Articles/megaposts by DaveT

[SBenson]

From reading several articles and opinion posts on Bloomberg over time, I have always been stuck with the impression that Uber is growth hungry but an ever money losing enterprise, even in it's most mature markets like US. Which is kind of very odd because Uber doesn't invest in buying cars. Drivers are expected to bring their own cars. I never thought Uber is executing well. It is marketed and hyped very well by banks in private rounds to garner ever higher valuations, which is good for banks because they make commissions and fees on valuations.

I will post a recent few to highlight what I mean.

 

[SBenson]

Uber Loses at Least $1.2 Billion in First Half of 2016

Subtext:
After touting profitability in the U.S. early this year, the ride-hailing company is said to post second-quarter losses exceeding $100 million.

 

[SBenson]

Here is a very informative post. Highlights how terrible execution has been.

Uber May Be Making Too Much Money

Some key points (but the article in entirety is a worth read)

Uber is racking up bigger losses than perhaps any young technology company ever has before.

On average, eBay keeps 8 percent, or $1.60, if you spend $20 on a coffee maker from their online marketplace. Grubhub typically gets $3.20 from a $20 restaurant takeout. Airbnb collects 9 percent to 15 percent for each reservation, and Priceline's Booking.com gets 11 cents of every dollar from a hotel booking, on average.

Uber aims to keep roughly 20% to 30% or so of the money from each fare. That is a relatively large share among companies that likewise run online marketplaces to connect buyers and sellers.

For sure, if Uber did take a smaller cut of fares, its losses would be uglier. Uber's net revenue -- the total commissions it earns -- was $2 billion-plus in the first half of this year, my colleague Eric Newcomer reported. If Uber's share of fares were smaller, net revenue would be lower, and losses would be higher than the more than $1.27 billion reported for the first half of 2016.

(reminds me of SolarCity)

 

[tander]

Uber Loses at Least $1.2 Billion in First Half of 2016

Subtext:
After touting profitability in the U.S. early this year, the ride-hailing company is said to post second-quarter losses exceeding $100 million.

The question I think is can they raise long enough until they don't have to pay drivers anymore?

 

[SBenson]

Uber - Funding Rounds | crunchbase

It seems like they have no path for self sustainability. Again, just like SolarCity. But on steroids.

I hope Tesla is not like this and can self sustain (maybe after raising capital for one last time).

 

[DaveT]

More info on Uber/Otto effort in self-driving trucks.

It's a 50,000-pound semi. And, now it's self-driving

 

[palmer_md]

All of those articles talk about the income stream, but speak nothing of the outgoing stream. All of the worries outlined in those articles might be for nothing if the expenses side is for one time expense items for growing the business. If they are not one time and are going to be recurring expenses, then there is reason for worry. Purchasing OTTO for $700M this year was likely a one time expense (I would hope).

 

[palmer_md]

More info on Uber/Otto effort in self-driving trucks.

It's a 50,000-pound semi. And, now it's self-driving

 

[dha]

Want to share a few thoughts on some of the comments above regarding Uber vs Tesla.

First, Uber has a very strong "moat", in my opinion because it's a two-sided market (see Two-sided market - Wikipedia, the free encyclopedia). When you bring two sides of the market together, you enjoy network effects and often a "winner takes all" position. Think about Ebay... is it just a website? No, it's a lot more than that. They bring together sellers and buyers, but they have more sellers and buyers than anywhere else... thus everyone goes there because it's significantly better than other sites.

This left me scratching my head a bit. This moat is precisely what disappears in an autonomous world as one side of the market becomes moot. With full autonomy, it's just consumers buying a service from a single service provider--no value add in connecting them with one of many people currently available to drive.

 

[tander]

Uber - Funding Rounds | crunchbase

It seems like they have no path for self sustainability. Again, just like SolarCity. But on steroids.

I hope Tesla is not like this and can self sustain (maybe after raising capital for one last time).

With Uber the paradigm/business model shifts as soon as they don't have to pay drivers anymore, much is the same as when Tesla has a lower priced value model that people buy because it's cheaper to buy electricity than gas, or if gas prices go up and it's just like that most buyer segments. Same thing with SolarCity, as soon as you pair solar panels with storage the business model shifts and it becomes cheaper than paying the utility.

 

[DaveT]

Say Tesla does not have a competitive advantage vs Uber on self-driving cars.

Tesla is still several years ahead of everyone else in the EV world + charging network which drastically reduces cost/km or mile.

The cost drivers of transport - AS IS - are fuel, maintenance of car and driver's pay check.

Tesla will dramatically reduce or nullify (if self-driving) all cost drivers.

Tesla is quickly becoming an established brand. Nothing stops the Tesla Network from being a huge success if they can pump out Model 3's and stay even on self-driving tech with competitors.

@W84M3 In your cost factors, you're missing the actual cost of the car. Tesla's cars are expensive, and even with the Model 3 the ASP is likely going to be over $40k. Compare that to a $10k ICE car, and I think you probably will have lower cost of ownership (let's say over 5 years) with the ICE car, including fuel and maintenance.

 

[DaveT]

With regard to Uber, and its subsidiary Otto, as a competitor in the autonomous space, both passenger ride sharing as well as trucking/goods transport, this was an interesting article I think:

'Driverless' beer run; Bud makes shipment with self-driving truck

@Johan, Yep, the folks at Otto are very smart and capable. Uber/Otto will go all-out to capture the trucking space. We'll see if Tesla can come to the plate with an integrated product that will hopefully give them an advantage... Tesla semi truck, battery packs, truck swapping/charging stations, autonomous driving, etc.

 

[DaveT]

Care to revisit any of your thoughts in response to Tesla's self driving hardware, Tesla Big Rig and "Tesla Network" announcements?

@callmesam I think the big question regarding Uber vs Tesla is how much of a lead will Tesla have in autonomous driving. We now know Tesla won't let Model 3 (or any AP2.0 car) owners share their fully self-driving cars on another network. So, that means Uber is going to have to find autonomous cars elsewhere. This becomes existential for them, and I'd expect them to invest a ton of money in the next couple years to make this happen. If I was Uber, I would partner with an existing manufacturer and have them produce an "Uber" model. This "Uber" model would have fully self-driving tech like Tesla. In fact, Uber can basically copy what Tesla is doing. So, if Uber can get an "Uber" model out the door and then they have a chance of closing the lead that Tesla has with self-driving tech. Tesla's main advantage right now is that they're actually putting the hardware on the cars right now. Other car makers are hesitant (due to liability concerns) of pushing the envelope with autonomous tech. As a result, most auto makers are laggards in this regard. However, there are many tech/software companies that aren't very far behind Tesla in regards to autonomous driving tech. These companies can provide the solution to existing car makers, but the question is how long would it take for these existing car makers to integrate them into their cars... The answer is too long. That's why Uber needs to have their own "model" at an existing car maker. Or buy an existing car maker so they can push it through. Or create their own car company by licensing an existing car design and hiring Magna to make it for them. In any regard, Uber ought to make some big moves. And they need to move fast. And I fully expect them to do something big, sooner than later. Uber can't afford to let Tesla have more than 1-1.5 years advantage in self-driving cars.

 

[DaveT]

DaveT, agreed that Uber has unlocked a true monster. However, the $2B/month in revenue might be subject to disruption with full self-driving car. Uber currently charges ~$2/mile (roughly, taken into account $/min, base fee, safety fee etc2). But that $2/mile rate was because there was a need for humans to operate the car, and we know how expensive labor cost is.

And truth be told, Uber ride is very expensive... Tried a few times commuting to work (~25 miles) and it charged me ~$45-48 per ride. Thankfully, I am on T-Mobile and it has T-Mobile Tuesday which give $15 coupon for Lyft. So I ditched Uber for Lyft because it was $15 cheaper.

With fully self-driving car, we can reduce/eliminate the need for a human to operate the car, thus Tesla Network could charge way less than $2/mile. if Tesla can reduce it and charge only $1/mile, imo, Uber is toast. Uber might as well buy every model 3, and help operate it over Tesla Network. But again this is an IF. Hopefully Tesla can execute well.

Already the cost of rides are going down due to Uber fitting more people into the same car via services like UberPool. Also, Google has Waze Carpool, and are charging riders a max of $0.54/mile. But I definitely agree, once we have fully self-driving cars absent of driver, then the cost of rides will go down dramatically. This is Tesla's opportunity and open door. It doesn't guarantee success for Tesla since other companies, including Uber, can gain autonomous driving tech as well. But it gives Tesla a window of opportunity to get their network up and running, and hopefully for Tesla's Network to prove superior before Uber/Google/etc starts to deploy their own autonomous vehicles.

 

[TMSE]

@callmesam I think the big question regarding Uber vs Tesla is how much of a lead will Tesla have in autonomous driving. We now know Tesla won't let Model 3 (or any AP2.0 car) owners share their fully self-driving cars on another network. So, that means Uber is going to have to find autonomous cars elsewhere. This becomes existential for them, and I'd expect them to invest a ton of money in the next couple years to make this happen. If I was Uber, I would partner with an existing manufacturer and have them produce an "Uber" model. This "Uber" model would have fully self-driving tech like Tesla. In fact, Uber can basically copy what Tesla is doing. So, if Uber can get an "Uber" model out the door and then they have a chance of closing the lead that Tesla has with self-driving tech. Tesla's main advantage right now is that they're actually putting the hardware on the cars right now. Other car makers are hesitant (due to liability concerns) of pushing the envelope with autonomous tech. As a result, most auto makers are laggards in this regard. However, there are many tech/software companies that aren't very far behind Tesla in regards to autonomous driving tech. These companies can provide the solution to existing car makers, but the question is how long would it take for these existing car makers to integrate them into their cars... The answer is too long. That's why Uber needs to have their own "model" at an existing car maker. Or buy an existing car maker so they can push it through. Or create their own car company by licensing an existing car design and hiring Magna to make it for them. In any regard, Uber ought to make some big moves. And they need to move fast. And I fully expect them to do something big, sooner than later. Uber can't afford to let Tesla have more than 1-1.5 years advantage in self-driving cars.

Good points. The big issue for Uber is the inherent inertia deeply embedded in the legacy ICE car manufacturers. It is like three-legged race with them, while Tesla, with its fully integrated solution, is jumping and hopping all the way to the finish line on its own two legs!

 

[DaveT]

This left me scratching my head a bit. This moat is precisely what disappears in an autonomous world as one side of the market becomes moot. With full autonomy, it's just consumers buying a service from a single service provider--no value add in connecting them with one of many people currently available to drive.

@dha Yes, I agree with you in that autonomous driving changes the equation. But whoever has the most cars (whether autonomous or not) resulting in the lowest wait times and the cheapest service, still has some advantage in providing a better service than the next competitor and that lead to more usage, which leads to increase in supply (since there's more revenue to purchase more cars), which leads to a better service. So, there's natural network effects still in place as more usage improves the service. Same goes for Tesla Network, if they can get it up and running successfully. The more people who use Tesla Network, will lead to more cars on their network, which will reduce wait times and reduce price... all a virtuous cycle.

 

[DaveT]

From reading several articles and opinion posts on Bloomberg over time, I have always been stuck with the impression that Uber is growth hungry but an ever money losing enterprise, even in it's most mature markets like US. Which is kind of very odd because Uber doesn't invest in buying cars. Drivers are expected to bring their own cars. I never thought Uber is executing well. It is marketed and hyped very well by banks in private rounds to garner ever higher valuations, which is good for banks because they make commissions and fees on valuations.

I will post a recent few to highlight what I mean.

Please do NOT believe all what you read from Bloomberg or other publications. These are journalists writing these articles. And most of them are tilted negatively to high-growth companies like Uber or Tesla. Rather, do your own research and come up with the raw numbers. You'll see Uber's business model is amazingly compelling. They've grown probably faster than any other company in the history of the world. And they're still growing at an amazing rate. The beauty of their business model is that they don't own many physical assets, so that they have little capital needs other than to recruit initial drivers and build the initial network in each city.

 

[DaveT]

Uber - Funding Rounds | crunchbase

It seems like they have no path for self sustainability. Again, just like SolarCity. But on steroids.

I hope Tesla is not like this and can self sustain (maybe after raising capital for one last time).

If Uber halted spending on growth, they would be profitable.

Also, look at their cash on hand, around $9 billion. Very impressive. They are not the cash-burning machine that the media has portrayed them to be. Take all the money they've raised and minus that by the cash on hand, and you'll see the several billion they've spent to build out a $24 billion annual revenue run rate business is amazingly efficient... and truly the envy of any high-growth company.

 

[TMSE]

@dha Yes, I agree with you in that autonomous driving changes the equation. But whoever has the most cars (whether autonomous or not) resulting in the lowest wait times and the cheapest service, still has some advantage in providing a better service than the next competitor and that lead to more usage, which leads to increase in supply (since there's more revenue to purchase more cars), which leads to a better service. So, there's natural network effects still in place as more usage improves the service. Same goes for Tesla Network, if they can get it up and running successfully. The more people who use Tesla Network, will lead to more cars on their network, which will reduce wait times and reduce price... all a virtuous cycle.

Dave,
Your argument for competitive advantages of Uber is very compelling, in fact, I would have bought it had it been public. However, over a billion dollar loss in the first quarter alone makes me scratch my head. Why on earth is that happening? All Uber owns is the technology, IP, and the man power behind it. There is hardly any capex except for datacenter infrastructure. Are they spending so much more on their R&D and SG&A that is causing such a loss? Where can I find the details?

 

[DaveT]

Good points. The big issue for Uber is the inherent inertia deeply embedded in the legacy ICE car manufacturers. It is like three-legged race with them, while Tesla, with its fully integrated solution, is jumping and hopping all the way to the finish line on its own two legs!

@TMSE Yes. Tesla has all the pieces for autonomous driving already put together, which is a big advantage. @sdtslafan linked to a video by Peter Thiel where he describes Tesla main competitive advantage is that of "complex coordination", meaning Tesla is able to coordinate and put together many things... like vertical integration, supercharging, software tech, EV tech, autonomous driving tech. While, other companies can compete with Tesla in individual arenas, Tesla's advantage is that they're putting it altogether and it just works.