Uber’s become the generic trademark—right up there with Kleenex and “Google it”—for using your phone to get into strangers’ cars.
But like most cheap commodities, what you’re paying for the sausage might not reflect the actual cost it takes to make it.
Transportation industry expert Hubert Horan is building a case for why Uber will never become a profitable company on the Naked Capitalism blog. One of the most eyebrow-raising statistics, as gleaned from investor reports, is how little riders are paying of the true cost of their trips: “Uber passengers were paying only 41% of the actual 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.”
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.
Financial Times’ Alphaville, which highlighted Naked Capitalism’s findings, calls it like they see it: “This is critical because it suggests we’re dealing with a charity case in disguise.”
The math doesn’t add up, from a consumer standpoint, because you’re not seeing the subsidies’ long shadow over it all: Only a third of Americans have ever heard of Uber. Of those, the frequent users spend a median of $95 a month on rides. That’s not a ton of income, for a company that also has to pay its drivers, especially when some of those drivers are currently protesting for higher wages and turning to rival companies to get what they believe are fairer fares.
Although, if Uber’s driverless car efforts currently underway in Pittsburgh expand as the company hopes, the days of paying a chauffeur could be numbered.
Uber lost $1.27 billion globally in the first half of 2016 and 100 million domestically in the second quarter.
You’re paying beans for your Uber ride because you’re cruising on investor cash, which Uber is using in an attempt to drive competitors into the ground.
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