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Comment by tristanj | Hacker News Reader

>Uber passengers were paying only 41% of the actual cost of their trips ... That means your $25 trip into Manhattan from Brooklyn should actually cost around $60. Investors in the private company are currently footing the other $35 (most!) of your fare.

Ehhh I don't buy the thesis. The author is suggesting all Uber rides run at a loss, but Uber makes a killing on some rides. Not every ride is subsidized, I've paid $60 for a 20 minute ride through LA during surge pricing, and I'm certain both Uber and the drive made a profit off me. I've seen stories of $300+ Uber rides too. There's no way Uber and drivers don't make money off these.

I know many rides are subsidized and Uber loses some money on them, but implying Uber's business model is a failure based off average cost is a fallacy.

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Looks like the author is being intentionally deceptive. Uber lost $1.27bn globally (mostly in China AFAIK), but only $100m in the US. The author spent all his time talking about the US, and then tried to group the global loss onto the price of all rides. Not all rides are equal. Not all loses come from driver wages. Big overhead and marketing costs trying out the Chinese market.

Uber booked well over 100M US rides. I think 400M, but I can't find a reliable source ATM. You do the math. Uber rides don't cost an average of $2 in the US. Uber isn't paying 50% of our bill in the US.

You can't run a company at break even, you need profit from the average ride. So, if it's a ~50 billion dollar company making 4% or 2 billion in profit per year, and the US is 10% of that profit they need to charge an average of 6$ more per ride.

Which is flat out not going to happen without reducing the number of riders thus pushing up prices even more. Which is why it's not a 50 Billion dollar company long term.

The argument is that they are turning a profit on the average ride in mature markets, and losing money on the average ride in emerging ones. Right now, because they are trying to grow quickly, they have a lot more emerging market rides than mature market rides, and so the average across all rides looks pretty bad.

This is perfectly common for companies starting up business in new markets. The trick is to turn emerging markets into mature ones.

If indeed Uber is losing money on their local operations plus non-growth overhead, then it's bad. But we don't have those numbers.

Uber is 8 years old and still losing money on the US market.

I have no problem saying they could eventually break even by adding ~2$ a ride in the US. But, that's only enough to be a multi million dollar company to be a multi billion dollar company they need to raise the price 5+$ in the US and the rest of the world without losing ridership.

Now, increasing prices reduces demand... So, to be a 50 billion dollar company they would need to keep a huge ridership while charging ~twice as much on average. Or charge ~5+$ more per ride while becoming a monopoly.

QED: They have zero paths to maintain their current valuation let alone growth to offset the risk of failure.

Uber 'competition' in China was a marketing thing, surely? The country CEOs were cousins. It seemed to me that Uber entered China to fail, and China-savvy, but 'fail' doesn't mean lose, as they grabbed a big chunk of Didi (China's Uber equivalent).

This article is based on a naked capitalism article [1] from 2016. That article adresses the China criticism under the section:

"Uber Losses Not explained by Uber China and No One Can Explain How Profitability Can Be Achieved"

The losses covered in that article don't include anything from China.

[1] https://www.nakedcapitalism.com/2016/11/can-uber-ever-delive...

The Naked Capitalism “analysis” never broke down how much Uber spends opening new markets vs. it’s costs in mature markets. Their conclusions are totally farcical.

I agree, there is no way that anyone outside of Uber has accurate figures on the profit/loss of any ride.

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