A Blog by Jonathan Low

 

Aug 16, 2018

Investors Tire of Uber's Self-Driving Car Losses and Want It To Sell: Are They Wrong?

Investors these days seem to tire of any investment without an immediate payout. In the era of algorithmic nano-investing they don't give a fig about the future because they don't expect their money to stay still for more than a few seconds anyway.  

The problem for Uber is that its entire business model is under attack as cities moves to limit the number of available cars for hire while at the same time demanding that Uber, Lyft et al pay a living wage. Without driverless cars, their future is in question.

Let us not forget that investors were also impatient with another tech company that kept investing in its business in defiance of investors' wishes. It's name is Amazon. JL


Chris Mills reports in BGR:

Investors, probably tired of the bad PR but certainly tired of the $125 million the self-driving program loses every quarter, have now suggested to Uber that it should divest the self-driving car division before things get worse. (But) The idea has always been that once self-driving cars become feasible, Uber will transition away from“contractors” and their self-owned cars towards autonomous vehicles owned and operated by Uber. Not needing to pay drivers, Uber would finally it would be profitable.
Uber’s self-driving car has been touted as the thing that’s going to eventually take the ride-sharing company out of the red and into the cheap, ubiquitous mass-transit future that it’s been promising.
Unfortunately, Uber’s self-driving car program has also been the subject of a high-profile court case, been kicked out of San Francisco, and killed a pedestrian in Arizona thanks to something that sure looks like corporate negligance. Investors, probably tired of the bad PR but certainly tired of the $125 million the self-driving program loses every quarter, have now suggested to Uber that it should divest the self-driving car division before things get worse.

The Information reports that losses at the self-driving division are worse than most outside observers initially imagined. The company spent “between $125 million and $200 million a quarter on its self-driving car unit over the past 18 months.” If we average that out, it means that Uber spent around $1 billion on self-driving cars in the last year and a half. That tallies with the other data point The Information quotes, which says “Uber has invested least $2 billion in [its self-driving] unit over the past three years.”
Unfortunately for Uber, it doesn’t have that kind of money to burn any more. The company has spend $10.7 billion in the last nine years on building out its platform, and often on subsidizing rides. It’s very slowly clawing its way towards profitability, but it still lost around $600 million in the last quarter. With a public offering still on the books sometime in the future, investors need Uber’s balance sheet to at least show some aspirations of profitability.
But selling off the self-driving unit would mean truly giving up on any kind of leadership in autonomous vehicles, which has always been a key part of Uber’s plan for world domination profitability. The idea has always been that once self-driving cars become feasible, Uber will transition its vast customer base away from Uber’s “contractors” and their self-owned cars, and towards a fleet of autonomous vehicles owned and operated by Uber. Not needing to pay drivers, Uber would be able to keep all of the revenue for itself, and finally it would be profitable.
That idea has always been questionable, especially given the lead that other self-driving companies like Waymo have over Uber’s technology. But once the self-driving unit is sold, Uber is going to have to come to terms with the fact that its current business model just isn’t working.

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