They are burning through VC money by subsidizing the cost of each ride, thus artificially deflating its actual cost. Once the gravy train runs out, these ride sharing companies will have no choice but to jack up the prices to their actual value. You'll then have normal cab prices, but without the headache of hailing one.
They are burning through VC money by subsidizing the cost of each ride, thus artificially deflating its actual cost.
They're not losing money on rides.
Uber is two things. A moderately profitable ride sharing company, and a loss-making VC-backed R&D enterprise working on things like self-driving cars. If they shut down or spin off their R&D they could continue on as a ride sharing company indefinitely -- they could probably lower prices because they're not using that money to supplement the VC money they're spending on R&D.
But you only separate the R&D if you think it won't ultimately lead anywhere. If they eventually actually get self-driving cars working then it's obviously to their advantage to be the same company that people are already using for car service.
You won't have normal cab prices, you'll have cab prices plus the cost of Uber's 20,000 engineers as well as whatever ROI that that VC money is expecting.
As I understand it, they are able to streamline or bypass some of the regulation of traditional taxies use and offer a cheaper product this way. So it would be a cheaper cab ride plus the 20,000 engineers and profit.
They are burning through VC money by subsidizing the cost of each ride
I've never understood that. How are they subsidizing it? They take over 25% of what the customer pays and all they have to do is run the app. Whether they charge $10 or $15 for the same ride the cost to them is the same. It doesn't make sense, they don't have any extra cost by making a ride cheaper.
Because the cost of a cab ride is not $6 to drive entirely cross town. It just isn't. Uber is popular because it's cheap as shit. If SuperRide came out, and it was half the price of Uber, no one would ever use Uber again.
But that doesn't mean Uber is losing money by offering it less. It costs the driver more to drive farther for less, Uber doesn't have a higher expense for a longer ride.
Still doesn't really explain it. A taxi ride is not 59% more expensive than an Uber, yet a taxi driver is getting paid a better wage. So Uber is definitely burning more money in other areas not related to the ride itself. In Canada now the cost of an Uber when they tack on their safety fee and booking fee is pretty much on pare with what a taxi company charges for the same ride. And now taxi companies where I am from have their own apps just like Uber to request a taxi and get an upfront fee. So now I can easily compare the two costs and see that a taxi is usually the same fee or a $1 or $2 more.
Taxi companies are better at scaling than Uber. They can do bulk vehicle procurements and sign service deals. It is no wonder they can pay wages and not be that much more expensive.
Sorry maybe I am failing to understand a concept here but Uber does not even have to worry about vehicle costs at all, not to mention no expensive overpriced taxi medallion.
I am aware they pay the drivers incentives, but I am not sure I agree about the Pool rides, do you have a source for that? There are plenty of sources out there which speak about how drivers dislike Pool rides and often turn them off or reject them because they make less money off them versus a normal fare. So I am not sure I believe that Uber gives the rider more, in fact I feel like Uber makes more because now they are collecting a percentage off every rider in the pool whereas the driver is paid a set amount
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They are burning through VC money by subsidizing the cost of each ride, thus artificially deflating its actual cost. Once the gravy train runs out, these ride sharing companies will have no choice but to jack up the prices to their actual value. You'll then have normal cab prices, but without the headache of hailing one.
They're not losing money on rides.
Uber is two things. A moderately profitable ride sharing company, and a loss-making VC-backed R&D enterprise working on things like self-driving cars. If they shut down or spin off their R&D they could continue on as a ride sharing company indefinitely -- they could probably lower prices because they're not using that money to supplement the VC money they're spending on R&D.
But you only separate the R&D if you think it won't ultimately lead anywhere. If they eventually actually get self-driving cars working then it's obviously to their advantage to be the same company that people are already using for car service.
Did they not just spin off their R&D?
You won't have normal cab prices, you'll have cab prices plus the cost of Uber's 20,000 engineers as well as whatever ROI that that VC money is expecting.
As I understand it, they are able to streamline or bypass some of the regulation of traditional taxies use and offer a cheaper product this way. So it would be a cheaper cab ride plus the 20,000 engineers and profit.
I've never understood that. How are they subsidizing it? They take over 25% of what the customer pays and all they have to do is run the app. Whether they charge $10 or $15 for the same ride the cost to them is the same. It doesn't make sense, they don't have any extra cost by making a ride cheaper.
Because the cost of a cab ride is not $6 to drive entirely cross town. It just isn't. Uber is popular because it's cheap as shit. If SuperRide came out, and it was half the price of Uber, no one would ever use Uber again.
But that doesn't mean Uber is losing money by offering it less. It costs the driver more to drive farther for less, Uber doesn't have a higher expense for a longer ride.
"Investor reports reveal riders only pay 41 percent of the full cost of each ride, with investors footing the remaining 59 percent."
I hope this explains it more clearly.
https://www.vice.com/en_us/article/9a3vye/uber-true-cost-uh-...
Still doesn't really explain it. A taxi ride is not 59% more expensive than an Uber, yet a taxi driver is getting paid a better wage. So Uber is definitely burning more money in other areas not related to the ride itself. In Canada now the cost of an Uber when they tack on their safety fee and booking fee is pretty much on pare with what a taxi company charges for the same ride. And now taxi companies where I am from have their own apps just like Uber to request a taxi and get an upfront fee. So now I can easily compare the two costs and see that a taxi is usually the same fee or a $1 or $2 more.
Taxi companies are better at scaling than Uber. They can do bulk vehicle procurements and sign service deals. It is no wonder they can pay wages and not be that much more expensive.
Sorry maybe I am failing to understand a concept here but Uber does not even have to worry about vehicle costs at all, not to mention no expensive overpriced taxi medallion.
December 2016. Are you really going to base your position on data that out of date when things were far more opaque?
How about using the S-1 or quarterly filings instead.
Is it really cheap as shit? I've taken cabs and Ubers around Seattle and never found that one is particularly more expensive.
For some rides (especially Pool rides, in aggregate) Uber charges the passengers less than what they pay to the drivers.
Uber also pays driver incentives beyond fares (e.g. for completing a certain number of rides).
I am aware they pay the drivers incentives, but I am not sure I agree about the Pool rides, do you have a source for that? There are plenty of sources out there which speak about how drivers dislike Pool rides and often turn them off or reject them because they make less money off them versus a normal fare. So I am not sure I believe that Uber gives the rider more, in fact I feel like Uber makes more because now they are collecting a percentage off every rider in the pool whereas the driver is paid a set amount