First, understand that despite all the hype, neither the digitization of its interface nor the much-ballyhooed outsourcing of its operators, will be the source of Uber’s future success. Both may be more efficient than a traditional taxi operation, but they do not make a US$75-billion company. Indeed, even Uber doubts its current business model — as efficient as smartphoning the hailing business has been — will ever be profitable.
The problem is those pesky drivers. Outsourced they may be — and that outsourcing did allow Uber’s meteoric growth — but they haven’t made the company any more profitable. The bottom line in the taxi business — and let’s not fool ourselves into thinking that Uber is anything but a taxi company — is quite well known. The cost of operating any personal mobility system, ride-hailed or traditional, is, according to Eric Spiegelman, about US$2.70 a mile. Eliminate said pesky human, says Los Angeles’ taxi commissioner, and the costs drop dramatically, all the way to about 25 cents a mile.
And thus we come to the crux of Uber’s phantasmagorical valuation. It’s never been about the fact you can summon a ride via your smartphone. It has always been about the fact that the ride might not come with a driver. In simplest terms, says the Intelligencer’s Yves Smith, “Uber’s investors have been buying your satisfaction in the form of massive subsidies of services” and the only way Uber can ever become profitable is if all of its cars drive themselves.
Uber is currently losing $1 billion every quarter. The author makes the argument that it'll probably be at least 10-years before truly driverless vehicles appear, and that it will be much easier for Ford, GM, et al to get into the taxi business than it will be for Uber to purchase/lease and maintain a fleet of thousands of vehicles nationwide. Hard to see investors hanging around just to lose $40 billion .... and then see the automakers get into the taxi business. On the other hand, if a Dem gets elected POTUS, there's probably a very good chance Uber will receive Tesla-esque financing. LOL