A Blog by Jonathan Low

 

Aug 6, 2020

The Reason Ride Sharing May Never Go Back To Normal

It may be that people will never again be entirely comfortable with sharing anything, let alone rides.

But if its food delivery business continues to grow and the lower demand means a smaller, more profitable business model, Uber could benefit in the long run, though not at the same grand scale. JL

Faiz Siddiqui reports in the Washington Post:

Uber is not the same business it was before Covid-19. Since the pandemic hit, the company has grown increasingly reliant on food deliveries to buoy its rides business, which suffered losses of 80% in the hardest hit markets. Uber bookings were down only 40% in April, owing to the surge in deliveries that insulated total losses. "There’s maybe  a lower demand for ridesharing in the future because of covid. It’s possible that there are structural losers as a result of the pandemic and maybe one of them is ride-share.”


Uber is not the same business it was before covid-19. 
Since the pandemic hit, the company has grown increasingly reliant on food deliveries to buoy its beleaguered rides business, which suffered losses of 80 percent or more in the hardest hit markets in April. It has temporarily eliminated its “UberPOOL” option, which puts multiple passengers headed in the same direction into one car, allowing them to split certain trip costs.


On Thursday, Uber is expected to release its second quarter earnings numbers, for the period from April through June. 
The figures could paint a dire picture for not only the company but the ride-hailing industry as a whole. Uber is expected to post a substantial loss. At the very least, however, company executives will have the chance to shape a narrative around ride-hailing’s future.
Thursday’s updates will tell Wall Street whether the appetite for ride-sharing still exists in the wake of a virus that has changed the nature of work and commuting. The pandemic has obliterated the concept of “shared” rides and raised concerns about the Silicon Valley dream of taking a trip in the back of a stranger’s car — with all the potential safety and hygiene concerns that entails.
“The market thinks that it may be a long time before we recover to Ubering as much as we did in future years as we did in 2019,” said Mark Mahaney, managing director with RBC Capital Markets who covers Internet research.
Uber has already previewed some of its numbers. 
In a July analyst call following its acquisition of rival food delivery app Postmates, Uber said its second quarter gross bookings — the sum total it took in from passengers — declined by roughly 75 percent compared to last year, though the figure had recovered to about 60 percent more recently.
Meanwhile, food delivery was on a tear, logging 100 percent more in gross bookings compared to the same period last year. Uber said that its overall gross bookings were down only 40 percent in April, owing to the surge in deliveries that insulated total losses.
Still, analysts said, Uber is at an inflection point that has left its stock trading at just over $30 for the month of July, well below last year’s initial public offering price of $45.
“We’ve talked about structural winners coming out of the covid crisis: We’ve seen dramatic accelerated adoption of online retail,” Mahaney said. “It’s possible that there are structural losers as a result of the pandemic and maybe one of them is ride-share.”
Mahaney said that while he remains bullish about the business’s long-term prospects, “it’s possible that there’s maybe fundamentally structurally a lower demand for ridesharing in the future because of covid.”
There's one bit of welcome news for the industry.
However long the disruption lasts, the losses likely bottomed out in the second quarter as the strictest lockdowns took effect, analysts said. That means Uber and rival Lyft, which reports earnings next week, can begin to focus on what kind of businesses they want to be in the pandemic’s wake.

“Uber and Lyft will emerge on the other side of this dark valley much leaner and more profitable businesses as we head into 2021 and beyond,” wrote Dan Ives, analyst with Wedbush Securities, in an analyst report ahead of the earnings calls. “Clearly it's still a slow thaw … and likely an even longer return to normal environment, including business travel, there's still a long road ahead for ride-share.”
Ives noted riders’ skepticism of packing into crowded trains and buses during the pandemic, something he said could be an “incremental demand driver” in the short term.

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