In this week’s round up, senior RSG contributor John Ince covers Uber’s IPO and (pipe-dream?) valuation, plus how companies like Toyota and Tesla are doubling down on the idea of autonomous vehicles. How likely is this all to happen? Share your thoughts in the comments below.
Want to hear more of The Rideshare Guy? Listen to my interview on the Smarter Cars podcast, where we discuss driving for Uber/Lyft, the impact of rideshare on cities, autonomous fleets and more.
He Has Driven for Uber Since 2012. He Makes About $40,000 a Year. [The New York Times]
Sum and Substance: COTATI, Calif. — Uber’s public stock offering next month will make a bunch of people remarkably rich. Peter Ashlock is not one of them, although he has toiled for the ride-hailing company almost since the beginning.
Mr. Ashlock, who will be 71 next week, has racked up more than 25,000 trips as an Uber driver since 2012. His Nissan Altima has 218,000 miles on it — nearly the distance to the moon. His passengers rate him 4.93 out of five stars. His favorite review: “Dude drove like a cabdriver.”
While he is an integral part of Uber’s success, Mr. Ashlock is barely getting by. His 2018 tax return will show an adjusted gross income in the neighborhood of $40,000, better than 2016 and 2017. But he has maxed out his $3,200 credit limit at the local Midas car-repair shop and needs to come up with $5,000 to pay his taxes. He has Social Security but no savings to buy a new car that will let him keep working.
Silicon Valley has always been a lottery where immense wealth is secured by a few while everyone else must hope for better luck some other time. Rarely, however, has the disparity been on such stark display as with Uber. Its stock market value is expected to be about $100 billion, which would make it one of the richest Silicon Valley public offerings of all time. … Among those with something to celebrate: Uber’s founders, the Japanese conglomerate SoftBank, the elite venture capitalists Benchmark and Google’s GV, Saudi Arabia’s Public Investment Fund and the mutual fund giant Fidelity. Some have already cashed in. Travis Kalanick, Uber’s co-founder and chief executive until he was forced out after a series of scandals, reaped $1.4 billion by selling fewer than a third of his shares to private investors in 2017.
As independent contractors, drivers are not eligible for employee benefits like paid vacations or stock options. Uber said Thursday that it would offer bonuses of $100 to $10,000 to long-serving drivers. Its chief competitor, Lyft, did the same when it went public in March. …
Mr. Ashlock illustrates the hollow promise of the so-called gig economy, which billed itself as being superior to the usual manager-employee relationship. It promised to harness the power of technology to liberate the struggling millions. …
My Take: During our RSG quarterly editorial conference call a few weeks ago, I pitched a story for, How the Uber and Lyft Platform’s Exacerbate Income Inequality. Presto, here is that story that I wanted to write, in the New York Times. Uber and Lyft’s IPOs are bringing into bold relief the stark disparities in income of those who are connected to the ridesharing platform.
For investors and employees who got some slice of equity, the IPO is a signal event – a cause for celebration – a way to cash out of stock that will be minting thousands of millionaires and billionaires.
Consider Uber co-founders, Travis Kalanick and Garrett Camp, who will soon be splitting almost $13 billion between them. Current Uber CEO Dara Khosrowshahi was Uber’s $45 million man last year. According to Techcrunch he also, received a pay package estimated over $200 million when he took the job almost two years ago.
And what about the drivers like Mr. Ashlock, featured in this article, who have driven over 25000 rides? Yes, Uber will be giving some drivers a bonus in honor of the IPO. If you drove 2500 rides, you’ll get $100. Wow. If you drove 40,000 rides you’ll get $40,000.
How many drivers do you know who have driven 40,000 rides? No, this gesture, while nice, is mostly window dressing. For the real story, read the article to find out how drivers are struggling. Something’s wrong with this picture, and Uber’s offer of a few thousand bucks to drivers who amassed over 2500 rides won’t fix it. The problem is deeper, much deeper.
Uber IPO: Why a $100 Billion Valuation Is an Absolute Pipe Dream [CCN]
Sum and Substance: Uber revolutionized cross-town transportation, but that’s not going to help the company make any money. That’s one shocking revelation from the Uber IPO filing, which makes the rideshare giant’s $100 billion valuation look like nothing more than a pipe dream.
UBER: ‘WE MAY NOT ACHIEVE PROFITABILITY’
This major red flag really shouldn’t come as a surprise. Massive competition in the ride-hailing space could force Uber to lower fares and raise driver incentives just to retain market share – much less turn a profit.
Uber reported revenue of $11.3 billion for 2018. The bad news is that its top-line growth fell from 106 percent in 2017 to 42 percent last year. Moreover, the company incurred a loss of nearly $2 billion in 2018, after excluding the profit it made from selling portions of its businesses in Russia and Southeast Asia. This was a significant drop from the $4 billion loss it incurred in 2017. But the loss could balloon in the future, as Uber’s IPO filing suggests.
My Take: This is one of many highly skeptical articles that have been appearing in advance of Uber’s IPO. No matter. The IPO will probably go just fine – that is if you’re someone who wants to lock in your gains on the stock. If you’re an investor who wants to get in late in the game, after the IPO – well, you’ll get what you deserve. There’s plenty of information out there to give you pause – if you take the time to read any of it.
Toyota leads $1B investment in Uber’s self-driving tech [ArsTechnica]
Sum and Substance: On Thursday, news broke that Toyota, Denso, and the SoftBank Vision Fund are investing heavily in Uber’s autonomous driving operation. Together, the three companies will put $1 billion into Uber’s Advanced Technologies Group: $667 million from Toyota and Denso, with an additional $333 million coming from SoftBank.
“Leveraging the strengths of Uber ATG’s autonomous vehicle technology and service network and the Toyota Group’s vehicle control system technology, mass-production capability, and advanced safety support systems, such as Toyota Guardian™, will enable us to commercialize safer, lower cost automated ridesharing vehicles and services,” said Shigeki Tomoyama, Toyota executive vice president and president of Toyota’s in-house Connected Company, in a statement sent to Ars.
It’s actually not the first time Toyota has opened its wallet for Uber. In August 2018, the Japanese OEM signed a $500 million deal to integrate Uber’s autonomous tech into Toyota Sienna minivans, which will operate through Uber’s ride-hailing network at some future date. That followed an earlier investment of $300 million in 2016.
My Take: Uber’s ability to raise huge sums of capital from private investors is one of the amazing subplots of the overall Uber drama. Here Uber has managed to convince three major players to invest over a billion in a much maligned venture. Uber somehow managed to convince Toyota, etc. that all their labor in driverless cars, despite numerous missteps and even a criminal trial, is still worth over $7 billion.
I’m beginning to think that Uber’s greatest strength is their salesmanship. The whole thing has a sense of deja vu to anyone who lived through a bubble burst or two.
Elon Musk: Self-driving Teslas are going to make their owners money by competing with Uber, Lyft [CNBC.com]
Sum and Substance: Elon Musk says Tesla vehicles one day make money for their owners by autonomously transporting people when their owners are not using them — like a driverless Uber or Lyft ride. Teslas already have the hardware they would need built in.
For example, there’s a small camera above the rear view mirror of Teslas meant to eventually give users a way to watch what happens inside their car when they are not in it. It’s “there for when we start competing with Uber/Lyft & people allow their car to earn money for them as part of the Tesla shared autonomy fleet. In case someone messes up your car, you can check the video,” Musk Tweeted Thursday.
“It’s hard to wrap my head around a future where my car might be earning me money through autonomous driving while I’m asleep in my bed or play video games but here we are,” German professional e-sports player Marcel “Dexter” Feldkamp tweeted back.
That reality is “…just a matter of finishing the software & going through regulatory approval,” Musk tweeted. And eventually, “Instead of someone needing to drive their car personally, they can manage a fleet of self-driving cars,” Musk says.
Currently, Tesla has autopilot function which includes following features: “match speed to traffic conditions, keep within a lane, automatically change lanes without requiring driver input, transition from one freeway to another, exit the freeway when your destination is near, self-park when near a parking spot and be summoned to and from your garage,” according to the Tesla website. However, the autopilot features require the driver to be actively supervising the car.
All Tesla vehicles are built with the hardware capable of “full self-driving capabilities,” says the website. The hardware, however, is not useful until it has been activated with appropriate software updates. And Tesla will not be able to activate such software until “billions of miles of experience” have proven the features to be safer than humans and regulatory approval has been received, according to the site.
My Take: Is this a credible threat to Uber? Yes, of course it is. Uber has very little defensibility to its business model. If someone offers a better service at a better price, passengers will flock en masse to the new service.
Now bear in mind that Elon Musk doesn’t have the greatest track record delivering promises on time and on cost. And that last matter, cost, really matters here. Just how clearly has Musk thought through all the details of this thing? I doubt he’s penciled out all the costs. And if you own a Tesla, having invested all that money, are you going to put that car in jeopardy, driving in city traffic with all its hazards for a modest increment of monthly income? I doubt it.
Tesla’s Self-Driving Cars Will Change Everything [Teslanomics with Ben Sullins]
With Tesla’s announcement of full-self driving capabilities in it’s cars and pending regulatory approval, the launch of these capabilities next year, car ownership will never be the same.
Editor’s Note: Looking for an in-depth review of how the above-mentioned ‘Teslanomics’ would work? Check out this video with Ben Sullins, where he breaks down how Tesla’s ‘self-driving’ car works and how Tesla’s self-driving cars will change car ownership. Stay tuned: at 5:11, Harry Campbell shares what he thinks will be the biggest challenge to Tesla as they prepare for self-driving cars.
Readers, what do you think of this week’s round up?
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-John @ RSG