Uber announced its fourth-quarter results for the end of 2019, and they are pretty interesting. Even though Uber lost more money in Q4 than the previous year, Uber is expecting profitability ahead of schedule. Senior RSG contributor John Ince covers that news plus drivers demanding back pay in California and more below.
Why Uber won’t own its autonomous cars [Financial Times]
Sum and Substance: FT Alphaville has always questioned the popular view that ride-sharing companies like Uber will easily overcome their profitability challenges when they get rid of drivers and replace them with autonomous car fleets.
This is because owning fleets is a capital-intensive business, which for the most part companies like Uber have little to no experience running. To the contrary, ride-sharing companies have historically appealed to investors because of their asset-light models and potential for high cash-flow generation. While the downside of such structures is the lack of an obvious moat, when it came to Uber, investors seemed satisfied network effects and brand loyalty would be enough to protect market share regardless.
This is why when Uber set out to trial its own range of self-driving Volvos in 2017 — it struck us as odd. Odder still, we thought, was the industry-wide assumption Uber would continue to invest in autonomous vehicle ownership or expand its fleets significantly. …
But there’s more to worry about than just that. It’s hard to imagine a scenario where the legal owners of such vehicles wouldn’t bear some sort of liability for accidents arising from autonomous driving gone wrong. Even if insurance could buffer some of that risk, there’s still the exposure to potentially soaring premiums if and when autonomous cars prove more deadly than expected. …
My Take: This is the first article I’ve encountered that delves into the economics of autonomous vehicles. It’s a good analysis. If it’s accurate, Investors beware. Driverless cars may not be the answer.
Scooter app wars begin, and Lime isn’t happy about it [CNET]
Sum and Substance: A small battle is brewing in the scooter world. It involves an app called Scooter Map, which its developer said was created to help people find scooters from all companies grouped together in one app. Problem is, one of the world’s largest rental scooter companies doesn’t like it.
Lime sent Victor Pontis, Scooter Map’s developer, a cease-and-desist letter last April. Pontis said he’s since fulfilled Lime’s requests, but the scooter company kept raising other issues. By December, Lime had reached out to Apple’s App Store and requested Scooter Map be taken down because of trademark and privacy violations.
“They’ve been escalating via going to Apple,” Pontis said. “I don’t think this is something people in the community want or the chargers want. Scooter Map isn’t really hurting Lime.” (Chargers are people who collect scooters when their batteries are low and recharge them.)
Lime would beg to differ. A company spokeswoman said Scooter Map “phishes” for users account information and pings Lime’s servers “sometimes over a thousand times in a single hour, placing a huge load on our system and making our data server less accurate for users.”
Big tech companies going after boutique apps that make use of their data is nothing new. Uber, Amazon and Facebook are known for pursuing small app developers over such alleged violations. In August, Facebook sent a cease-and-desist letter to the Who’s in Town app over alleged location-tracking of Instagram users. In 2018, WhatsApp sent similar letters to developers allegedly using its API.
My Take: This is a fairly complicated dispute that has huge implications for some fairly small players. How it will come out is anybody’s guess. If you want to read more about this dispute, check out our article Lime Threatens to Sue Up and Coming Electric Scooter App.
Uber suspends hundreds of accounts after coronavirus patient takes rides in Mexico [NYPost]
Sum and Substance: Uber suspends hundreds of accounts after coronavirus patient takes rides in Mexico
A Chinese man who tested positive for the coronavirus had used Uber on a recent trip to Mexico, prompting the company to suspend hundreds of other riders’ accounts to contain the spread of the epidemic. The man flew Jan. 20 from Los Angeles to Mexico City, where he took Uber rides on at least two occasions, BBC reported.
He then began suffering symptoms on the evening of Jan. 21 and the next day took an Uber back to the airport, the report said. The man flew back to the US, where he was diagnosed with the coronavirus…
Uber said it has suspended two drivers whom he came into contact with on the trip, as well as 240 other rider accounts in case one of the drivers potentially spread the virus to them, BBC reported. The drivers and passengers won’t be able to use the app for two weeks — the known incubation period for the virus, according to a report. …
My Take: This is an interesting development. Social conditions dictating action. I don’t know what’s right here, but it looks like caution is the way to go.
Uber, Lyft drivers tell state to enforce AB5, get us back wages [SF Chronicle]
Sum and Substance: P.J. Ahern is among the drivers who say they are owed back wages and expenses under the new gig-work law.
“I believe I have been an employee since the day I first got behind my wheel,” said Ahern, of Daly City. Uber and Lyft drivers did not become employees when AB5, California’s landmark gig-work law, took effect Jan. 1. The ride-hail companies are battling to keep drivers as independent contractors rather than converting them into employees, as the law envisions.
On Wednesday over 100 Uber and Lyft drivers statewide are escalating the matter by filing wage claims with the state Labor Commissioner’s Office, The Chronicle has learned. They are seeking to be classified as employees and reimbursed for back wages, overtime and expenses for the past three years — amounts that for some drivers add up to over $100,000 each.
“Here we are a month into (AB5) and we don’t see big enforcement coming,” said Nicole Moore, who drives for Lyft in Los Angeles and serves on the organizing committee of Rideshare Drivers United. That statewide group, which numbers about 10,000 Lyft and Uber drivers, including a couple of thousand in the Bay Area, was behind this week’s action, which they are naming the “People’s Enforcement of AB5.”
“We’re going to do it ourselves,” Moore said. “We’re going to force these companies to comply with the law with the best tool the state gives us, the Labor Commissioner.”…
My Take: It’s the logical next step. Go to the Labor Commissioner and say, “Hey we’re employees. What are you going to do about it?” We’ll see what happens. I don’t even want to try to predict.
Uber’s ride-hailing business grew faster in the fourth quarter of 2019, even as the company grappled with continued challenges [NY Times]
Sum and Substance: SAN FRANCISCO — Uber capped a difficult 2019 by posting faster growth in its ride-hailing business, even as it lost more money.
On Thursday, Uber said its revenue in the fourth quarter of 2019 increased 37 percent to $4 billion from a year ago, faster than the 30 percent growth it recorded in the previous quarter. The company lost $1.1 billion, more than the $887 million it lost a year earlier. …
The results were driven by Uber’s main ride-hailing business, with the number of trips rising 28 percent to more than 1.9 billion from a year ago and revenue increasing 27 percent to more than $3 billion. In contrast, Uber’s food delivery business, called Uber Eats, lost $461 million…
Mr. Khosrowshahi previously said Uber aimed to make an operating profit by 2021. But on Thursday, he said the company would reach that milestone by the final quarter of 2020, ahead of schedule.
Nelson Chai, Uber’s chief financial officer, added that Uber expected to earn adjusted revenue of $16 billion to $17 billion this year as it worked to become profitable. The company also plans to cut back on the discounts and coupons it has used to grow, he said, calling them “bookings that are essentially empty calories.” …
“Clearly, Uber has put out a somewhat aggressive timeline for profitability,” said Tom White, a senior equity research analyst at D.A. Davidson. “These exits are partly a function of them making sure they meet that target.”
Uber is dealing with other challenges. On Jan. 1, California legislation went into effect that may force the company to reclassify its drivers, who are freelancers, as employees. That would drive up Uber’s costs because it would have to provide them with benefits and other perks. Uber last year filed a suit to block the law and has asked for a preliminary injunction that would give it a reprieve from the new rules until the case was resolved. …
My Take: This news seems to be more of the same, except that Khosrowshahi now says profitability will be coming one quarter sooner. The rest of the numbers are pretty much in line with what was expected though on the positive side. Investors liked what they heard and the stock is up in after hours trading. Can’t wait until the last quarter of 2020.
Readers, what do you think of this week’s roundup?
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-John @ RSG