goes way down. Price almost never varies or goes up. You can not say that about gas prices over the next five years.
Gasoline.
This can vary a lot based location, but these will be my assumptions. A Prius that get 50 mpg (sucky car to be sure, but most efficient ICE). Cost of gas an average of $3/gallon over the next 5 years. Not ever gonna happen as prices will be twice that in 5 years, but this is what most people can get their heads around and agree on, so, sure, gas prices will stay the same the next five years. Sure.
250,000 miles / 50 mpg = 5,000 gallons of gas for most fuel efficient gas/hybrid you can buy. That is $15,000 in gas. This equates to $.06/mile. If you drive an SUV, you can double that or more.
Cost comparisons
The EV will cost:
- $.08/mile to own
- $.03/mile to maintain/repair
- $.03/mile to fuel
Cost is $.14/mile. We will be generous and double that for unknowns and other. The asset (car) would have cost you $35,000 to $75,000 over five years to generate $250,000 in income. Your positive cash flow (not profit) is $175,000 over five years (worst case) or $35,000 per year. You use this money to pay your driver (you). Your tax deduction is $145,000 (subtract from the $250,000 income). You pay tax on $21,000 per year (that is your profit worst case).
This ICE car will cost: (own or lease is basically the same)
- $.24/mile to own or lease including maintenance repairs
- $.06/mile to buy gas. Minimum.
Cost is $.30/mile. Same doubling we did with the Tesla costs just to be fair. The asset (a Prius) would have cost you $75,000 to $150,000 over five years to generate $250,000 in income. Your positive cash flow (not profit) is $175,000 over five year (best case) or $35,000 per year. You use this money to pay your driver (you). Your tax deduction is $145,000. You pay tax on $21,000 per year (that is your profit best case).
So the WORST you could do with driving a Tesla is equal the BEST case you can imagine for driving a Prius. This is just for cash flow and profit.
Resale Thoughts
Your 5 year business plan has ended. You have invested in (or leased) an asset that you used to generate income. Time to go to the cashier and cash in our chips. How did you do? Well with the lease, you just walk away and have $0 in assets. With an ICE car, you can sell your now beater mobile (maybe, remember this will be 2024 when this happens) and you get at most a few thousand. Or you still own a Tesla. What does that mean for resale?
- The car has a 1 million mile motor. It is electric motor with 1 moving part (the bearing). It will go as fast and have as much power at 1 million miles as it had on mile 1. So from a performance stand point, the car is good as new. Even then, a replacement motor is only about $400 in 2019 dollars. In 2024 a replacement will be cheaper and better, but you won’t need it.
- The battery is warrantied for 8 years We are in year 5 of that warranty. Newest versions have 1 million mile warranty on the battery. If you needed to, you could replace the battery in 2024 with 2024 battery tech. It will undoubtably be better than what you started with. At today’s prices that would cost about $8,000. Prices are dropping 30% a year on batteries. Do the math. If you do replace a battery at that time, it is not ‘worthless’. These batteries will be highly sought after for grid storage solutions as they have an expected life expectancy of around 20 years. So you will be able to sell it. Think about that.
So, if this car can do 1 million miles in its life span (about 10-20 years), and you maintain it well, what is it worth in 5 years?. A whole hell of a lot more than $0.
Planning for the future
“The future? It aint here yet man”. No. It is, it just not evenly distributed and that distribution is totally up to you.
Tesla does not like you using their cars for other ride share platforms. Know this as a fact. They will not let you use Super Chargers if you are driving for other platforms with a Tesla. They will not let their autonomous cars be used by other networks. They are building their own rideshare platform called the Tesla Network and has already been shown at the Tesla Autonomy day to investors. They have it done. It is planned for release at the end of 2019. Think about that for a minute and what it means for your business. This is one reason why Uber/Lyft hate Tesla. They are competitors. Uber famously made an offer to buy 500,000 Model 3s, but Tesla turned them down. Why? There is more money in rideshare than there is in making cars. Easier to build an app than a million cars. Platforms make residual money, selling a car makes you money 1 time. So your business uses a platform, or many platforms, to get customers and billing services. However, you do not work for any of them! You USE them to get customers and get paid. PERIOD. You DO NOT WORK FOR THEM. They do not PAY you, the customer does. You pay a fee for the service. You cannot however, use the Tesla Network platform without a Tesla and every rider on that network will expect to be in a Tesla when they get a ride. This will be a popular service, even a premium service at the same or lower price.
But the elephant in the room is that the future is robo-taxis. Cars that drive themselves. Currently about 100 BILLION dollars is being spent, per year, by every major automotive, rideshare, startup corporation in the WORLD to make this happen. That is 10 moon missions. 10. They all expect to get their money back. And soon. Money talks, bullshit walks as the saying goes. Your rideshare business needs to include this in your 5 year plan or you do not really have a plan at all.
Tesla plans for every car it has built since 2016, to drive itself, without a driver, by the end of 2020. The hardware is in every car they sell right now. Let’s be pessimistic and say that this does not occur until 2024 the date of the end of our ownership experiment that we see has been cost effective in and of itself. That 5 year old Tesla you now own, with 250,000 miles on it, can now drive itself for another 750,000 miles or so. At a $1/mile that is another $750,000 in potential income with no driver cost. Or in a personal case, you don’t need to spend the hours. Hmmmm. Of course, you will not still get $1/mile anymore in 2024. Robots will compete at a price just above operating costs. About say $.50/mile. You think you will be driving still in 2024? Interesting. What color is the sky on your planet. Maybe you live in Alabama or some other electric car hating area. It is going to happen somewhere, bet on it.
Uber and Lyft know this. GM, Ford, VW and Toyota know it too. They will build their own fleets of autonomous, electric vehicles that they will rideshare. They too are your competition. Only Tesla is planning to allow owner/operators (Gig type ownership). Why? Well margins on cars are small. About 6% and this only one time on the original sale. Ride share revenue is residual, and happens every day for years. In five years, they will not sell you a car (let alone a robo-taxi) because it won’t be worth it. Believe me or not, it will happen. It does not require your believe or approval. Economics, man, economics like physics is just a fact.
Personally, I want to own a fleet of Teslas while I still can. But, hey, that’s me (and my business).
Apps
My other business is writing apps. My company is Next Wave Mobile Apps and you are probably reading this on our web site.
If you want to run your Rideshare business like a business, try one of our apps! They are free to use.
- iDrive For Uber. Is specific to tracking Mileage, expenses, fares, fuel purchases, etc for Uber drivers.
- iDrive Rideshare. Is the same as iDrive For Uber but income can be tracked by platform instead of by type.
- iDrive Mileage. Is for those who only want to track their mileage and do not care about income, expenses, fuel, etc.
- Ride Share Car Cost Calculator. If you want to play with what if like those in this article, you can use this app to play around with.
We also have a company called Jaa (Finnish for share). This company owns and operates a fleet of Tesla cars for profit. We do this using Turo rentals, Rideshare driver leasing, and more. If you want to know more about how you can participate in Jaa, send us an email here.