They still have the drivers. I'm not even endorsing it--but even at worst, that means drivers are subsidizing the ride prices, not investors.
I don't think they are, though. If they were, they'd be having trouble keeping drivers working and we'd see complaints about long waits and unavailability.
There have been stories that drivers in searches of riches lease a car from Uber, which is paid off by being an Uber driver. If they leave the platform, they can't pay their lease.
Low-income "gig economy" workers might not have the mobility to leave for better jobs. Perhaps that's a privilege only certain classes of well-paying jobs have.
I don't think you understand. Uber loses money on every ride. The only reason they can set such low prices is they're burning through investors' money.
No--the only reason they can pursue growth into new geographic areas and pursue new business models (like Uber eats) is because they're burning through investors' money. That in no way implies that their rides would not profitable if they were not spending so much on growth.
But that's basically every business focused on growth.
> In an epic five-part series of blog posts, transportation industry analyst Hubert Horan lays out the case for skepticism about Uber’s hype. In his view, Uber just doesn’t have a cost advantage over its competitors the way Amazon did. Amazon saved money by getting rid of expensive retail stores and sales clerks. In contrast, an Uber ride still requires a car, a driver, and some fuel just like a conventional taxi ride. So there isn’t much room for Uber to undercut its competitors.
> “This industry has a simple cost structure,” Horan told me in January. “Labor is about 58 percent, fuel is 9 percent, and so forth.”
> Of course, this flies in the face of many customers’ experiences. It sure seems like Uber has figured out how to provide a cleaner, faster ride at a lower fare. But Horan argues that this is entirely a reflection of the subsidies provided by Uber’s investors. Uber rides aren’t actually cheaper to provide than conventional taxi rides, Horan believes, it just seems like it because Uber is taking a loss on every ride.
> An obvious objection here is that Uber’s investors are not idiots. They know perfectly well that “lose money on every ride and make it up on volume” isn’t a viable business model. And when they made their investments, they presumably had access to internal financial data that isn’t available to the rest of us. It seems very unlikely that Uber could convince investors to give it $11 billion to continue pursuing a business model whose numbers didn’t add up.
> Horan told me Uber is accepting big losses now in an effort to drive conventional taxi companies and rivals like Lyft out of business. “Their growth is predatory,” Horan argued. “They are trying to displace more efficient producers.”
The article I linked also offers an argument against this logic, but I'm not persuaded by it.
Uber's financials are irrelevant to whether or not the ride sharing business model is sustainable.
The argument cannot be made without claiming the non-driving part of the business cannot be run for the 25% rake they take on every fare. Period. And I don't think anyone is willing to make that claim.
That doesn't mean Uber's a good investment, or Uber is doing it right, or Uber isn't pursuing monopolistic practices, or Uber isn't ripping off drivers, or that Uber isn't doing something sufficiently different that a competitor won't beat them--none of that matters.
All that matters is whether or not the business model is sustainable without burning through investor cash. That was the question. And if someone else beats them doing it while turning a profit, the business model is still sustainable.
Well, no, the article is about Uber, specifically. If you mean where I said that neither Uber nor Lyft is sustainable, then specifically what I'm referring to is operating with such low prices that rides are money-losers, aiming to raise prices after achieving total market dominance. I do not doubt that ride-sharing is a business model that can make money if prices are high enough to make the business self-sustaining, but Uber and Lyft aren't pitching themselves as such a minor variation on the traditional livery service.
> then specifically what I'm referring to is operating with such low prices that rides are money-losers
This is meaningless semantics. The business is growing and spending money to expand. That does not mean each ride is not priced profitably, or that each ride does not bring in more money than is spent providing that ride. It's just a more convoluted way of saying the business--at a high level--sells rides and is not turning a profit.
They are priced at a rate that entirely covers the driving after a 25% cut. For it to not be sustainable, it'd have to be not possible to run the rest of the business on that cut, which is difficult to imagine.
Your whole argument hinges on not understanding these concepts.
I am capable of appreciating that such a circumstance is possible, but what I have read leads me to believe that's not what's happening, and instead Uber is charging prices that do not cover their costs, with the hope of achieving monopoly. Earlier series on the subject: https://www.nakedcapitalism.com/2016/11/can-uber-ever-delive...
> By contrast, in the hundred years since the first motorized taxi, there has been no evidence of significant scale economies in the urban car service industry. That explains why successful operators never expanded to other cities and why there was no natural tendency towards concentration in individual markets. Drivers, vehicles and fuel account for 85% of urban car service costs. None of these costs decline significantly as companies grow. As the P&L data above demonstrates, Uber has not discovered a magical new way to drive down unit costs.
I don't think they are, though. If they were, they'd be having trouble keeping drivers working and we'd see complaints about long waits and unavailability.