Ride-sharing giant Uber Technologies Inc. is about to have its long-awaited IPO, a milestone in the company’s history that will see its shares being publicly traded on the New York Stock Exchange, and make some of the early investors in the business walk away with huge piles of cash. Part of any initial public offering is the issuing of a prospectus, a comprehensive sales brochure for the business that includes everything from financial information to corporate strategy. Uber’s prospectus is a true treasure trove of interesting data, stating a few things that may also be applied to the ride-sharing industry as a whole. In a nutshell: It’s not the savior it promised us to be.
Let’s start with the numbers of this American juggernaut. Uber now operates in 63 countries and had 91 million monthly active platform consumers in 2018. These are customers who used the firm to hail a ride or have a meal delivered from Uber Eats in a given month. These users took 5.2 billion trips and deliveries in the same year. If everything goes according to plan, the company could be valued at almost $84 billion after the IPO.
But as impressive as all these numbers are, one has to keep in mind that the San Francisco giant is still losing money. The 2018 figures show revenue of $11.3 billion (up 43% from $7.9 billion a year earlier) but also costs and expenses amounting to $14.3 billion. That translates to a loss of $3 billion. That’s not a pretty sight in anyone’s book.
It’s no secret that Uber is working hard to reduce or even replace its biggest expenditure item on the balance sheet: human drivers. Some say the venture can only ever be profitable if it swaps all flesh-and-bone chauffeurs for autonomous vehicles, and while the prospectus doesn’t go as far as to outright say that, it clearly mentions concrete plans in this direction. It also doesn’t hide the fact that the relationship between Uber and its drivers isn’t the best, even stating that Uber expects driver dissatisfaction to increase as some of the incentives are removed in an effort to make the financial bottom line look less horrifying. This may sound familiar to former drivers in the Philippines, where Uber was booted out by Grab and drivers are now trapped in the quasi-monopoly of the Singaporean startup.
Then there are some general points that should make us all reconsider how we see ride-sharing companies as part of the mobility mix that keeps this—or any other—mega city going. One of the arguments often used to support businesses like Uber and Grab is that these firms will reduce car ownership in cities and therefore aid in the reduction of traffic as a whole, but this doesn’t seem to have materialized yet according to recent research. The only thing that really reduces the number of cars and the miles driven by them is public transport, but that’s exactly what ride-hailing companies are trying to compete with. Uber even mentions this in its prospectus by including public transportation users in its total addressable market. This is definitely not a step in the right direction and won’t do anything to make motor-vehicle traffic flow more freely.
In a nutshell, what the Uber IPO is showing us is that ride-hailing app providers have not turned out to be the knights in shining armor we were all hoping for. Human drivers are seen almost as a necessary evil instead of an integral part of the company’s future; the services do little to nothing to reduce the number of cars on the roads; and instead of existing side by side with public transport, ride-sharing firms are actively trying to kill it off. One would hope that city and transport planners everywhere are paying close attention to this, as it can and will have serious implications for the way we travel around our cities now and in the future. The lesson is simple: If you want the best way to get from A to B, don’t call Uber or Grab. Instead, call your local political representative and demand better public transportation.