Ride-hailing service, Uber Technologies with a valuation of $62.5 billion is currently recognized as the most valued startup in the world. But according to Bloomberg, the company has reported losses amounting to the north of $1.27 billion in the first half of this fiscal year. A majority of these losses were incurred in the second quarter of operation.
Since the American ride-hailing company isn’t a listed public entity, thus a dozen of its shareholders get on a conference call with Gautam Gupta, head of finance, to discuss the company’s performance every quarter. And according to sources familiar with the matter, Gupta broke the news of surmounting losses in a call on Friday.
According to sources, Uber losses in the first quarter added up to $520 million before interest, taxes, depreciation and amortization. While in the second quarter, the losses significantly climbed and exceeded $750 million, including the $100 million loss in the United States where the service had turned profitable in the previous quarter. Adding up the two gives us a rough figure of about $1.27 billion.
Sources report that the majority of Uber’s losses have been incurred due to the massive amount of subsidies it offers to drivers operating on the platform globally.
But, rest assured, the company would no longer need to count the humongous losses related to its Chinese operations in the balance sheet. Uber has recently decided to cut losses in China and sold its operations in the country to local rival Didi Chuxing. The acquirer, thus, gave the American ride-hailing service a 17.5 per cent stake in its business alongwith a $1 billion investment in exchange of its exit. It is, however, now planning to boost resources in India and Southeast Asia to take on the likes of Ola, Grab and Indonesian Go-Jek.
On the bright side, Uber isn’t doing as bad as it may sound in this earning report. Gupta says that ride-hailing services have definitely altered the way people commute, but they still need to find a way to make the business profitable(or not lose humongous amounts of money in trying to do so). It has recently celebrated the completion of two billion rides on its platform, where 147 rides where booked simultaneously.
It reports that bookings on its platform have grown tremendously to more than $5 billion as compared to$3.8 billion in the first quarter. The net revenue of the company also saw a spike of 18 per cent, rising from about $960 million in the first quarter to about $1.1 billion in the second. In the conference call, Gupta said that the company is also changing how it calculates UberPool’s contribution to revenue in the second quarter.
However, Uber also reports that the increase in losses could also be due to its fierce price war with Lyft in the United States. The ride-hailing service told investors and shareholders that it currently has between 84 percent and 87 percent of the market in the U.S, but the same has been denied by a Lyft spokesperson. He also goes on to add that the companies marketshare in major U.S cities in more than 20 per cent and growing substantially.
Uber’s alleged market share is a misleading and skewed statistic given that they offer service in more markets than Lyft
Uber and its investors both believe that the ride-hailing service will continue to lose money in the U.S, as it is trying to keep the drivers on its platform from fleeing to another service, like Lyft. Thus, the increase in spending on subsidies provided to them. They are also spending a lot of marketing and promotions, like fare discounts and giveaways. It managed to beat Lyft’s 13.9 million ride count in July by completing over 62 million rides in the U.S.
But Uber in partnership with Volvo is now planning to publicly test a fleet of driverless self-driving cars in the city of Pittsburgh. It has been conducting early-stage trials in the same city for the past couple of months, and is sure to become the second ride-hailing service to launch an autonomous cab fleet after Singapore-based nuTonomy. This tech, however, if successful could easily help the company remove the drivers(who’re eating up the money in form of subsidies) from the equation.
