Author Topic: UBER - Uber Technologies  (Read 10665 times)

merkhet

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Re: UBER - Uber Technologies
« Reply #10 on: May 15, 2019, 10:57:44 AM »
ajc, you may have overlooked the 10,000 mile annual limit for the Tesla lease at that price.


ajc

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Re: UBER - Uber Technologies
« Reply #11 on: May 15, 2019, 11:25:43 AM »

ajc, you may have overlooked the 10,000 mile annual limit for the Tesla lease at that price.



My bad, thanks for pointing that out. Here's one via The Rideshare Guy with a Chevy Bolt EV though, which does 200 to 250 miles on a single charge. Unlike the $35000 Tesla it can be got for below $25000 with incentives and rebates (https://therideshareguy.com/driving-a-chevy-bolt-ev-for-rideshare/).

It's not the $10k to $15k per vehicle that DTEJD1997 was talking about, but maybe if a person stretched and saved and put in some extra ridesharing hours with their existing ICE vehicle then after a year the $25k EV is within reach. Further, with VW likely entering the US market next year to compete (https://www.bloomberg.com/news/articles/2019-05-14/vw-cranks-up-electric-car-plants-to-overtake-tesla-s-capacity) we might see some generous introductory prices or incentives by folks like GM who still want to remain in the fight.

Maybe there are strict limits on all EV leasing programs like that Tesla Model 3 has, I'm not sure. However, Uber's EV leasing program in Portland from 2017 suggests there might be some car companies that are willing to lease to full-time ridesharing drivers for around $100 per week (see https://www.citylab.com/transportation/2017/04/uber-electric-vehicles-leasing-program-portland-oregon/522759/) so I'm not sure my thinking here is a million miles off. Others might disagree.



ajc

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Re: UBER - Uber Technologies
« Reply #12 on: May 15, 2019, 12:14:23 PM »

Here's a Chinese EV coming to the US in 2019 (https://cleantechnica.com/2019/02/22/us-approves-chinese-electric-cars-imported-from-kandi/).
Their K22 model will sell for below $20 000 before rebates.
It has a range of 125 miles which is almost enough for a whole day rideshare driver today. If you drove home for lunch and charged it for an hour, it'd be fine.
As their batteries become more efficient, I think it's fair to say it'll be enough for full-time Uber use.
It's not a $10 000 to $15 000 car like DTEJD1997 mentioned, but after subsidies it's darn close.



wabuffo

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Re: UBER - Uber Technologies
« Reply #13 on: May 15, 2019, 12:24:39 PM »
Ajc - thanks for posting all of that info.   Very interesting reads.

Question -- if EVs become ubiquitous due to cost their advantages over gasoline/diesel powered vehicles, why won't the "fuel savings" be competed away?   If its a good deal, cab companies and other ride-sharing competitors will come out with EV fleets and everyone (including the driver and UBER) is back to square one.   

Its like Buffett's textile mills, the capex might look like it has great returns, but if competitors also do it, then no one has an advantage.   Its like watching a parade, the first person to rise onto their tippy-toes gets a momentary better view, until the entire crowd stands on its toes.

wabuffo

« Last Edit: May 15, 2019, 01:07:46 PM by wabuffo »

Jurgis

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Re: UBER - Uber Technologies
« Reply #14 on: May 15, 2019, 12:47:06 PM »
As a cheapskate customer, I think Uber/Lyft have space to increase prices without forcing me to take cabs. There are definitely trips that I would not take if prices increased ("Uber-vs-drive-myself-and-pay-for-parking", "Uber-vs-complicated-public-transport"), but there are trips that I would still have to take and probably take up to the taxi prices ("Go to airport"). They can also probably have more "partial surge" pricing, which might be tough to avoid. So from customer point of view, I'm afraid Uber/Lyft will start pushing prices up. Whether that's enough to justify investor point of view to invest into the stock, I'm not sure.

I'm not sure how it's in US, but in Lithuania wait charges can be annoying. The price of a ride is so low that couple minutes of driver waiting can up the price of the trip 10-20%. I understand that this is a nice way for drivers and Uber to get extra revenue, but the customer does not get a discount if the driver is late...

Which brings me to the anecdotal observation that it seems like a large percentage of Lithuanian Uber drivers casually hang out at home with app running. The scenario plays out as follows: I order Uber, it shows 6 minute arrival time, and then... the car on the map does not move at all for 2-4 minutes. Pretty sure the driver was just at home and then went to their car after accepting the trip. I'm not against this on principle, but it adds waiting time for customer. And it's asymmetric with customer being charged for waiting the moment driver hits the pick up spot.

Electric scooters for rent seem to be a big thing right now in Lithuania. I did not try it, since you have to get an app and I'm not sure if the app would accept my US credentials. So maybe if they were offered by Uber, I would have tried them. Not sure. Most of the time I'd either choose to walk or to take a car (Uber) rather than taking a scooter. Might change my mind if I lived/worked/etc in more urban area. And in Lithuania there's tons of scooters in city center, but you can't really get one if you're even just outside the center. So it seems the convenience/availability is mostly for trips from center to suburbs, but not really in the other direction.
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SHDL

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Re: UBER - Uber Technologies
« Reply #15 on: May 15, 2019, 01:16:12 PM »
Not much to say about this beyond what was discussed in the pre-IPO thread:

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/uber-filing-for-ipo/

I'm still pretty skeptical about this but I do enjoy reading the counterarguments. 

DTEJD1997

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Re: UBER - Uber Technologies
« Reply #16 on: May 15, 2019, 08:19:40 PM »

Here's a Chinese EV coming to the US in 2019 (https://cleantechnica.com/2019/02/22/us-approves-chinese-electric-cars-imported-from-kandi/).
Their K22 model will sell for below $20 000 before rebates.
It has a range of 125 miles which is almost enough for a whole day rideshare driver today. If you drove home for lunch and charged it for an hour, it'd be fine.
As their batteries become more efficient, I think it's fair to say it'll be enough for full-time Uber use.
It's not a $10 000 to $15 000 car like DTEJD1997 mentioned, but after subsidies it's darn close.
AJC:

I think that UBER drivers in foreign countries make MORE than their home countries minimum wage largely because they are SUPPLYING the vehicle.  Let us say that UBER lowers the wage of the driver to minimum wage or close to it...what driver would drive for them?  I can't think too many would do that!  A car in most foreign countries takes more hours of labor to earn than it does in the USA.  I would think is especially the case in Africa and India...thus UBER drivers make substantially more than minimum wage in those places.  Could UBER lower the wages of drivers in those places?  Maybe? Probably?  but I think there is less slack than what you are initially thinking.

The successful UBER drivers that I know in the USA follow demand pricing AND they also have LYFT.  They run both apps simultaneously to get fares AND to get the highest paying ones.  The drivers ALSO have researched their car selection VERY carefully.  They are getting heavily depreciated cars that are still reasonably dependable and cheap to drive.  The most flash for the cash.  Think $10k or a bit less.  Drive them for a 1-2 years and then sell & replace.  You've got to own these vehicles, you can't lease them.  I am not sure that a brand new $35k+ Tesla would work.  A $20k electric vehicle?  Hmmm...maybe?  I wonder how reliable it will be though?

In different countries and different areas of the USA, electric cars may work.  I am not so sure that they will work in all USA cities.  For example, for me to get to the main Detroit airport, it is about a 30 mile drive.  When I had a job it was about a 35 mile commute EACH WAY.  Many residents live at least 10-15 miles from the city center.  So if you were doing an 8 hour shift AND you had to go the airport (lucrative run), you would have to recharge, maybe recharge twice even?  You would have to be EXTREMELY careful not to run out of electricity while out on a run.  So maybe once you get to about 10%, you've got to recharge?

So I'm not sure that EV will solve UBER's problems.

ajc

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Re: UBER - Uber Technologies
« Reply #17 on: May 18, 2019, 08:35:21 AM »


Ajc - thanks for posting all of that info.   Very interesting reads.

Question -- if EVs become ubiquitous due to cost their advantages over gasoline/diesel powered vehicles, why won't the "fuel savings" be competed away?   If its a good deal, cab companies and other ride-sharing competitors will come out with EV fleets and everyone (including the driver and UBER) is back to square one.   

Its like Buffett's textile mills, the capex might look like it has great returns, but if competitors also do it, then no one has an advantage.   Its like watching a parade, the first person to rise onto their tippy-toes gets a momentary better view, until the entire crowd stands on its toes.

wabuffo




No problem. I don't think the textile mill example applies. Those have no real barriers to entry. There were likely dozens or more textile mills in the US then, and vastly more overseas. That makes for a race to the bottom.

I can't think of a large scale duopoly that didn't have either key competitive advantages as a result of their scale, or at least a few major barriers to entry.
By definition, a duopoly almost can't develop if the barriers to entry are negligible, so the fact that ridesharing has moved from 100's of competitors globally since 2011 to only two majors in each region, is strong evidence that ridesharing has formidable barriers to entry.
If anything it's our understanding of them and how they work that's likely non-existent, rather than the barriers to entry themselves.


EVs and their impact on the economics of ridesharing

To give some general ridesharing context, I think the importance of an EV revolution shouldn't be understated. The average price of gas/gallon has gone from $1.00 in 1998 to $2.50 as of 2019 (https://www.energy.gov/eere/vehicles/fact-915-march-7-2016-average-historical-annual-gasoline-pump-price-1929-2015). Same with oil production where exploration, capital, operating, and tax costs, have risen at essentially the same rate (https://www.bbc.com/news/business-15462923).
The price of your average new ICE car in the US was $17 000 in 1990, but by 2013 it was over $30 000 (http://www.thepeoplehistory.com/70yearsofpricechange.html). ICE vehicles have far more moving and breakable parts than EVs, so each year you spend more money on maintenance and repair costs too.
Essentially for ICE vehicles, the cost of everything (including the car itself) increases on average over time. Uber wants to lower prices for riders, but drivers want more money so they can cover rising expenses. The incentives are competely at odds with each other.

On the other hand, in 2010 your two EV choices were basically a Tesla Roadster for $100 000 with a 200 mile range or a Nissan Leaf for $33 000 before rebates with a 100 mile range. Today EVs are far cheaper.
A Model 3 starts at $35 000 with a 250 mile range and a Kandi K22 costs $20 000 before rebates with a 125 mile range. This is possible because battery efficiency has improved and costs have fallen from $1160/kWh in 2010 to less than $200/kWh today. Current forecasts are that prices will drop to $94/kWh by 2024 and $62/kWh by 2030 (https://about.bnef.com/blog/behind-scenes-take-lithium-ion-battery-prices/).

What does this drop in battery prices mean for EV prices and range over the next decade? A $15 000 Hawtai EV, will theoretically have a 190 mile range by 2030 up from 96 miles today (https://cleantechnica.com/2018/11/03/china-has-record-electric-car-sales-month-china-electric-car-sales-report/).
If Renault can upgrade the $8 000 Twizy (https://en.wikipedia.org/wiki/Renault_Twizy) to be a little more like a Smart ForTwo or Smart ForFour car, then the 62 mile range you get today would translate to a 176 mile range by 2030. Maybe you'd need to pay $10 000 instead of $8 000 for the slightly larger body and chassis, but it would still be incredibly affordable.

Residential solar has gone from 52 cents per kWh in 2010, to 10 cents today, and the US government goal for 2030 is 5 cents (https://www.energy.gov/eere/solar/sunshot-2030). If this efficiency carries over, the current $400 monthly cost for charging your EV overnight during off-peak hours would fall to $200 per month.
Basically, by 2030 it's not absurd that a full-time Uber driver could buy a $10 000 EV with a 170 mile range that costs $200 to charge fully each month. The only other running costs would be new tires and insurance, vehicle tax, etc, since EVs have close to no maintenance fees.

If you depreciate that theoretical $10 000 EV over a decade, add $200 per month for insurance, license, registration, plus vehicle taxes (https://www.ridester.com/uber-lyft-driver-costs-and-expenses/), $200 per month for charging costs, and $400 for a new set of tires each year, you end up with monthly running costs of just over $500 overall by 2030.
Today's Uber drivers earn $15 to $20 per hour before subtracting depreciation, operating costs, etc (https://www.ridester.com/how-much-do-uber-drivers-make/). That means $600 per week at the low end. If you minus the $120 theoretical weekly all-in operating cost of a 2030 Twizy-like EV, that leaves the driver with $480 per week net at the bottom end of today's Uber pay scale.

Assuming the current minimum US weekly wage of $290 goes up to $350 or even $400 by 2030, that still means by 2030 even the lowest paid Uber drivers today will be earning far more than the minimum wage even after accounting for all expenses. In other words, EVs do change the dynamics completely and will allow Uber drivers to earn much fairer net salaries over the next decade.
It also means as cheaper and longer range EVs become more mainstream and widely available, so the pay tensions between Uber and their driver community will become less of an issue. In fact with the projected battery and EV improvements by 2030, Uber wouldn't need to even increase driver pay for the next decade in order for Uber drivers to earn radically more.


Potential barriers to entry across the ridesharing industry

We can see Uber and Lyft still account for 97% of all ridesharing trips in the US after many years (https://secondmeasure.com/datapoints/ubers-not-as-bad-off-as-you-think/), so something's going on. I think one key thing is driver down time and miles unpaid versus miles paid. Part of what keeps drivers using Uber and stops ACME ridesharing from gaining share is the miles unpaid to miles paid ratio. ACME rideshare will have no option but to have a very high starting ratio, so they'd need to pay drivers a lot more per ride.
The finance self-help guy, Mr Money Mustache, did a test and found a miles unpaid to miles paid ratio of roughly 1:1 for his Uber drives (http://www.mrmoneymustache.com/2017/11/22/mr-money-mustache-uber-driver/).

Say an Uber driver needs to ride 4 miles to pick up a fare who travels for 4 miles in the car and they get paid $8 total. Uber is then paying them $1 per mile driven. ACME would have far fewer drivers and riders for the first few years or more. If the average ACME driver had to ride 8 miles (because of lower driver and rider density) to reach their fare, and their rider also took a 4 mile trip, then that driver moved 12 miles instead of the 8 the Uber one did.
ACME would have to pay their driver $12 for that same 4 mile paid ride to make sure their driver got the right amount per total miles driven. Expenses and depreciation obviously only care about total miles driven, nothing else.

That would be an impossible trick for ACME to pull off. In 2018, Uber did over 140 million trips (400 000 per day) in New York (https://www.nytimes.com/2018/06/17/nyregion/uber-taxi-drivers-struggle.html).
If ACME rideshare wanted to take over NYC, they'd need to start paying their drivers maybe 50% more than Uber per ride in order to make the economics work on a total miles driven basis. I think the average Uber trip costs $15 or so. You can do some rough math yourself. It's ugly.
In my view, this is a big part of the reason why Uber and Lyft control 97% of the US market. Astronomical amounts of money would be needed just for another company to have the chance to properly compete.

Then you have to consider Uber's backing from Saudi Arabia and the Softbank Vision Fund. Saudi Arabia's PIF owns a $3.5b stake directly and the Vision Fund (which has strong Saudi state participation) owns an $11b stake. Let's say like Juno did in 2016, someone wants to try take share in New York after raising $80m (https://www.reuters.com/article/us-juno-fundraising-idUSKCN1232A5).
Why would the Saudi's or Softbank not lend Uber another $100m or $200m just to crush the competition? That doesn't seem like a lot to spend in order to protect a multi-billion dollar investment that could be worth far more a decade from now. I think almost every small startup or VC is well aware of how deep Uber's pockets might be.

Johnny mentioned Google or Apple could potentially build price comparison into their apps and disintermediate Uber and Lyft. If enough drivers switched over to use that as their primary dashboard, it might take care of the miles unpaid problem since they'd be piggybacking off the Uber and Lyft driver/rider bases.
It's a fair point but I think the thing is Uber and Lyft don't have to offer Google or Apple, visibility into their specific ride pricing. As long as Uber and Lyft benefit from it as an extra customer acquisition channel, that's fine.
If they saw their share eroding though, they'd simply pull their data. If anything, Google or Apple would likely take the bigger hit since their apps would have far less functional value in the future on-demand world of 2025 or 2030.

Plus, there's also an already sizeable and growing dissatisfaction with the FAANGs from a market dominance perspective. In a theoretical case where Alphabet tried essentially subsuming two other tech companies worth a combined $100b through their own platform, would Alphabet be perceived as less monopolistic or more?
Also, Alphabet owns Waze Carpool and Waymo. Is it market abuse for them to use their platform to degrade Uber or Lyft's market share, when there's a clear conflict of interest?
I think the FAANG companies are in a tough spot and it's getting tougher. They're going to be scrutinized far more heavily going forward. Growing numbers of important Dems and GOPers are becoming more vocal with their criticisms. While I don't think Uber is an angel, it does really help that they're still far smaller than the FAANGs and at least part of an obvious duopoly.

Other potential barriers to entry are insurance as well as regulatory burden. There's a subscription-only article I don't have access to (https://seekingalpha.com/article/4249415-lyft-insurance-path-profitability) which likely argues that the sizable insurance operations required by Uber and Lyft, together with the reluctance of insurance companies to do business with ridesharing companies (https://www.buzzfeednews.com/article/williamalden/meet-the-guy-who-solved-ubers-insurance-problem), constitutes a significant barrier to entry.
Furthermore, ridesharing these days requires working very closely with local and federal governments on a ton of issues. Uber and Lyft have a lot of compliance experience by now and the cost of this might be prohibitive for some small potential challengers.

Finally, it's worth making a few quick comparisons with Amazon. Amazon had no real network effects and instead focused on having greater selection in books and then all other categories, shipping faster, and pricing affordably. Uber is in many ways the same, since it focused on maximizing geographic coverage, having the quickest pick up times, and the most affordable pricing. There's a very good piece (https://hackernoon.com/the-network-effects-of-ubers-master-plan-or-why-travis-kalanick-is-captain-nemo-46d521a03b2d) with numerous links on the similarities between Amazon and Uber by Whitney Zimmerman. I'd say it's 100% recommended reading.
In it, he addresses what Uber Prime would look like and how it would create some very strong incentives for users to make Uber their default app for many things logistics-related.

I think this makes sense. We're already seeing Ride Pass and family plans offering a kind of early-stage bundled subscription option. This is logical when you consider that Uber's JUMP bikes for short, inner-city trips are already available, and how Uber Eats is currently driving incremental users onto their ridesharing platform (https://twitter.com/BluegrassCap/status/1128322898857476096).
Uber's Rewards program for drivers and riders also already offers discounts on other related products and the opportunity to earn points that can be used for other services across Uber.
To me, a subscription option from Uber with rewards attached, is the obvious move for them over the next 5 years and once Uber can deliver anything to you or take you wherever you want to go, it really becomes difficult to see why you wouldn't want to pay one low, monthly fee for that kind of option.

In the end, I think one or two of the things I've listed above wouldn't really represent a super strong barrier to entry. When you put them together though, and realize all the incentives are pushing people on both the driver and user side to ever-increasing engagement with the Uber platform, I think folks have a lot of reasons to stick around and use Uber more and more heavily as each year goes by.



muscleman

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Re: UBER - Uber Technologies
« Reply #18 on: May 18, 2019, 08:44:09 AM »
ajc, I disregard any such EV economics analysis without taking into account the depreciation of the battery itself, which is the bulk part of a Tesla price.
I heard some claim that batteries can last 200k miles and still have 80% capacity, but some others say the battery dies after 8 years. It seems to me that gasoline car makers want to say the latter and EV makers want to say the former. I haven't seen any objective study on the battery yet.
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wabuffo

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Re: UBER - Uber Technologies
« Reply #19 on: May 18, 2019, 09:11:48 AM »
Quote
The finance self-help guy, Mr Money Mustache, did a test and found a miles unpaid to miles paid ratio of roughly 1:1 for his Uber drives

Yes - and he also found that his net pay was just $7/hr. That jives with another more exhaustive study I've seen that pegged the net hourly rate at $9/hr - but they miscalculated car expense because they did not include an estimate for dead-heading miles like Mr Mustache did.  I think this is a problem especially since Uber is trying to raise its percentage of the gross fare vs its drivers during its run-up to the IPO in order to make its financials look better.

Quote
Amazon had no real network effects

This is simply not true.  Amazon was able to bypass building physical stores to sell books.  This was a huge advantage in both selection and cost.  Amazon was also cash-flow positive by year three (cash flow from operation - capex) and stayed that way despite GAAP accounting losses.   Uber has had nothing but cash flow losses for 10 years.  What's worse - it seems as they get bigger, so do their cash flow losses.

We'll see, I guess.

wabuffo
« Last Edit: May 18, 2019, 09:17:43 AM by wabuffo »