Big Opportunities Ahead for Delivery Companies, Drivers

Lots of big news this week between earnings calls for both Uber and Lyft and new threats to leave California if Uber and Lyft are forced to classify drivers as employees instead of independent contractors. Senior RSG contributor John Ince breaks down the news below.

Opinion: Uber and Lyft’s ‘day of reckoning’ is finally here [Marketwatch]

Sum and Substance: Investors in the two big publicly traded ride-hailing giants, Uber and Lyft, have been warned that this day may eventually come.

Uber Technologies Inc. UBER, -3.28% and Lyft Inc. LYFT, -1.28% have been fighting all legal attempts to change the status of their drivers from independent contractors to employees, avoiding the additional costs of providing benefits and protections. They have based their businesses on this structure and spent millions fighting for it in courts and statehouses across the U.S., and beyond.

The facade finally fell Monday afternoon. A judge in San Francisco Superior Court issued an injunction in a lawsuit filed by three cities in California against the ride-hailing companies over the status of their drivers. The lawsuit, filed in May, contends that the companies are violating a new California law that passed in January, called AB-5, that seeks to classify their drivers as employees.

My Take:  The day has come.  Uber and Lyft will have to make a choice.  Do they continue operating in California or shut the ridesharing business down?  We’ll find out soon.

Curious as to what your fellow drivers think about this? Check out our article on Uber and Lyft Threaten to Leave California.

Uber Eats is bigger business than Uber rides right now, but far from profitable [Yahoo Finance]

Sum and Substance:  Uber released its second-quarter 2020 earnings last week, and as expected, ride bookings plummeted amid the pandemic as people continue to stay home. Mobility bookings, the core division that includes ride-hailing, fell by 73% compared to Q2 2019, and mobility gross revenue fell 67% to $3.05 billion. Uber overall lost $1.8 billion in the quarter.

Uber Eats was a very different story. Delivery bookings in Q2 grew 113% from a year earlier, and delivery gross revenue grew 103% to $6.96 billion.

The big takeaway: Uber Eats was more than double the size of Uber’s rides business in the quarter. …

My Take:  So Uber is two companies now – ridesharing and food delivery.  Ridesharing makes money, but the revenues are down.  Food delivery has rapidly expanding revenues, but makes no money.  What to do?

Read more on our analysis of Uber’s second quarter earnings’ announcement here.

Uber, Lyft could pause ride-hailing in California if drivers become employees [SFChronicle]

Sum and Substance: Both Uber and Lyft would press pause on their California service if they’re forced to reclassify drivers as employees, the companies said Wednesday.

Uber CEO Dara Khosrowshahi said in interview on MSNBC that the ride-hailing service likely would temporarily halt California operations until at least November if it’s forced to reclassify drivers as employees.

Lyft president John Zimmer made similar remarks on Lyft’s second-quarter earnings call.

My Take:  So look for these companies to pause operations.  What would life be like with no Uber and Lyft?  If the judge upholds the ruling, we’re about to find out.

Lyft reports dramatic revenue drop of 61% but points to uptick in rides in July [CNBC]

Sum and Substance:  Lyft just reported second-quarter earnings including a 61% revenue drop versus the same period last year, but a glimmer of hope for its core ride-hailing business with monthly rides increasing 78% in July, as compared to April.

President and co-founder of Lyft, John Zimmer, said on an earnings call Wednesday that the company may need to suspend its ride-hailing operations in California if a court does not overturn its recent ruling, which requires the company (and competitors Uber) to classify drivers as employees eligible for benefits, not independent contractors.

My Take:  No surprises here.  Lyft doesn’t have the food delivery business so the pandemic really hits hard.  Not sure what their profitability projections are based on for the fourth quarter of 2021.

If Uber’s Food-Delivery Business Isn’t Profitable Now, When Can It Be? [NYMagazine]

Sum and Substance:  In the quarter that ended on June 30, Uber saw wildly different tracks for its two main businesses, due to COVID-19. Gross bookings in the company’s people-transportation business fell 73 percent as people went out less and were increasingly afraid to get in cars with strangers when they did go out. But its goods-transportation business grew 113 percent, as people went out less and ordered food for delivery to their homes…

But there is one factor that undermines the value of this hedge. Uber loses money on delivery, and so the rapid growth in this business has not generated the thing companies are supposed to generate: profits….

My Take:  Again, a tale of two businesses.  Uber has big choices ahead.  We’ll find out soon enough where they stand.

Readers, what do you think of this week’s roundup?

-John @ RSG