uber is the godfather of ride hailing they have 5 million drivers worldwide and operate in 900
different cities to put that in perspective even walmart only has 2.3 million employees
now of course uber's employees aren't full-time like walmart's
but together uber drivers provide ride sharing and delivery services to 65 million people in america
alone but despite this insanely massive network uber has never been that profitable of a company
in fact since they went public they haven't even had a single 12-month period in which they were
profitable for a little bit it seemed like uber was finally turning things around as the company
posted their first profitable quarters last year but in 2022 things have gotten worse than ever
before as uber just posted the worst quarterly loss ever coming in at nearly 6 billion as you
would guess this hasn't been great news for the stock as uber has sold off 66 from its
all-time high coincidentally this correlates to a market cap loss of roughly 66 billion dollars and
while that is quite devastating it also makes sense considering uber's financials
for uber to really make progress forward it they have to first become profitable so here's
why uber has been struggling to make money and when the company might finally become profitable
one of the biggest fundamental issues with uber's business model is that they're constantly fighting
with themselves to grow larger here's the thing for uber's network to be as strong as possible
they need both the drivers and riders to be on their side but the issue with this is that the
goals of riders and drivers are exactly opposite of each other riders want the service to be as
affordable as possible while drivers want the service to be as worthwhile as possible so uber
is stuck in this super weird catch-22 situation if they raise pay for drivers they'll grow the size
of their network but this is pointless because less people will find their services appealing on
the other hand if they lower fares they'll appeal to more customers but this is once again pointless
because there won't be enough drivers to meet demand clearly uber isn't quite a pickle but this
isn't that surprising when you take a look at the history of the taxi industry the first gas-powered
taxis appeared in new york in 1907 but it was until the launch of the model t that this industry
really took off soon enough there were dozens of new taxi companies fighting for market share
and there's really not much innovation you can do with the taxi business really there's
only one way to capture more market share and that's by lowering fares and that's exactly what
all these companies did this trend was just further accelerated by the great depression
as many of the people who lost their jobs turned to becoming taxi drivers all this competition it
completely eliminated the profitability of the industry and we saw protests break out across
the country these protests demanded that the government regulate the tax industry by limiting
the number of taxis in each city and that's exactly what the government would do so becoming
a traditional taxi driver isn't as easy as simply getting a car and marketing your services
you actually have to get a taxi medallion in most urban cities across the us while this did make the
tax industry rather bureaucratic it also affects the profitability problem the takeaway from this
story is that the tax industry has never been profitable without regulations and limitations
and given that neither uber nor any of their competition abide by any of these regulations
thanks to a few loopholes it's not surprising that they've been struggling to make a profit
to make things even worse ride-hailing companies are extremely well-funded lyft for example
currently has 4.7 billion dollars in total assets and uber has 32 billion in total assets even with
the recent six billion loss so for these guys it's not just a race to the bottom it's a race to see
who will go bankrupt or get bought out first and the survivor takes it all the bright side
for uber is that if they do make it to the other side they'll have such massive economies of skill
that they'll basically become untouchable but in the meantime they're burning money as always
likely the only technology that can disrupt uber's dominance in such a future is robo taxis machines
don't care about getting paid a decent amount and they rarely have to rest or take a break so
this is clearly what uber needs to get to the next level but it can also be used against them uber is
of course well aware of this threat and that's why they're investing so heavily in robo taxis
but this hasn't exactly worked out for them in fact in late 2020 uber ditched the idea of
creating their own robo taxis by selling their robotics division to a company called aurora
now uber did take on a stake in aurora so it's not like they completely gave up on robo taxis
but they did limit exposure and give up on the idea of developing an in-house robo taxi
and while this might sound like a questionable decision at first glance it was really the only
choice they had because they don't really have a chance against tesla for a couple of reasons
starting with data collection data is likely the single most important factor in developing machine
learning and artificial intelligence especially when it comes to edge cases and with how many
cars tesla already has on the road collecting data it's basically impossible to catch up to
them in terms of data way back in april of 2020 tesla already had a 3.3 billion autopilot miles
so they're probably closing in on 10 billion miles by now this amount of data is simply not
something that uber can compete against with a small fleet of test vehicles i mean even
google has only been able to clock in 20 million miles so the odds were never that great for uber
but even more importantly than the data lead tesla has something that no one else has
which is that consumers are literally paying tesla to develop autonomous vehicles
with companies like uber and google they have to make money from their main businesses or
raise money to invest in robo taxis but tesla already has hundreds of thousands of
customers who are paying them at 12 000 per car to continue developing autonomy this is clearly
not a battle that even google much less uber can win and uber did eventually realize this
but not before sinking 2.5 billion to europa taxis themselves and while it makes sense
why they made this bet this bet has unfortunately been weighing down on uber's bottom line for years
fighting in a race to the bottom and being forced to ditch robo taxis
are already bad enough but these issues were just made even worse by leadership usually when we talk
about bad leadership we're generally talking about nba businessmen who prioritize short-term profits
over long-term innovation but when it comes to uber we're actually talking about the co-founder
travis kalanick travis wasn't exactly a bad leader from a business perspective per se he
was expanding the company across the globe and he was heavily investing in self-driving which seemed
like the right move at the time the real problem with travis however was all the drama that he
brought with him first of all travis was infamous for overseeing a rather toxic workplace culture
allegedly he had a bad habit of turning a blind eye to gender-based discrimination
and harassment and in february of 2017 a former uber employee would publicly blast the company
for these practices this prompted a full-on investigation into the company's workplace
culture by former u.s attorney general eric holder eric's investigation would result in
a slur of recommendations for uber one of which was reducing travis's role at the company this
was already a pretty bad situation for travis but things would just get even worse when travis
himself would get accused of harassment as this entire harassment case was unfolding travis was
also being blasted for a leaked argument with an uber driver in this argument the
uber driver would question travis about recent changes to uber black which seemed unfair to
apparently uber had reduced uber black fears substantially which made it unprofitable for
the driver to continue driving around with a 97 000 car at first the two would address the
problem diplomatically but it didn't take long for things to get out of hand how much is the mile now
275 you know what what some people don't like to take responsibility for that they blame everything
good luck good luck to you too but i know you don't gonna go far
travis's comment that the uber driver wasn't taking responsibility for his own actions
attracted a lot of criticism people were quick to call out how travis had bypassed loads of taxi
regulations and labor lost through uber and how he was not taking responsibility for any of that now
honestly i think some of the blame does lie on the uber driver as well given that buying a 97 000 car
based on uber income is not exactly the smartest of choices but that's besides the point travis's
allegations and the comments had destroyed his reputation and this was enough to kick off the
delete uber movement travis would eventually be ousted by the board and he would leave the company
altogether and sell all of his talk in december of 2019 but the damage had already been done
despite all these challenges it does look like uber is finally turning a corner they've already
expanded all across the globe so they no longer have to fight so hard for market share they
have also expanded into adjacent businesses like food delivery which has diversified their income
on top of this they've cut losses on self-driving and travis is no longer involved in the company
whatsoever so it really is just a matter of leaning up the business
and achieving profitability something else to note is the vast majority of the losses last
quarter were due to poorly performing assets as opposed to terrible cash flow if we take a look
at their ebitda we'll see that uber only lost 250 million last quarter due to the business itself
something that is a bit concerning is their ebitda has actually never been positive but
fortunately their revenue and gross profits are at all-time highs so uber may just need a couple more
quarters to achieve consistent profitability in fact many analysts are speculating that 2022 will
be uber's final negative year and that they'll be consistently breaking even by the end of 2023
now of course it'll take a couple of years from there to really build up profitability
but it does seem like uber can pull in respectable profits by the end of this decade however
this does not mean that uber is completely out of the woods because they still have to go up against
tesla it's no secret that tesla wants to get into the right healing business with self-driving cars
and though elon's timelines are almost always too ambitious it seems like whether it happens
in 2025 or 2030 or 2040 tesla will likely be the first one to achieve fully autonomous cars
and once tesla starts releasing these cars onto the road things will get quite challenging for
uber either they can buy teslas themselves or they can continue keeping up their partnerships
with autonomous companies like aurora but neither of these are exactly optimal tesla will always be
able to offer cheaper ride healing services than uber buying teslas and then putting them on the
road conversely it's also not clear how well uber self-driving partnerships will pan out
compared to tesla's offerings so the long-term future of uber is still rather uncertain but
the next three to five years should hopefully be smooth as uber finally achieves profitability but
that's just what i think do you guys ride ubers comment that down below also drop a like if you
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more questions logically answered but until then i'm hari and i'll see you guys on the next one
you