Please stop repeating this, or at least find a source that supports it. There's a big difference between "losing money in the aggregate" and losing money on each ride; the latter is only true if the marginal costs of providing each ride are greater than the revenues from it, and the source in [1] only reports the former kind of loss. It's very unlikely that each ride is actually costing them the ~$4 they take from it; that would be some pretty inefficient IT.
> It's Uber who loses money on those rides, not the drivers.
If you want to view it that way then it's both drivers and Uber that's losing money.
I do Lyft on the side over summer as a poor grad student. I only have 3 pool ride and those three the passenger didn't have to share any ride with anybody and I made less than if those ride were not pool.
You're also implying that in the long ride Uber will win if it works as if the speculative end will justify the mean.
Which, personally, I think a flaw and weird way of seeing it.
>>Sure Uber is losing gobs of money, but that's not the most important metric at this stage for them. Look at Tesla, they lost 330 million in 2017 Q1.
Apples and oranges. Tesla is losing money because they are investing massive amounts of capital to improve their supply chain and production capabilities. Uber is losing money because they subsidize rides to try to push competitors out of business. Tesla is actually profitable. Uber? We don't know.
> A company that loses money on every unit sale has no breakeven point (Uber)
What? Uber spends an additional ~$0 on every additional ride. They only lose money because of growth and price wars with the competition.
In mature markets with no competition (eg. Toronto) there are no driver incentives or bonuses and they are still cheap and popular with riders and drivers alike.
I agree with your broader point, but Uber lost some 8.5 billion USD last year. They're not (yet, at least) making bucketloads of money, despite paying their workers badly.
> People are commenting as if app-based ride share will no longer be available. It might cost more, but it wouldn't be much more.
Uber lost $8.5 billion dollars in 2019. Think about that. Uber is losing the better part of a billion dollars every month. They are hemmorrhaging money at their current prices. It will cost a lot more for this to be profitable when you consider how much more expensive this will make the drivers.
>Uber passengers were paying only 41% of the actual cost of their trips ... That means your $25 trip into Manhattan from Brooklyn should actually cost around $60. Investors in the private company are currently footing the other $35 (most!) of your fare.
Ehhh I don't buy the thesis. The author is suggesting all Uber rides run at a loss, but Uber makes a killing on some rides. Not every ride is subsidized, I've paid $60 for a 20 minute ride through LA during surge pricing, and I'm certain both Uber and the drive made a profit off me. I've seen stories of $300+ Uber rides too. There's no way Uber and drivers don't make money off these.
I know many rides are subsidized and Uber loses some money on them, but implying Uber's business model is a failure based off average cost is a fallacy.
> The only issue is that companies like Uber are lying to themselves and their investors that costs will go down significantly in the future.
did you not read the article? the entire thing premise is that is not true and there are negative externalities and incentives even if the company doesn't ever make a profit.
> If a trip cost $10, the driver gets $7. You are telling me $3 to uber doesn't cover overhead?
Your mistake (I think) is that you are connecting the costs to the prices on a per-trip basis.
In the hyper-growth phase where the objective is to gain mindshare and market share, their VC and IPO cash can be used instead of charging reasonable prices.
For your scenario it’s entirely possible that the price of the ride is $10 but the cost of the ride to the driver is $12.
Because driving individual people around in expensive cars burning expensive fuel is not a profitable business (in the economic sense). Where are all the billion dollar taxi empires? It's a tough racket. It's equally laughable that Uber's "killer app" is going to be food delivery.
> The fact they're losing money like this doesn't really mean anything because Uber isn't a normal business.
Yeah, Uber is different because of its insane amount of investor money but losing money is still losing money; it can't go on forever. So saying it doesn't mean anything is a bit shortsighted in my opinion.
> It's a place for absurdly wealthy people to park vast sums of cash on the bet that Uber will continue to gobble up marketshare from taxi companies, etc., until they're in a position to disrupt transit in general (and ride sharing services, too) with self-driving cars and who knows what else they'll come up with.
Seems like an extremely risky bet to me. I'm unconvinced they'll be able to make any decent amounts of money in this service especially considering the majority of auto manufacturers are working on similar capabilities; they'll be able to drive the price down far below Uber ever could unless they start manufacturing their own vehicles.
> Many times I call for an Uber and a cab comes first and then they lose my business to the cab, which kind of highlights the commodity nature of rides
In that scenario, Uber should be charging you a penalty for the cancelled ride.
> Right now, Uber can beat everybody on price and quality because they don't have to be profitable for a long time.
I certainly hope they're not losing money on each ride right now.
> Uber loses money, at most you could argue that it is law breaking AND VC money.
I don't follow the logic. Many companies have negative cash flow while they invest in growth. What is "it" in your sentence? If you're saying there are only two possible factors for the relatively low ride fares, I think you're forgetting the reduction of transaction costs.
Hailing a cab on the street is frustrating. Hailing a cab by phone call even more frustrating and uncertain. Decreasing the transaction cost increases demand, which encourages supply, which lowers cost, which ... Anyway, there's a new equilibrium price.
> Uber said it expects an impairment charge of up to $2.2 billion in the first quarter due to the outbreak and for revenue to nosedive by $17 million to $22 million in the quarter.
The impairment charge is on the “reduced value of equity investments”. Not sure what that’s about.
But “revenue to nosedive $22 million...” this makes no sense. Last year Uber reported a net loss of $8.51 billion.
I think $22 million is the cost of programs it has put in place to help drivers during the pandemic. In other words, a pittance.
Last report was that Uber traffic had cratered 60-70% in Seattle as of March 19th. I can only imagine the world of hurt Uber is in for based on a global 60-70% revenue drop in the face of their fixed costs. $22 million ain’t it.
You've asserted that they're ignoring cost in their pricing, but have provided no evidence for it. Uber and Lyft have claimed to be profitable in their biggest markets. Doesn't that suggest they set prices above marginal cost?
Please stop repeating this, or at least find a source that supports it. There's a big difference between "losing money in the aggregate" and losing money on each ride; the latter is only true if the marginal costs of providing each ride are greater than the revenues from it, and the source in [1] only reports the former kind of loss. It's very unlikely that each ride is actually costing them the ~$4 they take from it; that would be some pretty inefficient IT.
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