Driving Into Debt: Can Uber Go The Distance?
It's no secret that seven in 10 Silicon Valley ventures go belly-up. Uber continues to lose billions and be embroiled in controversy -- so can it survive?
This week, Uber Technologies Inc posted a US$1 billion (AU$1.37 billion) loss for the latest quarter.
The company said that while growth in bookings for its ride-hailing and delivery services rose 6 percent in the latest quarter -- in 2018 any growth has been in single digits, which is a dip from last year.
Uber now operates in more than 60 countries as the taxi of the digital age. And its empire is getting bigger and broader - as it seeks more ways to change modern life. Uber has expanded its services beyond car rides to freight hauling, delivering food, sharing scooters or bicycles and it's even exploring driverless transport.
Yet, despite these undertakings, it continues to bleed cash. In 2017 it lost US$4.5 billion (AU$6.18 billion) last year, up from US$2.8 billion (AU$3.85) in 2016.
Dr Rohan Miller, from the University of Sydney's Business School says Uber has "gone a step too far" and "needs a reality check".
"They are going in a lot of different directions, Uber Eats is doing well and there is probably an upside to their transport freight services, but the are also trying to get into automated cars and trucks," he told 10 daily.
Now a decade old, its valuation has reached AU$98 billion -- but that's largely thanks to considerable venture capital funding to subsidise at least 50 percent of every ride in order to cut fares and beat taxi competitors.
Uber's business model has been compared to that of Amazon: (i.e. try to gain a monopoly position that can drive the competition out of business).
Amazon became the largest online retailer on the planet by burning through huge sums of investment on the way to becoming dominant in an ever-increasing number of sectors.
Miller says the main similarity he sees is that both transnationals need to re-assess how their staff contractors are treated and paid.
In terms of Uber's investors, Miller says "it's time they got something back for their money".
The Controversy Continues
In addition to speculation about its future and sustainability, the San Francisco-based firm continues to be embroiled in controversy.
There's a seemingly never-ending string of missteps -- from its controversial CEO to questionable tactics and sexual harassment claims. There's also a case before the British appeal courts.
Uber is currently defending its business model before courts in the UK against renewed accusations that it should classify drivers as employees rather than independent contractors. It's the latest in a series of challenges against Uber and the so-called "gig economy" in general.
Uber is trying to to overturn employment tribunal findings which could pave the way for tens of thousands of its drivers in Britain to receive the national minimum wage and paid holiday time.
Survey Of Driver Conditions In Australia
A Transport Workers Union survey conducted on 1,100 rideshare drivers found a typical driver is worried about personal safety, passengers making fake complaints about them and getting underpaid.
Released in October the key findings showed that half the drivers work full-time and, on average, they earn $16 per hour (before costs like fuel, insurance and car maintenance). Australia's Fair Work Ombudsman has set the minimum wage at $18.93 per hour.
The Ride Share Drivers Association of Australia (RSDAA) also revealed that 50 percent of drivers ditch rideshare apps within the first three months of joining.
But Uber maintains that their internal staff surveys revealed that 93 percent like being able to work flexible hours.
"Australia is a very expensive market for automobiles, running costs and we also have high employment and a good minimum wage," Miller said.
This is why Miller sees Uber as an increasingly unattractive employment option.
Former Sydney Uber driver Jonathan Byrnes shared his reckoning with fellow drivers on a Facebook page for colleagues.
"For those constantly bitching and complaining about Uber ... do something like I did and make a change. I got a full-time day job, I have super, RDOs, sick leave and annual leave.
"Not glorious but I don't have to worry about some c***y company taking my money whilst I waste my time, fuel and money to then not have assured work and pay," he wrote.
Stock Market Release And The Road Ahead
As a private company, Uber is not required to publicly disclose financials, but last year started releasing selected figures.
The company faces pressure to show it can still grow enough to become profitable and satisfy investors in an initial public offering planned for some time next year.
“We had another strong quarter for a business of our size and global scope,” said Nelson Chai, Uber’s chief financial officer, who joined in September after the job had been vacant for three years.
In a statement released on Wednesday he emphasised the “high-potential markets in India and the Middle East where we continue to solidify our leadership position."
But it is not yet clear whether the business can sustain a profit.
Locally, Miller says customers benefit from Uber's continued market presence because it has forced the taxi industry to clean up its act.
"I really hope Uber goes back and improves and focuses on its core business. This will mean the taxi community will continue to reflect and improve."
Featured Image: Getty
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