when coming back Uber Technologies When it went public in 2019, CEO Dara Khosrowshahi quietly warned that profits wouldn’t really start pouring in until the company developed self-driving cars, a project it was investing heavily in at the time. .
Meanwhile, Uber has lost more than $25 billion as its early self-driving car project floundered and canceled countless other half-baked expansion ideas that the 54-year-old inherited when he took the job in 2017.
“For most of our history, when you asked someone about Uber, profitability wasn’t the first thing that came to mind,” Khosrowshahi said on Uber’s second-quarter conference call on Aug. 1. “In fact, many observers have boldly declared over the years that we will never make money, and I understand why they feel that way.”
As self-driving car advances converge with Uber’s rapidly improving cash flow, looming profitability, and the company’s other goal of making all of its U.S. fleet fully electric by 2030, the strategy may return to origin.
“By 2030, every driver on the platform will own an electric car, because it’s crazy if they don’t,” the Uber CEO said at the recent Aspen Ideas Festival. in the interview With NBC’s Savannah Cyrus. “Our job is to get them to that place.”
Analysts believe electric vehicles could hold the key to returning the world’s largest ride-sharing company to a future business model, especially since electric self-driving cars as a ride-hailing strategy are showing more signs of life.news such as General MotorsIts second-quarter report showed rapidly falling costs at its Cruise Automation AV unit, which said it would soon bring operating costs below $1 per mile, and the California Public Utilities Commission’s Aug. 10 decision to lift limits on the number of self-driving cars cruise and letterWaymo’s unit can operate on the streets of San Francisco and can be deployed around the clock of the day, a future that some see coming sooner than many investors expect.
The road will not be smooth. Shortly after California’s decision, a series of Cruise accidents led the state and GM to agree to quickly cut the size of the robotaxi fleet experiment by 50% while the investigation is underway. But analysts are convinced of the long-term trend.
“All self-driving cars will be electric,” said Angelo Zino, an analyst at CFRA Research. “Uber will be more than happy to let them in, and they’ll get a piece of the action. The price should come down significantly because there won’t be a driver. The number of cars should grow exponentially.”
Of course, Uber has had a tumultuous time. Its IPO price of $45 per share fell to $27 within months and to $21 early in the pandemic — a low the company hit again last summer before doubling to $44. From 2019 to 2022, the company’s income statement shows net losses totaling nearly $25 billion, mostly due to taking note of past mistakes, including when the unit was sold to Pittsburgh between 2018 and 2020, when the company was in the red. The $1.7 billion lost in self-driving car development work is based on Aurora innovations.
But under the surface, a lot is happening to make Uber a profitable company (at least by Internet accounting) in the second half of 2022. Operating cash flow reached $2.69 billion over the past five quarters and $2.69 billion this year. Operating cash flow will grow to $3 billion to $5 billion by 2024, Zino said.
that’s one of the reasons Follow all 32 analysts at Uber The stock is recommended by TipRanks. “They resized their business because they had to during the pandemic,” said Wedbush Securities analyst Scott Devitt.
Morgan Stanley’s Brian Novak now thinks that the combination of annual single-digit growth in subscribers, frequency of trips per subscriber, and price increases will keep revenues growing double-digits for several years.
Inflation is one of Uber’s unexpected helpers.The company simply raised the cost of a service long criticized for undercharging, even as it built market share faster than its rivals Lyft. This year, the company saved money by laying off staff when it eliminated nearly a third of its recruiting team to reflect a slowdown in hiring. But the most important strength is that Uber is finally getting big enough, with revenue climbing from $13 billion in 2019 before the COVID-19 outbreak to $31.9 billion last year.
“They’ve been a net beneficiary of inflation,” Zino said. Relatively flat spending, especially on research and development, has led to some growth in revenue, he said, with the ride-hailing division’s revenue up 40 percent in the second quarter, down 1.5 percent. to the bottom. Wire. “They’re generating a lot of cash flow and they’re going to scale that. It’s a business of the utmost size.”
All of this is the backdrop to the push for an all-electric fleet.
What’s striking about Uber’s plan, DeWitt said, is that it’s capitalized so lightly that it can handle increasing share buybacks. hertzThrough a partnership with Uber, drivers can rent a Chevrolet Bolt or Hyundai Kona EV for as little as $273 a week, a Tesla Model 3 for $299, and enjoy up to 45% off public rides with EVgo. Discount on charging fees.
To help drivers recoup costs, Uber pays drivers an extra $1 per ride and enrolls EV users in the Uber Green program, the pricier Comfort Electric program for which most EV drivers are eligible. The company says that $1 for a single ride can bring drivers as much as $4,000 a year in earnings. In London, where it charges clean air on all its rides, it has raised at least £145m to subsidize drivers buying electric cars.In the U.S., drivers who purchased an electric vehicle through TrueCar.com Get $1,000 back If they use the vehicle for at least 100 Uber trips.
So far, 20 percent of the miles Uber has driven in London have been electric, the company said, far higher than the 10 percent in California or 5 percent in North America as a whole. That’s far short of the company’s goal of making the city fully electric by 2025. The company said it has no plans to introduce the Clean Air Fee to the U.S. market.
“We’ll see in 2025 or 2026 what they look like and whether something like that is on the table in the U.S.,” Zino said.
It’s working so far.The number of electric vehicles on Uber’s platform tripled last year
That view is supported by Tracy Lynn Young, who drove for Uber in the Atlanta metro area for seven years. She told CNBC in May that she pays $340 a week for Teslas through Hertz and said she can save $1,800 on busy weekends, thanks in part to EV incentives and those asking to buy Teslas. The curiosity of Tesla passengers, because they have never used a Tesla. in electric vehicles. She said the incentive alone could almost buy a car.
Bonus: She charges $120 a week less than she used to pay for gas, which also includes monthly car maintenance, and she’s saving money on her own car, which works as a ride-share driver and in estate sales 95,000 miles in two years as a driver.
Most of the $800 million Uber plans to spend will subsidize those benefits, Khosrowshahi said. Much of the rest will be spent on developing charging stations and mobile phone apps that let drivers find them. The company is also developing software to monitor how well drivers’ batteries are doing, dispatching them when needed to areas with plentiful chargers, and directing them to charge at slower times of the day so they don’t lose revenue.
“If you’re at 15 percent, it’s not going to get you where it gets you into trouble,” Khosrowshahi said.
But Zino said the investment would be insignificant if, as the chief executive hopes, it is enough to switch nearly all drivers to electric vehicles by 2030. Khosrowshahi did not say that existing drivers not using electric vehicles would be cut off from Uber, saying he considered incentives rather than punishment.
But analysts believe that if self-driving cars are really on the verge of mass adoption, the real payoff will come over time from deals with Waymo, Cruise and others. They foresee a hybrid Uber in which many routes are served by self-driving cars dispatched by Uber but not owned by the company, eliminating many drivers.
That will allow Uber to lower fares on many routes, Zino said, as Uber reported just 29% of total ride bookings as revenue in the second quarter of this year, up from about 26% a year ago, but the Still make more money. explain. That would bring the company back to its previously promised loss of $25 billion.
If all goes well, that is.
Analysts don’t think Uber will ever have a large self-driving fleet. Instead, the more likely outcome is for the app to become a smart hub for Cruise, Waymo, Tesla, and AV players. All of these companies will compete for customers on Uber’s platform in the same way hotels did for searches on Expedia.com — once run by Khosrowshahi.
In fact, Zino said, the threat to Uber’s current market darling status is if self-driving car makers, especially Tesla, decide to compete directly with Uber for riders. Recession fears could hurt stocks, as they did for a while last year, and worsen if a recession does occur.
Khosrowshahi told Sellers that 10-20% of Uber drivers could soon be robots, but said he still thinks there will be more people driving for Uber than there are now.
“We want every driver in the world to be on our platform; if that driver happens to be a robot, that’s fine as long as that driver is safe,” he said. “2030 is fast approaching.”
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