Author Topic: Uber/Lyft have defective business model?  (Read 5562 times)

DTEJD1997

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Uber/Lyft have defective business model?
« on: March 05, 2018, 11:19:17 PM »
Hey all:

I've always questioned whether Uber/Lyft had a "defective" business model...it now appears that there is a significant chance that this is correct.

MIT published a study claiming that most drivers NET something like $3.25/hour.  Apparently the eggheads at MIT got it wrong, and the drivers really make $8/hour on average:

Please see:

https://nypost.com/2018/03/05/revised-study-finds-uber-drivers-make-more-than-first-reported/amp/

I've known a few attorneys that drive for Uber.  Most no longer do it.  They made money but it just was not enough after expenses.

One attorney said he did reasonably well IF he drove during PEAK DEMAND hours.  This would be weekend evenings and late at night when college kids were coming out of the bars.  He would also do airport runs.  He reported to me that if you were selective about WHEN you drove, you could make OK money....if you just drove all the time and during the day, then it was usually not very remunerative.

If I am not mistaken, NEITHER Uber or Lyft has ever reported a profit.

Some analysts speculate that these companies will turn profitable once "self driving" cars become available and they can cut out the driver.

If the driver is only earning $8/hour, just how much "profit" is there in the business model to begin with?

Further, these drivers are shouldering the capital cost of the vehicle and fronting the expenses.  If/when Uber/Lyft has to do this...they are going to require BIGLY amounts of capital.

I am also going to guess that a fully autonomous car is going to cost at a MINIMUM $50k.  What if these cars cost $75k or $100k?  They are going to buy a very expensive piece of machinery to capture $8/hour in profit (maybe?).

So color me skeptical...I think these companies do not have a viable business model.

Any thoughts?



VAL9000

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Re: Uber/Lyft have defective business model?
« Reply #1 on: March 06, 2018, 03:04:37 AM »
Here is the information you are looking for:

https://www.wsj.com/graphics/uber-financials/

Of $11bn revenue $7.5bn goes to drivers and their cars.  It's an enormous opportunity for both revenue growth and cost optimization.

Self driving cars will cost less than a typical vehicle today and will be much better utilized.

DooDiligence

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Re: Uber/Lyft have defective business model?
« Reply #2 on: March 06, 2018, 04:10:26 AM »
I think the taxicab model is just a path to an autonomous model.

Tie ins with insurance could add incrementally?
https://www.bloomberg.com/gadfly/articles/2018-02-12/softbank-billionaire-bets-on-a-world-without-car-crashes

In the short run, the IPO should be profitable for some (Masa being one.)
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Spekulatius

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Re: Uber/Lyft have defective business model?
« Reply #3 on: March 06, 2018, 04:27:12 AM »
Here is the information you are looking for:

https://www.wsj.com/graphics/uber-financials/

Of $11bn revenue $7.5bn goes to drivers and their cars.  It's an enormous opportunity for both revenue growth and cost optimization.

Self driving cars will cost less than a typical vehicle today and will be much better utilized.

But what is Uberís edge running a large fleet of cars exactly?
To be a realist, one has to believe in miracles.


cwericb

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Re: Uber/Lyft have defective business model?
« Reply #5 on: March 06, 2018, 04:35:37 AM »
Anyone expecting to see autonomous cars running on our highways has a long, long wait ahead.

Perhaps in sunny south California, but not in the snow belt and not on rural two lane highways during the winter where there are no lines on the roads and where snow drifts and whiteouts can crop up in minutes.

Uccmal

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Re: Uber/Lyft have defective business model?
« Reply #6 on: March 06, 2018, 04:49:45 AM »
DTEJD,

Leaving aside the concept of automous vehicles and focussing only on the business of Uber/Luft.

It doesn't surprise me that it took a study to reveal that drivers aren't making any, or at least very little money.  Most people dont have a good sense of what the overall costs of driving are.  Insurance, wear and tear, fuel costs, and so forth add up. 

Uber/Lyft, if they make any money at all, are making it on the backs of their (suckers) drivers. 

In every city in the world there are cab companies, usually a few, in some degree of competition with one another.  This has been going on for a hundred years.  Why would we think that they haven't optimized the cost structure?  And the cabbies and cab companies have been operating with the above mentioned driving costs all in.  If Uber and Lyft had to start paying the full costs they cannot beat a cab company. 

Needless to say, I wouldn't touch an IPO in either company with a barge pole. 

GARP tending toward value

EliG

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Re: Uber/Lyft have defective business model?
« Reply #7 on: March 06, 2018, 05:30:08 AM »
DTEJD linked MIT study.

Chief Economist of Uber challenged the validity of the study.

https://medium.com/uber-under-the-hood/an-analysis-of-ceeprs-paper-on-the-economics-of-ride-hailing-1c8bfbf1081d

He claims that MIT used a flawed methodology.

twitter discussion
https://twitter.com/calebwatney/status/970052190084706304


CorpRaider

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Re: Uber/Lyft have defective business model?
« Reply #8 on: March 06, 2018, 05:48:06 AM »
I received from amazon like a tube of toothpaste in a 12 x 8 (ish) corrugated box delivered by a union member UPS carrier in a $100K truck that gets crappy mileage yesterday.  The last 6 Netflix originals I watched were MEH. I frequently wonder about business models.

VAL9000

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Re: Uber/Lyft have defective business model?
« Reply #9 on: March 06, 2018, 05:50:04 AM »
But what is Uberís edge running a large fleet of cars exactly?

Oh, I don't think this is Uber's game to win.  They have done a fantastic job of creating a centralized service for ride hailing which gives us great insight into the economics of the business.  I don't believe Uber will develop the technology needed to create a very profitable business.  This game will be won by whomever does.  Probably Google and/or GM based on what I've read.