Topic: Ride sharing
The Wall Street Journal reports that Uber is planning to shut down its US car leasing business, which was apparently losing $9,000 per car instead of the $500 Uber projected it would lose when creating the program. It sounds like Uber might have around $800 million in cars leased through the program, which Uber apparently holds titles to in trust rather than on its books, and it may have to sell many of them and the associated leases to get out of the business. The program and this outcome are indicative of Uber’s enormously aggressive expansion strategy and the huge sums it’s sometimes incurred in poorly thought out initiatives which have ended up significantly worsening its losses. Though it’s most common to see Uber’s losses attributed to its subsidies in ride sharing itself, a good chunk of its losses are made in these other aspects of its business and could be cut back significantly as it focuses on more rapid progress towards profitability. I suspect cutting the leasing program in particular wouldn’t dent growth much but would certainly go a long way towards improving margins. It’s also likely another example of an area where Uber might well do better to partner with a small number of large, reputable firms rather than taking such a direct role in the operation – in general, Uber seems far less willing to partner than Lyft, which is arguably holding it back in some areas.
Lyft’s Gross Bookings Growing at Higher Rate Than Uber’s (Jul 25, 2017)
Bloomberg has some inside data from Lyft that suggests its gross bookings grew by 25% year on year in the second quarter, which would be higher than the mid-teens growth Uber had told investors to expect in a preliminary call earlier this month. As with other recent signals that Lyft may be gaining on Uber, it’s tempting to read this as evidence that there’s some kind of backlash against Uber over its recent troubles, but I continue to see very little evidence of that. Rather, it’s likely that Lyft’s big push into new markets in the first half of this year has helped it grow bookings significantly during this period, while the Uber scandals have made a far more limited impact. And of course Uber’s results are on a much bigger base, meaning that its dollar growth is likely far larger than Lyft’s even if its percentage growth rate is lower. I’m happy to see Lyft gaining on Uber – it’s always struck me as a more ethical company with a leadership with more integrity than Uber’s, and I’ve been using Lyft pretty much exclusively when traveling recently. But I see very little evidence that Lyft is gaining on Uber broadly for this reason, and in using Lyft it’s often been clear just how big an edge Uber has – at airports, there are multiple times as many Ubers in the pick-up area as Lyfts, and at least half my drivers have been drivers for both services, often skewing heavily towards Uber in their actual share of driving (which often turns to a 100% share on specific days given the bonuses Uber offers for driving over a certain amount).
It’s been somewhat heartening lately to see Lyft partnering with a number of different players around autonomous driving technology, and even announcing its own “open platform” (mostly an API for integrating with its ride sharing data) for the space. At a time when Uber, Waymo, Tesla, and a raft of big legacy automakers are all competing around self-driving systems, it appeared Lyft was going to avoid diving into the fray and instead try to partner with the best in the industry. However, all that got rather turned on its head today when it announced that it will also be developing its own self-driving technology, with 10% of its engineers already devoted to this area and a big expansion and new offices planned for the team. On paper, that looks like something of a contradiction given the recent announcements about partnerships, or at the very least a serious hedge that will make at least some of those partners think twice. However, in reading both Lyft’s own blog post and several press articles about the news, I’m coming to the conclusion that there’s actually very little there, and in fact Lyft may be building something far more limited in scope than what most others mean when they talk about a self-driving system. All that’s really described in Lyft’s announcement is leveraging its existing ride sharing data and possibly adding sensors to some of its drivers cars to create 3D mapping. The former is already the centerpiece of its open platform, while the latter seems overly ambitious and probably also redundant given the much larger and more advanced high definition mapping efforts underway for the last several years. What I don’t see any references to are developing LIDAR or other hardware necessary for self-driving, or even software to steer self-driving cars – it’s almost as if Lyft expects its partners to fill those roles, though it still talks about Lyft’s own self-driving cars as distinct from those run by partners. I’m hoping we’ll get more clarity as this project moves forward, but suspect it’s less momentous and therefore also less contradictory than it might at first seen based on the headlines.
Uber Talking to SEC About Giving Drivers Equity (Jun 29, 2017)
According to Axios, Uber has been meeting with the Securities and Exchange Commission to discuss giving drivers equity in the company. As the piece notes, this was something recently-acquired ride sharing startup Juno promised to do, but which it found legally difficult given SEC regulations. Of course, if drivers were employees, there would be entirely standard ways to deal with stock-based compensation, but the combination of the fact that Uber is a private company and drivers are contractors rather than employees make this more complex. Given the historical meteoric rise of Uber’s valuation, I could certainly see the appeal for drivers of getting a stake in the company, though the attraction will have waned a little as there have been reports of shares selling at lower prices in the private markets over recent months. Longer term, there are still big questions about whether Uber’s valuation will continue to grow if it doesn’t have a clear path to profitability and doesn’t seem to be winning decisively against Lyft and other big competitors in its important markets. And its big investment in autonomous driving is another potential huge cash sink which isn’t guaranteed to pay off, especially given the distraction and uncertainty created by the Waymo lawsuit and the departure of Anthony Levandowski and Travis Kalanick in recent weeks. Still, Uber does seem to be genuinely interested in trying to find ways to improve its relationship with drivers recently, and this is another potential step in that direction.
Nissan-Renault Plans to Combine Electrification, Automation and Mobility Within 10 Years (Jun 23, 2017)
Uber’s CEO Travis Kalanick has finally bowed to pressure from investors in the company and resigned. It doesn’t look like Uber has issued an official statement at this point, but Recode claims to have confirmed the news following a letter from a number of big investors demanding his resignation. At various points since Uber started melting down in January, I’ve both said that Travis Kalanick was the source of the company’s cultural problems and therefore that it would be very hard for the company to truly change with him still in place, and also as recently as last week said that resignations of other top executives felt hollow when Kalanick had in many places been involved in or at least aware of their wrongful actions. For many years, Kalanick’s closest allies within the company were protected by him even when acting egregiously, and that circle had tightened to just Kalanick himself in recent weeks, but did still include him, making all the changes Uber was making ring rather hollow as he continued at the helm. I think his leave of absence was intended to achieve some of the same objectives as an outright resignation without forcing him out, which would have been tough to do, but it was already clear that he was remaining involved remotely in key decisions and thus that there was no real separation. What’s notable is that, despite all the outside pressure for Kalanick to go, and board members’ repeated defenses of him, it took investors acting as a group to finally force him out. This now leaves an enormous vacuum at the top of the company – a committee of no less than 14 people has been said to be running Uber during Kalanick’s absence – at a time when it has already been looking to fill the COO role and has left several other key executives in recent months. I would guess all that will now be reset, with several new executive search processes eventually running to fill the key roles. That, in turn, is going to make it very hard for the company to move forward aggressively with the changes it has committed to in the wake of the Holder Report recommendations. But this is all for the best long term, even if it’s messy in the short term. One big question that’s outstanding is whether the legal strategy in the Waymo-Uber court case changes at all as a result of Kalanick’s departure – we’ll see now to what extent the approach pursued so far was driven by him personally and to what extent the company will act consistently or differently now that he’s out.
Uber Adds Tipping and Makes Other Driver-Friendly Changes (Jun 20, 2017)
While ride sharing companies like Uber and Lyft continue to grab the majority of attention in the transportation tech space, with autonomous driving technology companies getting most of the rest, it’s worth remembering that there are various other transportation tech startups out there, not all of them doing all that well. It appears that Uber is in the process of trying to acquire assets and hire staff from valet parking service Luxe, which is one of those services that appears to have struggled to make its business model work. It had recently announced a pivot of sorts to a new model, but it now seems as though all that will remain is a shell once Uber has snapped up the parts it wants. That may or may not mean that Uber expands into the valet parking space – in fact, I’d say it’s at least as likely that Uber simply sees this as a way to get a number of competent staff with relevant skills quickly and easily while also acquiring some relevant technology.