Some companies just have a much bigger ramp up than others. Amazon has so many markets to build warehousing & logistics in. Uber has so many markets to establish drivers in.
The subsidising of rides makes complete sense; subsidised rides are loss-leaders aimed towards building habits. I haven't seen their data, but it seems like a good plan.
Uber's service is more than just an app. They have operations teams in every market they operate in to onboard drivers, deal with local issues, etc.
Think of it from a driver perspective; if a competitor pays less than Uber and has less demand, why drive with them?
And if you think there will be a competitor capable of out-spending Uber using venture capital, think of it from the perspective of a VC; why pour so much capital into a business so unlikely to succeed against an incumbent when you could put it into the incumbent itself?
I think the primary risk to Uber's business is that of a self-driving competitor being capable of disrupting them; such competitors will have capital already, and will be capable of disruption through all the same ingredients that got Uber to where they are. Those companies would probably work with Uber at least at first, anyway. Uber will be at their mercy every time the contract needs to be renewed.
Uber had to spend money to test the waters and figure things out. Competitors can just copy.
I think they will probably end up working with the first company to have autonomous cars "ready". The big question is what happens next. Will Uber be at the mercy of that supplier every few years as the contact comes up for renewal, or will autonomous cars become so commodity that there will be multiple players competing to be Uber's supplier? Another possibility is an M&A event.
This may not work, but that in no way makes Uber a Ponzi scheme.
In what way? Will they manufacture their own cars? That seems expensive, and from the past experience of GM and Chrysler Fiat not exactly a money-printing machine. Will they partner with manufacturers and buy their cars to add to Uber fleet? That will be a new expense that was externalised to the driver before, but now affects the company's bottom line. Will they just become a dispatch software licensee like Flywheel? Enterprise buyers tend to squeeze margins and negotiate tough.
What's the scenario where either their top line increases in a massive way or expenses are trimmed way, way down from where they are today?
Yes the driver is a big cost factor but so is the vehicle. If you can eliminate the driver and produce the vehicle and parts you will be able to produce and repair cars at rates lower than anyone without the same manufacturing capability.
This only makes sense if Uber driver's net income is pure profit. Instead I hear they have a set of expenses - fuel, insurance, tires, maintenance as well as servicing payments on the car. Some of these Uber is likely to negotiate down, mainly insurance. But some (cleaning, maintenance, parking, car washes, tires) are currently externalised to the driver and will have to be assumed by the company.
This is even before we get into the details of who manufactures the cars and how Uber comes into the possession of the vehicle (lease? outright purchase? purchase backed by a loan? etc.)
That can't be their goal. Personally I think their goal is to get bought out at a very high price by some sort of car company / conglomerate. If car companies can make their own cars that are also self driving, why wouldn't they just toss up some software and go direct to consumers with them and cut out Uber entirely? Uber has a lead on the software and infrastructure for mapping but they're really pretty awful (I'd argue Apple Maps has surpassed much of what Uber does with mapping and routing at this point).
A car company with self driving cars is going to be able to provider a lower cost per ride while still profiting than Uber ever could unless they start producing their own vehicles.
> that in no way makes Uber a Ponzi scheme.
The parent stated "Isn't Uber like a Ponzi scheme in some way?" and then explained the rationale behind the thought. I think you took some words out of the parent's question when understanding what he or she was asking.
Uber subsidizes car rides using investor money to bring in more users which can make their valuation higher which can then bring in more investor money. Rinse repeat. It's not a ponzi scheme but it certainly has some traits of one and I think parent's question was fair.
It also reminds me of those daily deal websites like Groupon, which were controversial yet hyped. That was back when there was a lot of money in 'hyper' local services.
Now there's a load of hype in self driving cars, the problem is the technology is probably decades away. It's just the latest hype in a new cycle. Local taxi services will take up the slack once the investment dries up.