Lyft to Lay Off Hundreds in Cost-Cutting Effort Amid Intensifying Competition with Uber

Lyft, the ride-hailing service, is set to lay off hundreds of employees in a bid to reduce costs and remain competitive with its primary rival, Uber. The decision comes just days after former Amazon executive David Risher took the reins as Lyft's new CEO. Risher, who replaced co-founder Logan Green, announced the impending layoffs in an email to the company's 4,000-strong workforce, calling the move "significant." According to The Wall Street Journal, at least 1,200 employees are expected to lose their jobs, representing about 30% of Lyft's workforce.

The layoffs come as Lyft's market share has continued to shrink compared to Uber. As of February, Uber accounted for about 75% of US consumer ride sales, while Lyft held just 25%. One factor contributing to this disparity is Uber's expansion into food and beverage delivery, which has allowed it to thrive during the pandemic when demand for shared rides decreased. Lyft, on the other hand, has struggled to recover from the pandemic's impact, and a driver shortage has resulted in higher prices and longer wait times for customers. In fact, Lyft's prices per mile are approximately 31% higher than they were in 2019, while Uber's prices are only 20% higher.

In response to these challenges, Risher aims to improve the experience for passengers and drivers by "reducing costs and building our company so that our management better understands passengers and drivers." Despite the potential cost savings from the job cuts, investors are growing increasingly skeptical about Lyft's ability to compete with Uber. Bloomberg analyst Mandeep Singh commented, "Everybody expects them to sell the company," adding that "the prospect of Lyft turning things around is pretty bleak."

Recurring waves of layoffs are a relatively new phenomenon in the tech industry, following more than a decade of rapid growth. Meta Platforms, Amazon, and other tech giants have experienced multiple rounds of major layoffs in the past year, largely in response to hiring sprees during the pandemic that they later came to regret as the COVID-19 threat subsided and growth slowed.

Lyft's latest round of layoffs will mark its second after cutting 700 workers last year. The company intends to begin notifying affected employees on Thursday when its offices are set to close. More information on the layoffs is expected to be released next week.

Risher has emphasized the importance of expense control as a top priority since his appointment as Lyft's CEO. By making the company "super efficient," he believes Lyft will be better positioned to lower fares and attract passengers who have switched to Uber due to more competitive pricing. In his email announcing the layoffs, Risher stated, "We need to bring our costs down to deliver affordable rides, compelling earnings for drivers, and profitable growth."

Since the beginning of the year, Lyft's shares have dropped by 6%, resulting in a market value of $3.9 billion. In contrast, Uber's stock has climbed by 22%, reaching a market value of $62.3 billion.