Articles/megaposts by DaveT

[DaveT]

Uber needs to become a total transportation company to justify it's valuation. It doesn't provide any of the ancillary services or integration that other ride sharing companies currently offer.

Uber's outreach efforts in Korea currently consist of workers making fake airbnb accounts and messaging hosts with offers of free vouchers.

Uber's vision is "Transportation as reliable as running water, everywhere for everyone." Basically they're trying to get people (and eventually goods/services) from Point A to Point B and do so in the cheapest, most reliable manner.

Uber is also busy launching other services, like UberEats and UberPool, etc.

Most people who take Uber are very satisfied with just getting from Point A to Point B in a reliable/easy manner, and they don't need Uber to be integrated with their social network platform.

 

[bh1783]

First, I really don't see how Facebook could create a more compelling service than Uber right now. I think if Facebook got in at the beginning, then that would have been a different story. Facebook could have leveraged their app/services to push their ride-sharing services. But since Uber has the dominant and established market leader position in the U.S. (for example), I don't think Facebook having much advantage at all. Facebook could debut their own ride-sharing service but it wouldn't be as good as Uber, and thus people wouldn't use it much. It would be a waste of time for FB and FB probably knows it, thus they haven't entered the market. I think it's different in parts of Asia, since the companies that either started or backed the earlier ride-sharing companies were often the large social/internet companies in that area. So, it was more natural for them to include the ride-sharing services within their app along with a host of other services. That can help in the beginning to gain exposure/marketing. But once a dominant player has been established in a country, it's proven very difficult to unseat them in this market.

Regarding Korea, I would agree that the total taxi business there is probably currently larger than Uber's U.S. business in terms of revenue. But I think that's missing the point. The point is that Korea's taxi business isn't growing at a very fast rate. Compare that to the very-fast growing ride-sharing business in the U.S. So, it's not about today but it's about where things are headed. And things are headed to where the ride-sharing business in major markets will be much larger than the traditional taxi markets.

Uber's goal is not really to disrupt the taxi industry. They actually prefer not to work with existing taxi companies. Rather, Uber's goal is to reduce car ownership... so Uber is really going after people who own cars. Uber wants to provide a service that is cheaper/better than evening owning a car. Also Uber prefers to work outside the taxi industry because they can make larger margins when working with independent individuals. This is part of the problem that Uber faced in Korea... Uber wanted to bypass the taxi industry by going straight to UberX and using independent cars/drivers. But the taxi industry (250k drivers) basically flipped out, and the government supported the taxi drivers who are a significant part of the economy and society there. Also, Uber's brash western direct approach I'm sure didn't help in an environment like Korea.

Good points Dave. I think in America Uber makes a lot of sense. There are very few taxis and the few that exist are poorly managed.
So Uber's business model works in America because the public transportation infrastructure is very poor. The US doesn't have enough subways, buses or taxis, so people drive personal cars.

The problem is this:
In most countries, taxis are considered part of the public transportation network. They are often subsidized by the government. In Korea they get to use LPG for fuel so no regular car using gasoline can compete with them on a cost basis. LPG burns cleaner than gasoline and costs 1/3 the price (price is subsidized by the government).

So for Uber to survive in these countries they must subsidize their service with driver referrals, sign up bonuses and free vouchers. However in other countries they are replacing existing public transportation networks instead of supplementing them.
Uber makes a lot of sense in America because there are less than 240,000 taxis in the entire country.

Car ownership is already reduced in Korea. Everyone has a car, but instead of having 4 or 5 cars like a family in America would, people only have 1, maybe 2 at most. The idea that ride sharing will eliminate cars is a myth. People will always enjoy having their own vehicle. That's why there are summer homes instead of just hotels.

Uber's struggles with the taxi industry is not just in Korea, but in other countries as well. You see protests in France and Germany against Uber there too. It's just that in America, the taxi industry was so weak politically and financially that they couldn't mount any defense against Uber.

I agree that the ride sharing business is growing, but Uber's growth model of subsidizing growth is unsustainable as it tries to scale up. Unless it finds an organic way to grow (for example autonomous vehicles) it won't be able to sustain its current growth or market dominance in the long run. Thus I think its current $69 billion valuation is unmerited.

 

[bh1783]

Uber's vision is "Transportation as reliable as running water, everywhere for everyone." Basically they're trying to get people (and eventually goods/services) from Point A to Point B and do so in the cheapest, most reliable manner.

Uber is also busy launching other services, like UberEats and UberPool, etc.

Most people who take Uber are very satisfied with just getting from Point A to Point B in a reliable/easy manner, and they don't need Uber to be integrated with their social network platform.

Ubereats is a copycat of what already exists in Asia. They are already behind existing competitors in the market. Food delivery is a very very low margin business that is often subsidized by the restaurants themselves. In Korea, McDonalds has their own delivery service, they don't charge anything for orders of $10 and provide 24/7 delivery. How would Ubereats compete against that?

 

[Tenable]

Amazon also offers food delivery with no charge in city centers. I use them daily, love the service and it's impossible to compete with as they don't consider it a profit center.

 

[bh1783]

Wouldn't Amazon pose a credible threat to Uber? Amazon is developing drone delivery and experimenting with their own deliveries. They have the scale and userbase to threaten Uber.

 

[wdolson]

I can't help but think that we might have hit a historical "peak production for cars" and from here on out, we'll see a radical decline in auto production worldwide.

I don't think we're close to that right now. In the developed world, especially the US, there are fewer new cars being sold. Americans are driving older and older cars, I think the average age of a car in the US is 9 years now and the average age of a US new car buyer is around 50. Some countries strongly encourage new car purchasing, like the UK which has MOT and it gets tougher for older cars to pass MOT so people end up getting rid of their older cars and buying new every few years. Though the average new car in the UK is much lower price point type car than that sold in the US.

But in most of the developed world, car purchases are mostly replacing an existing car, so there is little growth in the market. And Millennials are less interested in owning a car than previous generations, so there probably is a slight decline in car ownership in a lot of developed countries. Though most Millennials I've known bite the bullet and reluctantly get a drivers license and a car at some point in their 20s because in many US cities getting around without a car is a major hassle.

On top of that, China's car market is exploding. There is a massive cultural incentive to buy a car. Because of the one child policies and there is a shortage of young women, the competition among men to find a mate is extremely fierce. One of the biggest status symbols for a young man looking for a mate is to have his own car and women tend to look more favorably on young suitors who own their own car.

In India the social pressure to buy a car isn't quite as high, but India's car fleet is expanding very quickly too. When the two most populous countries on Earth start buying car en masse, the worldwide demand for cars will not decline until those markets saturate, or they have a cultural shift.

 

[wdolson]

Amazon also offers food delivery with no charge in city centers. I use them daily, love the service and it's impossible to compete with as they don't consider it a profit center.

We live too far out in the suburbs for Amazon food delivery, but Safeway delivers. Though there is so little at Safeway we want, we just drive into Vancouver for most of our food shopping.

Wouldn't Amazon pose a credible threat to Uber? Amazon is developing drone delivery and experimenting with their own deliveries. They have the scale and userbase to threaten Uber.

Some people here have talked about Tesla starting their own Uber-like service, but I see Amazon as much more likely. If Amazon decides to buy an autonomous car fleet to do fast Amazon deliveries as well as ride sharing, I expect they would bury Uber in every city they expand into.

 

[bh1783]

I don't think we're close to that right now. In the developed world, especially the US, there are fewer new cars being sold. Americans are driving older and older cars, I think the average age of a car in the US is 9 years now and the average age of a US new car buyer is around 50. Some countries strongly encourage new car purchasing, like the UK which has MOT and it gets tougher for older cars to pass MOT so people end up getting rid of their older cars and buying new every few years. Though the average new car in the UK is much lower price point type car than that sold in the US.

But in most of the developed world, car purchases are mostly replacing an existing car, so there is little growth in the market. And Millennials are less interested in owning a car than previous generations, so there probably is a slight decline in car ownership in a lot of developed countries. Though most Millennials I've known bite the bullet and reluctantly get a drivers license and a car at some point in their 20s because in many US cities getting around without a car is a major hassle.

On top of that, China's car market is exploding. There is a massive cultural incentive to buy a car. Because of the one child policies and there is a shortage of young women, the competition among men to find a mate is extremely fierce. One of the biggest status symbols for a young man looking for a mate is to have his own car and women tend to look more favorably on young suitors who own their own car.

In India the social pressure to buy a car isn't quite as high, but India's car fleet is expanding very quickly too. When the two most populous countries on Earth start buying car en masse, the worldwide demand for cars will not decline until those markets saturate, or they have a cultural shift.

Agreed. Cars are an emotional purchase. Even if people don't need one they will still buy one. Automation and electrification of vehicles will drive the cost of cars down (insurance, gas, maint, taxes, pollution) so this in turn will increase demand as well. Nobody needs a boat but they still buy them.

The car market will continue to grow. Look at places in Southeast Asia like Indonesia, Philipines and Malaysia. There are hundreds of millions of people there that don't have cars yet. Everyone drives scooters there.

 

[bh1783]

We live too far out in the suburbs for Amazon food delivery, but Safeway delivers. Though there is so little at Safeway we want, we just drive into Vancouver for most of our food shopping.



Some people here have talked about Tesla starting their own Uber-like service, but I see Amazon as much more likely. If Amazon decides to buy an autonomous car fleet to do fast Amazon deliveries as well as ride sharing, I expect they would bury Uber in every city they expand into.

Food delivery will continue. In Korea, every grocery store does delivery. You buy your food, they take your cart and its at your house 30 min later. Same thing is done at department stores and every other place.

 

[hiroshiy]

So many of the articles out regarding Uber contain a lot of FUD. It's amazingly similar to Tesla articles (ie., losing money, overvalued, etc).

But if you dig down into the data, it turns out Uber has a very compelling growth story.

This article is showing Uber the dominant ride/taxi-hailing app in 108 countries.
Uber Is Now the Most Popular Taxi App in 108 Countries

The main battle areas are:
1. India
Uber is in a dead heat battle with Ola. And the battle is just getting more intense. This will likely be Uber's top priority over the next 1-2 years. Uber claims they have even market share w/Ola but Ola claims they're larger. It looks to me like Uber has got momentum here, but Ola is a formidable competitor w/more tailored options for the locals.

2. SE Asia
Harvard grads started Grab in 2012 to basically do Uber in SE Asia, so they have a headstart over Uber and they're very smart in localizing the service to the SE Asia region. But Uber is gaining traction in this region, so I think the battle will get more intense.

3. South America
Easy Taxi merged with Tappsi late last year to fend off Uber emerging in the region. But Easy Taxi has lost a lot of momentum. They used to be in Asia and other parts of the world, but they've pulled back significantly. And even in the home markets Uber is gaining ground. Easy Taxi also doesn't have the funding needed to take on a giant like Uber. I'd give this a couple years and I think we'll see Uber dominate South America.

4. Russia
Yandex is the leader here and Uber can afford to lose this country, but it appears that Uber (though much later to the game than Yandex) still has a chance. Game not over here yet.

A few other notes. Israel's first place player is Gett... and VW just acquired a controlling stake in the company.

When Didi Kuaidi acquired Uber China, they also did a board tie-up of sorts. Didi's CEO joined Uber's board and Uber's CEO joined Didi's board. Seems like they're intending to cooperate more in the future, perhaps in future markets.

Overall though, it's very impressive that Uber has been this effective in over 100 countries. It must be a logistical nightmare to have operations in so many countries, and to be doing so at a frenetic pace.

(note: these are my thoughts after reading a few hundred articles on the ride-sharing industry worldwide, but my thoughts will probably evolve as I read more... i'll probably have read few thousand articles after another month since I'm investing a lot of time into this)

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Just an additional info. Uber is not dominant in Japan. It's one of the smallest operators here with only 5-10 cars in whole Tokyo with 11M population. Government issues as you know. It's not allowed for an individual to operate a livery business and getting such license is very very difficult. Right know Uber is working several limo companies to assign several cars as Uber, so in Japanese law they are limos rather than taxi. Also since they are limo it's more expensive than taxi. Nobody uses such service here...

 

[bh1783]

Just an additional info. Uber is not dominant in Japan. It's one of the smallest operators here with only 5-10 cars in whole Tokyo with 11M population. Government issues as you know. It's not allowed for an individual to operate a livery business and getting such license is very very difficult. Right know Uber is working several limo companies to assign several cars as Uber, so in Japanese law they are limos rather than taxi. Also since they are limo it's more expensive than taxi. Nobody uses such service here...

Taxis are always cheaper to operate than private vehicles. Uber's success is more a reflection of how poor the taxis are in America. There's no incentive for governments to let a foreign tech company interfere with a public good (taxis). It's much easier to develop an Uber clone for existing taxis than it is for Uber to build out a base of drivers in a foreign market.

So, Uber is done in China, Korea, and Japan. Has tons of legal battles in Europe. The only market where they are doing well is in America, but that success is due to subsidized drivers and poorly run taxis.

In Korea, Uber is competing against a platform with 210,000 professional taxi drivers (running the app 60+ hours per week), where the drivers get subsidized cars from Hyundai and subsidized LPG from the government (LPG cars cost 1/3 the price of regular gasoline in Korea). And the Korean government shuts down the subway and buses early at night(so taxis can make money) and lets taxis charge surge pricing at night. Uber's business model doesn't work.

 

[AlMc]

@bh1783 and @DaveT: Excellent discussion and insights into UBER and the worldwide competition. Thanks

 

[bh1783]

I think it's a cultural difference. Most countries view taxis as part of the public transportation system. The taxi industry buys domestic cars, hires a ton of people, and the money stays in the community. A lot of a city's identity is linked to its taxis(NYC yellow cabs, London Black cabs, Tokyo's Toyota Crown) This is why foreign governments are so fiercely against Uber. Allowing money to leave domestic cities and go to a foreign tech company will not garner much sympathy.

The difference between Uber and Tesla is this. Uber must pay subsidies to drivers to compete against competitors that are being heavily subsidized by the government. Tesla gets quadruple subsidies(Fed EV credit, State EV credit, ZEV credit sales, tax credits for the gigafactory) to compete. Tesla continually raises their prices while Uber is in a race to the bottom. The valuations of the two companies should be reversed.

 

[JRP3]

One autonomous car that one a ride-sharing network could probably replace 5-10 existing cars (perhaps even more) since they would be in constant use.

On the other hand they will pile up the mileage 5-10 times faster and will probably need to be replaced more frequently, even assuming a longer lifespan for EV's.

 

[X Fan]

Just an additional info. Uber is not dominant in Japan. It's one of the smallest operators here with only 5-10 cars in whole Tokyo with 11M population. Government issues as you know. It's not allowed for an individual to operate a livery business and getting such license is very very difficult. Right know Uber is working several limo companies to assign several cars as Uber, so in Japanese law they are limos rather than taxi. Also since they are limo it's more expensive than taxi. Nobody uses such service here...

Hiroshiy-san-,

I'd also add that similar to other forms of Japan's transportation system, your taxi system is outstanding. Cars are clean and usually available & combined with Government regulation a Uber solution is not as feasible/needed.

 

[wdolson]

I think it's a cultural difference. Most countries view taxis as part of the public transportation system. The taxi industry buys domestic cars, hires a ton of people, and the money stays in the community. A lot of a city's identity is linked to its taxis(NYC yellow cabs, London Black cabs, Tokyo's Toyota Crown) This is why foreign governments are so fiercely against Uber. Allowing money to leave domestic cities and go to a foreign tech company will not garner much sympathy.

The difference between Uber and Tesla is this. Uber must pay subsidies to drivers to compete against competitors that are being heavily subsidized by the government. Tesla gets quadruple subsidies(Fed EV credit, State EV credit, ZEV credit sales, tax credits for the gigafactory) to compete. Tesla continually raises their prices while Uber is in a race to the bottom. The valuations of the two companies should be reversed.

I would say Tesla's government benefits are often overblown in the media. The federal EV tax break goes to the consumer, not directly to Tesla, but does encourage car sales is going away after they hit 200,000 domestic sales, which is not long after the scheduled launch of the Model 3 and not all buyers can take full advantage of the credit, You have to owe at least $7500 in federal income tax to take advantage.

Only a handful of states offer any kind of incentive to buy EVs and here in Washington State they restructured the tax incentive so any car with an MSRP over $42,500 does not qualify. Tesla's still sell well in states with no tax incentive, or only a weak one.

Tesla has been able to make some money from the ZEV credits, but California has weakened the program and they get a lot less from them. Finally Tesla did get a well publicized deal from the state of Nevada, but it wasn't a big wad of cash. The two biggest parts of the deal were a sales tax reduction spread out over 20 years (estimated worth $725 million) and no property tax for 10 years (estimated to be $332 million).

These things help, but they don't prop up the company. Other US companies get a heck of a lot more in subsidies from governments both local and federal.

 

[Fallenone]

On top of that, China's car market is exploding. There is a massive cultural incentive to buy a car. Because of the one child policies and there is a shortage of young women, the competition among men to find a mate is extremely fierce. One of the biggest status symbols for a young man looking for a mate is to have his own car and women tend to look more favorably on young suitors who own their own car.

In China, for males looking for mates, home ownership is much more important. It is rather custom that the male's family provides the home and the female family provides the car.

Also the one-child policy has been abolished. But this just creates more demand for private cars. You have more kids to take out with you now.

 

[Fallenone]

Uber's success is more a reflection of how poor the taxis are in America.

I couldn't agree more on this "how poor the taxis are in America". It was one of the greatest cultural I had when I came to the States several years ago.

 

[DaveT]

Good points Dave. I think in America Uber makes a lot of sense. There are very few taxis and the few that exist are poorly managed.
So Uber's business model works in America because the public transportation infrastructure is very poor. The US doesn't have enough subways, buses or taxis, so people drive personal cars.

The problem is this:
In most countries, taxis are considered part of the public transportation network. They are often subsidized by the government. In Korea they get to use LPG for fuel so no regular car using gasoline can compete with them on a cost basis. LPG burns cleaner than gasoline and costs 1/3 the price (price is subsidized by the government).

So for Uber to survive in these countries they must subsidize their service with driver referrals, sign up bonuses and free vouchers. However in other countries they are replacing existing public transportation networks instead of supplementing them.
Uber makes a lot of sense in America because there are less than 240,000 taxis in the entire country.

Car ownership is already reduced in Korea. Everyone has a car, but instead of having 4 or 5 cars like a family in America would, people only have 1, maybe 2 at most. The idea that ride sharing will eliminate cars is a myth. People will always enjoy having their own vehicle. That's why there are summer homes instead of just hotels.

Uber's struggles with the taxi industry is not just in Korea, but in other countries as well. You see protests in France and Germany against Uber there too. It's just that in America, the taxi industry was so weak politically and financially that they couldn't mount any defense against Uber.

I agree that the ride sharing business is growing, but Uber's growth model of subsidizing growth is unsustainable as it tries to scale up. Unless it finds an organic way to grow (for example autonomous vehicles) it won't be able to sustain its current growth or market dominance in the long run. Thus I think its current $69 billion valuation is unmerited.

I think Uber works better in the U.S. because of it's poor taxi and public transport system. However, I also think that Uber/Didi (and other ride-sharing companies) have a better business model than traditional taxi companies. They're able to employ part-time drivers (in countries that allow it) and they're able to better allocate supply/demand. Also, Uber's rating system allows passengers to rate drivers and Uber kicks off drivers under a 4.6 rating. All this helps to ensure driver quality.

Overall though, Uber's big push is not the taxi industry. They see a future where it's cheaper to take Uber than it is to own a car. And they see a future where people actually prefer to be driven than to drive themselves.

I personally think driving is over-rated. I'd love to be driven around everywhere. That's a luxury (at least to me).

When autonomous cars come out, not only will I enjoy being driven by the car, I personally don't mind if I own a car or not. Sure the first few to several years of autonomous ride-sharing might be a bit "buggy" or "rough". But after a while, I'm very confident that it'll probably be cheaper and probably more convenient to not own a car, especially if you can get all the benefits via an autonomous ride-sharing network.

Sure there will be people who will still own their cars, but it will be on the decline. And eventually it will be only people wth a lot of discretional money to burn that will own cars. For everyone else, it will make much more sense just to push a button to get somewhere.

Regarding your comment on "that's why there are summer homes instead of just hotels"... I think even this is being challenged by the sharing economy. Airbnb, as it grows, will cause people to think twice about buying a summer home vs just using Airbnb to rent it for a few weeks in the summer. Sure, there will be people w/summer homes but it will be for those who have a lot of discretionary capital and not for the ordinary person.

 

[DaveT]

Amazon also offers food delivery with no charge in city centers. I use them daily, love the service and it's impossible to compete with as they don't consider it a profit center.

Wouldn't Amazon pose a credible threat to Uber? Amazon is developing drone delivery and experimenting with their own deliveries. They have the scale and userbase to threaten Uber.

Yes Amazon is also increasingly getting involved in the transport business (of people, goods, services). Thus, Amazon and Uber will be going against each other in more and more markets. Amazon has grocery delivery, food delivery, same-day delivery, etc. They've started to lease their own airplanes, have purchased thousands of their own Amazon-branded trailers, are working on drone delivery, and will continue to push the envelope in getting goods (and maybe even people) from Point A to Point B.

And if Tesla wants to launch their own ride-sharing business w/autonomous cars, it won't only be about transporting people from Point A to Point B. It will be about transporting goods from Point A to Point B as well. For example, whatever you need from wherever, you'd want delivered to you... whether it be food, or groceries, or something else. And this is the business that Amazon/Uber and others are battling over, and Tesla could find itself in it as well. But it is and will be a fierce market. And for Tesla to have a chance they really need to execute flawlessly a genius plan... because there are already incredibly capable incumbents in the market.