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Uber and lyft are both on the way down. The price at which they need to operate to be profitable is not a price that most americans are ready to pay. As simple

Uber and lyft are both on the way down. The price at which they need to operate to be profitable is not a price that most americans are ready to pay. As simple as that. For now they delay this reality by subsidizing rides in order to generate business. In some cities like San Francisco, most incentives were removed and among my friends we all stopped using Uber (unless we really have to). It simply became way too expensive.

nichochar 7y ago
This is great because it's so simple, and I always try and explain it but it takes way too long. You've managed to very clearly explain why it will never work to the extent they pretend it will. It will work, but the market cap is much lower than everyone thinks, and competition will be fierce once the subsidies go away. edit: typo /s/extend/extent
- rainyMammoth 7y ago
  That's exactly my conclusion as well. Uber and Lyft will adjust their prices close to what taxis used to charge. Their market cap will dramatically go down until self driving reignite the price war.
  - foobiekr 7y ago
    Self driving as an escape path for Uber makes no sense to me. Right now Uber puts the cost of the fleet on the drivers. If they were to move to self driving they would need to build out both the fleet and the fleet support. That’s an enormous capital expenditure. I think it’s just a distraction for investors.
    - marvin 7y ago
      What you’re saying between the lines is that it won’t be Uber that succeeds in the self-driving space. But that means they’re doomed long-term.
    - mdorazio 7y ago
      Think of it like this: Most calculations of take-home pay for Uber drivers factoring in all vehicle costs come out to somewhere at or below minimum wage in local markets. That means that if Uber can get rid of human drivers, its potential margin increase including vehicle costs is that same minimum wage in the local market, which is actually respectable. It's probably slightly better than that since Uber as a large-scale fleet operator would get economies of scale for repairs, maintenance, cleaning, fuel/electricity/insurance, etc. that individual drivers don't get. It's difficult to put real numbers on it, but I'd say a good guess is Uber could drop its ride prices 10% or more from current levels and still turn a profit with driverless cars. Raising enough capital to purchase the vehicles initially would be pretty easy.
      - foobiekr 7y ago
        I have considered that. My objection is that Uber is very unlikely to be the entity that solves AV and so they will be buying the fleet (assuming one can). At that point, most of the Uber incumbency is of little value. Yes, they could likely raise the capital to transition the company, but others would be doing so without the cannibalism problem. AVs are not coming soon, in any case. The consensus finally seems to e waking up about this.
        mdorazio 7y ago
        A few points on that. 1) Totally agree that Uber will not be the manufacturer of the first wave of true AVs. That's likely to be whichever manufacturer Waymo is partnered with in a few years. 2) The value you assign to AV-enabled Uber is going to be related to whatever value you assign their brand name, gathered data, platform maturity, mindshare, marketing ability, and cash pile. It's technically not all that difficult to spin up a competing dispatch service to Uber, but it is difficult enough and capital intensive enough that there are very few competitors in most markets. Notably absent are the potential AV manufacturers who would basically be starting from scratch unless they grabbed Lyft at a discount or something. 3) It's important to define what "soon" means and what scope you're talking about when making predictions about AVs. Waymo is legitimately looking like they will be ready to launch true driverless vehicles for taxi service in select markets and conditions in under 5 years. Given the above, the question is can Uber last long enough burning cash every quarter and still remain a market force by the time it's in a position to leverage AVs? I don't think so, but I'm also not shorting the stock.
- ghaff 7y ago
  We saw this during the dot-com era and we've been seeing this play out again over the past decade or so. There are tons of things that middle-class/upper-middle-class people would like to have done for them. Many of us would probably like daily housekeepers, drivers on call, people to do home maintenance, assistants to handle travel and random appointments (e.g. taking car in for service), etc. (Child care of course if needed.) Sure, we might be fine doing some of those things ourselves just for variety or because they're essentially as easy to do ourselves. However, help on call would be great a lot of the time. But most of us can't actually afford to employ the equivalent of one or two people full-time even at rates significantly less than we're paid. Some things can work out because of economies of scale--e.g. eating out frequently in dense cities--but mostly people can't afford to have every "menial task" done for them on a day-to-day basis.
  - michaelt 7y ago
    ...and among households I know who have taken people out of the labour pool full time, 100% of them have chosen a stay-at-home parent before they've chosen a full time driver or housekeeper or nanny. Making things even less optimistic for Uber, IMHO.
mav3rick 7y ago
This is pretty much delusional. Most people are dependent on ride sharing in SF for even menial tasks.
- sytelus 7y ago
  Exactly. People saying this are unable to separate growth investment from core profitability. Uber or Lyft can pull out of money losing long tail markets, cut down staff to may be just 500 and would run just fine but would immediately become immensely profitable. However price to pay would be growth stagnation and robustness against future unknowns. For now they are doing the right thing to lose money to win the market share and diversity into other logistic businesses as well as prepare for future where autonomous vehicles would be the norm.
  - LunaSea 7y ago
    You are generalising the case of San Francisco as if the rest of the world was payed $150K a year and was able to throw wads of cash to buy groceries in Uber cars.
    - ghaff 7y ago
      The bubble is quite amazing. Outside of a very small number of cities (and even there it's probably largely confined to the upper end of income), most locals do not routinely take taxis/Uber on a daily, weekly, or probably even monthly basis. The typical American owns a car that is probably a number of years old and drives to the grocery store to buy food which they cook at home.
    - rainyMammoth 7y ago
      It's still amazing to me to see that people don't realize the Bay Area//New York//Seattle are micro bubbles that don't represent the world or even the united states. Yes, people in those cities are mainly rich Yuppies that don't mind throwing away money. Everywhere else I always try to remember that most people (70% I think) wouldn't be able to cover a 400$ unexpected expense.
tomp 7y ago
What do you use instead? In London, cabs are so expensive, even just looking at one is more expensive than 30mins Uber trip... In addition, unless you're in a very touristy area, your wait time for a black cab will be inversely proportional to how urgently you need it; in contrast, I can just magically summon an Uber with the magic wand in my pocket.
- ghaff 7y ago
  In the case of London specifically, there's a pretty good public transit system. Most people also have legs they can exercise. I'm usually in London a few times a year and I very rarely take a cab (whether black or minicabs); don't think I've ever taken an Uber there. Usually only if I need a very early run to the airport or if I have luggage to transport between two locations where transit isn't super-convenient.
  - tim333 7y ago
    Also in London, Kapten and Bolt are currently undercutting Uber. Ola launches in Sept. You often get almost free rides at the launch to promote take up.
    - PenguinCoder 7y ago
      What is stopping those undercutting companies from facing the same fate as Uber/Lyft in a few years?
  - tomp 7y ago
    I want to accuse you that "you don't live in London" but your comment admits as much. London has a huge sprawl so walking doesn't really make sense. A few biking lanes but not really relevant for most commutes. Public transport is great if you can use it, which generally means if you want to go to/from Central London. Buses are notoriously unreliable and will "change destination" at a moments notice. Yeah, the tube map looks "dense" on the map but see above for sprawl. Good luck commuting in any direction other than radially (unless you happen to be near an Overground line, which is a big if). In addition, most tube lines are closed at night and many have repairs done over the weekend. On top of that, late hours attract drunk / rowdy people, so I often prefer to avoid them. I'm fortunate to be able to use public transport for my normal daily commute, but I also often use other modes of transport (my favorite is bike, which public bikes make easy... again if you happen to find yourself near a station) over the weekend if I want to get anywhere "interesting".
csomar 7y ago
> In some cities like San Francisco, most incentives were removed and among my friends we all stopped using Uber (unless we really have to). It simply became way too expensive. Does Uber publish data about SF? That could remove the speculation.
untog 7y ago
It seemed Uber's long term strategy was to rely on self-driving cars to reduce their margins. Now that we know that's a long way off I'm really not sure what they do. Maybe split their focus in two: one on luxury (Uber Black already exists, after all) and on shared rides at the other end. I think Via has an interesting model here, using minivans to transport many more riders at once. Of course, the more passengers the longer your ride, but with enough demand and intelligent routing it could be worthwhile.
- ghaff 7y ago
  > minivans to transport many more riders at once Minivan/microbus routes are pretty common in some places outside the US. It seems as if it would be possible with existing tech to have some sort of hybrid between bus routes and a door-to-door Pool model. Obviously you need some level of density and predictability but it seems like something that could be made to work, including in areas that don't really support conventional bus routes.
- mountainofdeath 7y ago
  The proper term for what you describe is a Share taxi also know as a Jitney or a Dollar Van (because a ride costs $1). They used to be popular in underserved inner-cities (e.g. East New York) and were ran on an ad-hoc basis. This model is far from new. It just has a nice mobile app frontend. https://en.wikipedia.org/wiki/Share_taxi#Jitney https://en.wikipedia.org/wiki/Share_taxi#Jitney
  - untog 7y ago
    Not quite, the Jitneys in NYC have a specified route. The Via shares are dynamically routed according to who is in it and who needs to be picked up. That has both plus sides and down sides.

nichochar 7y ago

This is great because it's so simple, and I always try and explain it but it takes way too long. You've managed to very clearly explain why it will never work to the extent they pretend it will. It will work, but the market cap is much lower than everyone thinks, and competition will be fierce once the subsidies go away. edit: typo /s/extend/extent

rainyMammoth 7y ago
That's exactly my conclusion as well. Uber and Lyft will adjust their prices close to what taxis used to charge. Their market cap will dramatically go down until self driving reignite the price war.
- foobiekr 7y ago
  Self driving as an escape path for Uber makes no sense to me. Right now Uber puts the cost of the fleet on the drivers. If they were to move to self driving they would need to build out both the fleet and the fleet support. That’s an enormous capital expenditure. I think it’s just a distraction for investors.
  - marvin 7y ago
    What you’re saying between the lines is that it won’t be Uber that succeeds in the self-driving space. But that means they’re doomed long-term.
  - mdorazio 7y ago
    Think of it like this: Most calculations of take-home pay for Uber drivers factoring in all vehicle costs come out to somewhere at or below minimum wage in local markets. That means that if Uber can get rid of human drivers, its potential margin increase including vehicle costs is that same minimum wage in the local market, which is actually respectable. It's probably slightly better than that since Uber as a large-scale fleet operator would get economies of scale for repairs, maintenance, cleaning, fuel/electricity/insurance, etc. that individual drivers don't get. It's difficult to put real numbers on it, but I'd say a good guess is Uber could drop its ride prices 10% or more from current levels and still turn a profit with driverless cars. Raising enough capital to purchase the vehicles initially would be pretty easy.
    - foobiekr 7y ago
      I have considered that. My objection is that Uber is very unlikely to be the entity that solves AV and so they will be buying the fleet (assuming one can). At that point, most of the Uber incumbency is of little value. Yes, they could likely raise the capital to transition the company, but others would be doing so without the cannibalism problem. AVs are not coming soon, in any case. The consensus finally seems to e waking up about this.
      - mdorazio 7y ago
        A few points on that. 1) Totally agree that Uber will not be the manufacturer of the first wave of true AVs. That's likely to be whichever manufacturer Waymo is partnered with in a few years. 2) The value you assign to AV-enabled Uber is going to be related to whatever value you assign their brand name, gathered data, platform maturity, mindshare, marketing ability, and cash pile. It's technically not all that difficult to spin up a competing dispatch service to Uber, but it is difficult enough and capital intensive enough that there are very few competitors in most markets. Notably absent are the potential AV manufacturers who would basically be starting from scratch unless they grabbed Lyft at a discount or something. 3) It's important to define what "soon" means and what scope you're talking about when making predictions about AVs. Waymo is legitimately looking like they will be ready to launch true driverless vehicles for taxi service in select markets and conditions in under 5 years. Given the above, the question is can Uber last long enough burning cash every quarter and still remain a market force by the time it's in a position to leverage AVs? I don't think so, but I'm also not shorting the stock.
ghaff 7y ago
We saw this during the dot-com era and we've been seeing this play out again over the past decade or so. There are tons of things that middle-class/upper-middle-class people would like to have done for them. Many of us would probably like daily housekeepers, drivers on call, people to do home maintenance, assistants to handle travel and random appointments (e.g. taking car in for service), etc. (Child care of course if needed.) Sure, we might be fine doing some of those things ourselves just for variety or because they're essentially as easy to do ourselves. However, help on call would be great a lot of the time. But most of us can't actually afford to employ the equivalent of one or two people full-time even at rates significantly less than we're paid. Some things can work out because of economies of scale--e.g. eating out frequently in dense cities--but mostly people can't afford to have every "menial task" done for them on a day-to-day basis.
- michaelt 7y ago
  ...and among households I know who have taken people out of the labour pool full time, 100% of them have chosen a stay-at-home parent before they've chosen a full time driver or housekeeper or nanny. Making things even less optimistic for Uber, IMHO.

mav3rick 7y ago

This is pretty much delusional. Most people are dependent on ride sharing in SF for even menial tasks.

sytelus 7y ago
Exactly. People saying this are unable to separate growth investment from core profitability. Uber or Lyft can pull out of money losing long tail markets, cut down staff to may be just 500 and would run just fine but would immediately become immensely profitable. However price to pay would be growth stagnation and robustness against future unknowns. For now they are doing the right thing to lose money to win the market share and diversity into other logistic businesses as well as prepare for future where autonomous vehicles would be the norm.
- LunaSea 7y ago
  You are generalising the case of San Francisco as if the rest of the world was payed $150K a year and was able to throw wads of cash to buy groceries in Uber cars.
  - ghaff 7y ago
    The bubble is quite amazing. Outside of a very small number of cities (and even there it's probably largely confined to the upper end of income), most locals do not routinely take taxis/Uber on a daily, weekly, or probably even monthly basis. The typical American owns a car that is probably a number of years old and drives to the grocery store to buy food which they cook at home.
  - rainyMammoth 7y ago
    It's still amazing to me to see that people don't realize the Bay Area//New York//Seattle are micro bubbles that don't represent the world or even the united states. Yes, people in those cities are mainly rich Yuppies that don't mind throwing away money. Everywhere else I always try to remember that most people (70% I think) wouldn't be able to cover a 400$ unexpected expense.

tomp 7y ago

What do you use instead? In London, cabs are so expensive, even just looking at one is more expensive than 30mins Uber trip... In addition, unless you're in a very touristy area, your wait time for a black cab will be inversely proportional to how urgently you need it; in contrast, I can just magically summon an Uber with the magic wand in my pocket.

ghaff 7y ago
In the case of London specifically, there's a pretty good public transit system. Most people also have legs they can exercise. I'm usually in London a few times a year and I very rarely take a cab (whether black or minicabs); don't think I've ever taken an Uber there. Usually only if I need a very early run to the airport or if I have luggage to transport between two locations where transit isn't super-convenient.
- tim333 7y ago
  Also in London, Kapten and Bolt are currently undercutting Uber. Ola launches in Sept. You often get almost free rides at the launch to promote take up.
  - PenguinCoder 7y ago
    What is stopping those undercutting companies from facing the same fate as Uber/Lyft in a few years?
- tomp 7y ago
  I want to accuse you that "you don't live in London" but your comment admits as much. London has a huge sprawl so walking doesn't really make sense. A few biking lanes but not really relevant for most commutes. Public transport is great if you can use it, which generally means if you want to go to/from Central London. Buses are notoriously unreliable and will "change destination" at a moments notice. Yeah, the tube map looks "dense" on the map but see above for sprawl. Good luck commuting in any direction other than radially (unless you happen to be near an Overground line, which is a big if). In addition, most tube lines are closed at night and many have repairs done over the weekend. On top of that, late hours attract drunk / rowdy people, so I often prefer to avoid them. I'm fortunate to be able to use public transport for my normal daily commute, but I also often use other modes of transport (my favorite is bike, which public bikes make easy... again if you happen to find yourself near a station) over the weekend if I want to get anywhere "interesting".

csomar 7y ago

> In some cities like San Francisco, most incentives were removed and among my friends we all stopped using Uber (unless we really have to). It simply became way too expensive. Does Uber publish data about SF? That could remove the speculation.

untog 7y ago

It seemed Uber's long term strategy was to rely on self-driving cars to reduce their margins. Now that we know that's a long way off I'm really not sure what they do. Maybe split their focus in two: one on luxury (Uber Black already exists, after all) and on shared rides at the other end. I think Via has an interesting model here, using minivans to transport many more riders at once. Of course, the more passengers the longer your ride, but with enough demand and intelligent routing it could be worthwhile.

ghaff 7y ago
> minivans to transport many more riders at once Minivan/microbus routes are pretty common in some places outside the US. It seems as if it would be possible with existing tech to have some sort of hybrid between bus routes and a door-to-door Pool model. Obviously you need some level of density and predictability but it seems like something that could be made to work, including in areas that don't really support conventional bus routes.
mountainofdeath 7y ago
The proper term for what you describe is a Share taxi also know as a Jitney or a Dollar Van (because a ride costs $1). They used to be popular in underserved inner-cities (e.g. East New York) and were ran on an ad-hoc basis. This model is far from new. It just has a nice mobile app frontend. https://en.wikipedia.org/wiki/Share_taxi#Jitney https://en.wikipedia.org/wiki/Share_taxi#Jitney
- untog 7y ago
  Not quite, the Jitneys in NYC have a specified route. The Via shares are dynamically routed according to who is in it and who needs to be picked up. That has both plus sides and down sides.