Could Prices Double for Passengers if Drivers Become Employees?

In this week’s roundup, senior RSG contributor John Ince covers Uber’s acquisition news, its potential divestment from Uber Elevate, and Uber co-founder Travis Kalanick’s new investment in ghost kitchens.

What Prop. 22’s defeat would mean for Uber and Lyft — and drivers [LATimes]

Sum and Substance:  One way or another, the business of summoning a ride from your phone is likely to look different in California after Nov. 3.

The future of gig work could hinge on the success or failure of Proposition 22, called the App-Based Drivers as Contractors and Labor Policies Initiative. Uber, Lyft and other companies bankrolling the initiative say it would improve workers’ quality of life, providing new benefits while preserving their autonomy. If passed, the measure would cement gig workers’ status as independent contractors, dealing a huge blow to a labor movement striving to bolster protections for workers at the margins….

Proposition 22 represents the companies’ efforts to battle that law and the obligations that come with it….

The text of Proposition 22 assures drivers they would maintain flexibility as independent contractors. The measure offers some benefits similar to those conferred under AB 5, but significantly weaker.

Gig companies thus far have resisted compliance with AB 5, which went into effect Jan. 1. In early August, a judge ordered Uber and Lyft to convert their drivers to employees. At the 11th hour, the companies won a temporary stay of the order from a state appeals court, effectively pushing off the deadline until after voters have their say ….

My Take:  This is a long article and it goes into some areas that haven’t got a lot of attention.  For example, if Prop 22 passes, Uber more than likely will resort to the court system again, with appeals.  That adds another two years here.

There is a lot of uncertainty on the eve of the big decision for California – and the rest of the world that’s watching the outcome, closely.

Uber’s Jump bikes get a second life in Mexico City  [TheVerge]

Sum and Substance:  Uber wanted to get out of the bike business, so a Mexico City cyclist group took 1,600 bikes off the company’s hands. It’s a good thing they did — elsewhere in the world, Uber just sent them to the scrap heap.

When it isn’t rescuing hundreds of bicycles from destruction, Bicitekas advocates for bikeable cities, which it has done for the last 22 years. The group’s hope in rescuing the bikes to give people who usually don’t have access to bike-sharing programs another means of transportation. To do that, Bicitekas paid Uber a symbolic peso for each bike….

My Take:  Kudos to Bicitekas for entering the picture and saving these bikes.  It was just a shame for Uber to send the rest of the bikes to the scrap heap.  Now at least the bikes will have some value and can do what bikes do best – get people around.

Report: Uber Exploring “Strategic Alternatives” for Elevate Unit [MotleyFool]

Sum and Substance: Uber (NYSE:UBER) is looking to get out of the aerial taxi and delivery business. A report published in Axios Friday, citing “multiple sources,” said the ride sharing giant is “seeking strategic alternatives,” for its Uber Elevate unit.

Elevate is the company’s aerial technologies unit. It aims to put air taxis and drones to work delivering people and food. None of these services exist yet, of course, so the division is a cost center at the moment. According to Axios, Elevate currently employs around 80 people.

On the Elevate website, Uber writes ambitiously that it “is developing shared air transportation — planned for 2023 — between suburbs and cities, and ultimately within cities.”…

According to Axios, Elevate’s lack of revenue is a key reason why it’s being considered for a divestment. “This reflects Uber CEO Dara Khosrowshahi’s obsession with achieving profitability, as evidenced by partial sales of Uber’s money-losing freight and self-driving units,” the article states. …

My Take:  Uber is slowly but surely divesting unprofitable units. This one certainly qualifies. I don’t know how much this division is losing, but it surely won’t be making any money for the foreseeable future.

Who would buy it?  Who knows?  Maybe there’s someone out there who wants to be in this business.

Read more about the Uber Elevate project here.

Uber CEO says prices could double if drivers become employees, but this economist isn’t buying it [Marketwatch]

Sum and Substance:  Economist predicts ride-hailing prices would increase by a fraction of Uber’s dire predictions for California, citing new data from New York City after it established a minimum wage for drivers …

Two weeks ahead of an Election Day in which California voters will decide the future of Uber Technologies Inc.’s business model, Chief Executive Dara Khosrowshahi said Tuesday that the state’s residents could see the costs of ride-sharing as much as double if voters reject its ballot measure….

UC Berkeley professor and economist Michael Reich disputes those figures. He estimates much smaller price increases would be needed and could be absorbed by Uber and Lyft, and now he has hard data from the companies’ operations in New York City that shows single-digit percentage price increases after drivers there received increased wages as mandated by law, which he shared with MarketWatch ahead of publication.

My Take:  Uber’s CEO seems to be using scare tactics on the eve of California’s big election over Prop 22. There’s a lot of range in his estimate of 25-100 percent.

I suspect there would be a fare increase, but prices wouldn’t double.  But let’s not get ahead of ourselves.  Prop 22 would have to be defeated, and that’s anything but a sure thing.

Travis Kalanick cooks up a real estate empire [TheRealDeal]

Sum and Substance:  Uber co-founder is betting big on the ghost kitchen business with $130M investment….

Companies tied to Kalanick’s CloudKitchens, a startup that rents available space to food delivery businesses, have snapped up more than 40 properties across the country for more than $130 million, the Wall Street Journal reported.

Kalanick’s assets include closed restaurants, auto-body shops and warehouses in cities like Las Vegas, Nashville, and Portland, Oregon.

CloudKitchens is a “ghost kitchen” operation, which rents out non-traditional spaces to businesses that want to do food delivery without owning or leasing a restaurant space of their own. It’s similar to co-working or co-living, where companies can work with landlords on flexible terms at cheaper prices….

My Take:  Kalanick seems to have a nose for good business opportunities, and this seems to be one.  It’s still in its infancy, and the pandemic seems to be made to order for this opportunity.  Read more about ghost kitchens here.

Uber has offered BMW and Daimler $1.2 billion for its ride-sharing rival, according to reports  ([Marketwatch]

Sum and Substance: Uber has offered more than €1 billion ($1.2 billion) to buy its rival Free Now, jointly owned by BMW and Daimler, according to reports.

Daimler is apparently ready to sell its taxi business to Uber UBER, +1.66%, while BMW Chief Executive Oliver Zipse is more hesitant, and is considering offering Uber a stake in the business, German business publication Manager Magazin said on Wednesday.

An acquisition of Free Now would solidify Uber’s dominance in the European taxi and ride-sharing market.

My Take:  I guess Uber is still in acquisition mode  This would solidify Uber’s presence in Europe, but during the pandemic, I’m expecting that the company is losing money, which wouldn’t help Uber’s stated goal of profitability in 2021.

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

-John @ RSG