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You're right on Tesla and WeWork, but not on Uber. Uber doesn't buy and own the car, which means it requires much less capital. This small change has many impl
by projectramo 8y ago
You're right on Tesla and WeWork, but not on Uber.
Uber doesn't buy and own the car, which means it requires much less capital. This small change has many implications, and the tech helps solves many of the problems that come up.
I am not saying it is properly valued (over or under or whatever). Just that given the choice between an Uber (or Lyft or yourlocalapp.com) or a cab company with the same fleet, customers, and revenue, I would consider the Uber version more valuable.
- blang 8y ago>Uber doesn't buy and own the car, which means it requires much less capital. I don't think this is true with one of the major things they have been selling investors for years: self-driving cars. That certainly requires a lot of capital to pull off, and I think they plan is they would own those cars.
- projectramo 8y agoIf Uber pulls off self-driving cars, I would argue: 1. It is not the same business model it currently has 2. It has an even stronger claim to not being a traditional cab company, and for being a "true" technology company In that case they would have capital costs (perhaps even higher), but would eliminate labor costs.
- sp332 8y agoUber does plan to own the cars though, since they're doing their own self-driving car work and have a deal in place with Volvo for up to 24,000 self-driving SUVs. https://www.washingtonpost.com/business/economy/uber-signs-deal-to-buy-24000-autonomous-vehicles-from-volvo/2017/11/20/d6038f28-ce2a-11e7-81bc-c55a220c8cbe_story.html https://www.washingtonpost.com/business/economy/uber-signs-d...
- tptacek 8y agoThat doesn't really rebut the argument, since they'll only end up with an inventory of thousands of cars if they get self-driving cars to work productively, which would immediately propel them out of any "conventional" category they could have been assigned to. I don't think they will get there with self-driving, but by the same token they're not going to end up owning a zillion cars either.
- busterarm 8y agoUber has been financing driver car purchases for years. They might as well own the car.
- projectramo 8y agoNo, I don't agree with that logic. Credit risk is not the same as the risk on owning the asset. Your bank might lend you money to buy a house based on your excellent credit and your large downpayment. That does not mean they want to rent out your home, speculate on home prices etc. They may end up doing some of this tangentially (they have to dispose of the house if you end up not paying) but that is not the same business.
- zrobotics 8y agoWhat sort of moat does Uber have, though? Sure, it was a slight annoyance to sign up for lyft when they moved into the city my mom lives in, but that was ~5 minutes of annoyance and some phone data. I don't care at all about Uber, there's very little customer loyalty. How will they defend their valuation if the self driving project doesn't pan out?
- leesec 8y agoEven with self driving, there's effectively no difference to the consumer in experience/product whether the car drives it self or someone else does.
- paulie_a 8y agoI strongly disagree. I have had many Uber rides where I wished it took longer to get to my destination. The driver engaged in fantastic conversation. I learned from them, I got insight into the area and recommendations. Self driving seems sterile.
- JumpCrisscross 8y ago> How will they defend their valuation if the self driving project doesn't pan out? They’re already profitable in New York and San Francisco.
- 8y ago
- dragandj 8y ago> which means it requires much less capital They burned through billions of dollars of capital. That's quite a lot for a business that requires very little capital. What would they burn if they needed lots of capital? Trillions of dollars?
- Spivak 8y agoI mean half a million drivers each with a car that say costs $20k over its lifetime is about 10 billion. So like maybe?
- dragandj 8y agoIs there a single company in the world that pays for its machinery with cash, upfront? I don't think so.
- rmah 8y ago500,000 drivers * $20,000/car => $10,000,000,000 or $10 bil, not $10 trillion. Thus far, Uber has raised $24.2 bil in financing so they could have bought cars for every driver easily. No idea what they did with all that money.
- robryan 8y agoSubsidized fares.
- nimz 8y ago$20K is a very low estimate for cost of owning a car. Edmunds estimates the 5-year "True Cost to Own" of a Toyota Camry for home-use is $35K. This is based on a 15K miles a year, Uber drivers can easily put on 50,000+ miles a year.
- mcguire 8y agoIs Uber still using capital to pay operating expenses? [Edit] Doesn't Uber subsidize vehicle leases for drivers?
- reaperducer 8y agoDoesn't Uber subsidize vehicle leases for drivers? I don't remember if Uber does, but Lyft does.
- lsc 8y ago>Uber doesn't buy and own the car, which means it requires much less capital. This small change has many implications, and the tech helps solves many of the problems that come up. that can go both ways: If I have to buy a fleet of cars big enough to cover my area and write an app and advertise to compete with uber, that sounds like an expensive proposition. If all I have to do is come up with an app and the advertising, that sounds rather less daunting.
- usefulcat 8y agoExactly. The service currently provided by Uber is very much a commodity, both for drivers and riders.
- IanCal 8y ago> Uber doesn't buy and own the car, which means it requires much less capital. That sounds the same as all cab companies I know of that have operated in the UK for years.
- JohnFen 8y agoSame in my part of the US -- I believe that with every cab company in my city, the drivers actually own the cabs and are contractors. It's been that way for at least 20 years.
- JohnFen 8y agoHas Uber started actually turning a profit yet?