Uber and Lyft’s earnings announcements were keenly awaited this week by both investors and analysts as big questions still surround both companies. Are they viable companies? Do they justify the huge valuations that investors so far have been willing give? Do their business models make sense after years of astronomical losses?
The supposed panacea was supposed to be driverless cars, but nearly everybody now recognizes that the initial expectations there were unrealistic. So where does that leave the companies? They have two options: they can either increase revenues, or cut back on expenses and investments in still unproven markets and technologies. Both companies seem to have squeezed almost everything they can can out of the relationship with the drivers. In the midst of all this, one big question hovers over everything – how are the companies going move down this elusive “path to profitability”?
For years both companies have been subsidizing passenger fares in the interest of gaining market share, and the result has been impressive growth at the expense of near term profitability. Long term this can’t continue. Fare hikes in the future are an inevitability. One possible resolution would seems to be some form of detente between Uber and Lyft. But any collaboration or collusion between the companies risks violating antitrust laws, so they have to be very careful.