Not sure about this on Uber

This is a company that has become a byword for Silicon Valley excess – it’s not a business model to admire. This makes the number of left-leaning people bemoaning its possible exclusion from one city slightly surprising. Uber makes multibillion-dollar losses. The much-loved convenience and low prices rely on these losses, and on an excess of driver supply, so there’s always a car available when you need it. This isn’t good for the drivers, and ultimately it won’t be good for the passengers. It’s inevitable prices will rise – the company can’t continue to be loss-making for ever – and one theory goes that this will happen once it has driven its competition out of business, and/or developed the driverless cars that will put thousands out of work.

The excess of drivers thing is palpably wrong. Uber drivers spend more of their time with a ride than Yellow Cabs do (figures for NYC of course).

As to the losses, not, sure, would be interesting to know in fact.

It’s possible – and I really don’t know – that they’re cash flow positive in “mature” markets like London, the losses coming from starting up in other cities. Does anyone actually know?

23 comments on “Not sure about this on Uber

  1. “Does anyone actually know?”

    Does it really matter? Because the author of that article certainly doesn’t know. If we’re lucky he looked up ‘Uber earnings’ in Google and read the first link – and probably didn’t even get that far.

    He certainly doesn’t know how to run a business, he’s shown here that he doesn’t even know how to do *reporting* – and that’s supposedly *his job*.

  2. “It’s inevitable prices will rise – the company can’t continue to be loss-making for ever – and one theory goes that this will happen once it has driven its competition out of business, and/or developed the driverless cars that will put thousands out of work.”

    The left love the argument that capitalist pig dogs will drive the good guys out of business and then raise their prices to monopoly levels. They never provide an example nor consider the barriers to re-entry.

    So what’s the barrier to entry here? State regulations. The knowledge may have been very useful and a good thing in 1865 but is hardly necessary now. Other than that its about public safety licences and that should be the same for all drivers who come in to contact with the general public.

  3. Can’t expect the Guardian to understand about profits. On which, the Guardian can’t continue to make losses. Once it has, er, destroyed all competition it will be able to raise its cover price to £5 and, er, all shall have dachas…? Have I got that right?

  4. It may be that there’s a bit of subsidy at the moment, and maybe prices will rise a little, but what most of the commentariat isn’t grasping is the effect of scale on efficiency.

    If you’re in a small town and there’s 2 taxis operating by 2 operators and one is on the other side of town and one is right near you and you call the “wrong” company, you wait for him to come across town. Likewise, someone else on the other side of town can also call the “wrong” company. Put both under one company and everyone gets served better. And Uber are doing the same on a massive scale.

    The morons of the commentariat don’t get that. They think it’s all just cheating – not paying tax, bad behaviours, but the reality is that this saves everyone costs.

    I spoke to an Uber driver recently and this was precisely his point. He said he made less on each fare, but was making more fares.

  5. BonM4,

    Exactly, higher utilisation. I used to use a car company that specialised in Oxford area to Heathrow for businesses. The owner, who drove me occasionally, reckoned his two way occupation was over 70% without his drivers having to spend much time hanging around at Heathrow. He was by far the cheapest in the area for Heathrow trips.

  6. The Guardian hates fat capitalist pigs who run businesses that make enormous profits.

    The Guardian hates skinny capitalist weasels who run big businesses that make enormous losses.

    Using the above verbal Venn, we can see who the Guardian hates.

    Oh, and it loves poor downtrodden socialist businesses that make losses, use offshore vehicles to avoid paying tax and further evades tax by pretending to be a charity.

    I hope that’s all clear, Toby.

    P.S. do remember to avoid the Labour Conference this year Mr Moses. They are getting to the stage where they’ll start crucifying you lot again.

  7. Snippa’s comment on Uber is that “..a level playing field in tax is essential. As is security in employment.”

    40,000 (mostly immigrant) drivers job disappear, comforted by the fact the Ritchie is improving their employment security.

  8. So there are c40k drivers in London. They presumably each make something out of it, on their own account. Uber takes a commission per ride and a fee for the app. But they have to develop the brand and pay for the infrastructure. Difficult to add up all the individual bits. Most companies make paper losses during growth.

  9. The interesting bit here is why government hates the gig economy. I know the “common sense” answer, but this is a live case begging for a research grant!

  10. I hope that Uber win their appeal, but in the meantime we should remember that most of those 40k drivers have also bought a car on some form of financing. There are going to be an awful lot of second hand Prius around if we are not careful. So net result is 40k mainly low income , mainly recent immigrants lose their jobs and face financial ruin while 25k mainly middle income mainly white taxi drivers are able to afford another villa in Spain. Most of the uber riders are now forced back onto overcrowded public transport, often late at night which is properly ‘unsafe’ in the name of improving public safety. They say that your power is a reflection of how hypocritical you can get away with being. Sadie and his union puppet masters look pretty powerful right now.

  11. Is Über’s rapid growth a great example of the effects of innovation/ disruptive technologies eventually (or not so eventually here) manifesting themselves as consumer surplus?

    And is Sadiq Khan just a Luddite?

  12. Yes the model is not an ‘excess’ of drivers. It’s precisely what was mentioned above; higher utilisation. Uber drivers make less money per trip but make far more trips. This actually means less cars on the roads and less CO2 *for a given amount of journeys*.

    Sadiq Khan is taking the opportunity to play to his base here, but given the appeal routes and the workarounds available to uber I suspect the service is not going to stop operating at any point, and he knows it.

    What I find interesting is that TFL have not – to my knowledge – been at all precise about what they are actually sanctioning Uber for. They talk about ‘its approach’ to obtaining medical certificates and criminal checks, but what does that really mean? It *doesn’t* say they don’t have them.

  13. “The Knowledge” is for hackneys. Uber’s taxis are private hire. People keep comparing apples with milkshakes. Most of it down to navel-gazing metropolitans not understanding the concept of private hire as they’ve only had it for 15 years, probably never even noticed it being introduced, and think “taxi” means “black cab”, whereas the rest of the country has had private hire for five decades.

  14. The last time I used a black cab (about 15 years ago) the driver took me to the wrong street. We wanted Commercial Road, he took us to Commercial Street. Not exactly miles away, but so much for the fucking “Knowledge”. He then tried to charge us for the time we spent then going to the correct address, and got the arse when we refused and didn’t give him a tip.

    Wankers. And they insist on their right to do U-turns anywhere, at any time, regardless of traffic.

  15. What I find interesting is that TFL have not – to my knowledge – been at all precise about what they are actually sanctioning Uber for.

    Not paying TFL enough money and taking business from people who pay TFL money?

  16. The appeal and any court case will be interesting, because then TFL cannot get away with just saying “um we don’t like their processes”. They will have to actually present evidence, in public, in court.

  17. Not how the useless Grauniad dipshit writes about driverless cars putting people out of work as if it were a bad thing.

  18. jgh
    “Most of it down to navel-gazing metropolitans not understanding the concept of private hire as they’ve only had it for 15 years, ”

    There has been private hire (minicabs) in London since the 1960s. The only change is the introduction of licencing for private hire.

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