Uber Still Burns Money as Passengers Pay Only 41% of the Total Cost of Rides

By Gary Cutlack on at

Some analysis of the financial situation of motorised unicord Uber suggest it could very well all end in fire and perhaps trigger the next dotcom disaster, as the minicab firm appears to be struggling to turn its patchwork cab business into a profitable enterprise.

The bulk of the work has been done by Naked Capitalism, which got transport expert Hubert Horan to look at Uber's case. The bottom line seems to be that its tactic of subsidising the obliteration of competitors with money from investors is working, to a degree, but the fact is that running a business based entirely around expensive cars and the hiring of people means the cost base can only be driven down so far -- and if there comes a time when the investors want to make a profit, well, there might be trouble.

The Naked Capitalists explain: "Uber is losing more money than any startup in history and its ability to capture customers and drivers from incumbent operators is entirely due to $2 billion in annual investor subsidies. The vast majority of media coverage presumes Uber is following the path of prominent digitally-based startups whose large initial losses transformed into strong profits within a few years."

However, they say that's unlikely to happen as its 2016 margin improvements have only come about from paying drivers less, suggesting that further cost cutting -- to cover the gap between its losses of $2 billion on revenue of just $1.4 billion -- might be... impossible. [Naked Capitalism via FT Alphaville]


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