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Friday, 2 December 2016

Uber Fares To More Than Double

We are constantly being told how much less expensive it is to use driver and rider matching service Uber than to rely on black cabs or established private hire operators, and especially in cities like London. Uber’s cheerleaders keep up the propaganda, which holds, more or less, that it’s all about disruptive technology, that this is what progress looks like, and it will all be for our benefit, as it’s so inexpensive.
However, and here we encounter a significantly sized however, one inconvenient fact that the Uber fanboys tend not to dwell upon is that the whole operation is losing money, and losing rather a lot of it. But when this is brought up, it is dismissed as merely the start-up costs of the company, and we are confidently informed that all will be well as the business model matures, the clear implication being that it will still be cheaper than taxis.

This propaganda assault, together with Uber’s incessant lobbying to try and remove or at least relax regulations in order to tilt the playing field a little more in its favour, has established the idea that taxi and private hire drivers might as well give up and join the revolution, that this is indeed the future. But the latest numbers on Uber’s finances tell a very different story, and are very bad news for their cheerleaders.

Izabella Kaminska at FT Alphaville, in an article titledThe taxi unicorn’s new clothes”, has told “Finally! Word is getting out. It’s not just Uber’s ‘innovation’ claims which are questionable, it’s potentially the entire business model”. She cites new findings that show “for the year ending September 2015, Uber had GAAP [Generally Agreed Accounting Principles] losses of $2 billion on revenue of $1.4 billion, a negative 143% profit margin”.

There was more: “Thus Uber’s current operations depend on $2 billion in subsidies, funded out of the $13 billion in cash its investors have provided … Uber passengers were paying only 41% of the cost of their trips; Uber was using these massive subsidies to undercut the fares and provide more capacity than the competitors who had to cover 100% of their costs out of passenger fares”. Have a think about that.

Even if Uber was to wipe out the competition, it would still have most of those costs. Perhaps some capacity would be cut, but to make any kind of profit, fares would have to rise, and rise significantly - by at least 100%, maybe more. Factor in the tendency of the app to jack up prices at the first suggestion of higher demand - the fancily-titled “Surge Pricing” - and you realise this is nothing like the deal promised by all those cheerleaders.

And that is without considering all those overheads, like the advertising and lobbying. There is also the repeated suggestion that Uber may have been making payments to selected journalists and others in exchange for favourable coverage, or, as most people would call it, bribes. This is yet another example of something looking too good to be true, because - guess what - it really is too good to be true.

Uber is not about disruptive technology. It is not about giving customers better value for money. It is an aggressive campaign to wipe out the competition and then, having established a monopoly, put those customers over a barrel and screw them over.

Uber is a lousy deal for its drivers, and ultimately its customers. But not for its bosses, and all the others waiting at the payout window. No-one should be surprised.

4 comments:

Adrian said...

Uber already rely on 'surge pricing' defending it as a way to encourage more drivers to come out when there is a demand. The reality of this is prices leaping during events such as Hurricane Sandy or minimum fares of $100 being charged during the Sydney Hostage Crisis.

They are clearly a company whose goal is to monopolize and then charge the absolute maximum possible. The complacency with which people regard them is baffling and worrying. The days when companies charged a fair price for something are rapidly disappearing, more and more, companies are simply charging the maximum they can get away with.

In terms of fighting back against companies who use a predatory pricing model, Uber should be one of the easiest companies to defeat, but instead people are burying their heads in the sand and ignoring the obvious future in return for a slightly reduced fare now.

Sean Day said...

SEE UBER FOR WHAT IT IS, OR AT LEAST SEE OURSELVES FOR WHAT WE ARE

Uber does not represent the free market at all, but a predatory assisted, systematic takeover of a regulated industry.

Beyond the markets, Uber’s working model emulates that of a taxi, except it caters only for clients with smartphones and credit cards. It disregards the needs of the disabled and the hearing impaired. There has been numerous instances where the driver has been demonstrably homophobic as well as refusing journeys to those accompanied by assistance dogs.

Uber’s single payment method ensures data amassing and instils a class warfare. Why it doesn't run afoul of discrimination laws is beyond me. If Uber denies it's a transportation company, then at the very least it should not lead people to believe that those doing the transporting are responsible to uber.

Fundamentally, it should not make discriminatory decisions, such as refusing to pick up certain kinds of people or charging people more for circumstances beyond their control.

At least see Uber as an option that caters for you, which doesn't really cater for those outside of your demographic. In which case it has more to do with self entitlement, and isn't that the kind of prejudice we would scream our heads off about if it affected us!

Anonymous said...

Don't forget their refusal of trade based on peoples opinions.

Sounds very Murdoch or Mailesque.

Guido Acasa said...

Those losses are global. Even if you somehow believed that Uber in London was making those kinds of losses, they wouldn't need to double charges to the passenger, just to the driver. That might add 20% to fares, but not 100%.