Uber’s struggles look set to continue in 2020 as the ride-sharing company loses key markets, experiences more driver issues, and competition ramps up.
The last quarter of 2019 was a particularly bad one for Uber (NYSE: UBER), which was already reeling off the back of a bad year for unicorn IPOs.Now, in the first two weeks of 2020, things do not look to be much improved.
Can Uber bounce back from high operating losses?
Uber began 2019 as a private company worth close to $120 billion but saw this value cut to almost half before going public in May, not unlike its main rival, Lyft (NASDAQ: LYFT). In its second-quarter as a public company alone, it reported losses of more than $5 billion.
Uber has attempted many ventures other than its ride-hailing service over the past decade to bring in more revenue. Uber Eats — its food delivery service — looked set to become a real profit-driver for the company, making up 17% of its overall business in 2018, but that too has quickly become unprofitable. A rise in competition has effectively created a race-to-zero scenario for Uber as it tries to outprice its opponents such as Just Eat (LON: JE).
Elsewhere, Uber Freights — which connects truck drivers to shipping ferries — makes up 6% of Uber’s business, which may seem small, but it grew 78% year-on-year in 2019. However, it is still not likely to get Uber out of its current bind. The rest of the company’s business is made up of other bets such as its bike rental segment, JUMP, Uber Work, and Uber Elevate — a program to develop vertical takeoff and landing of aircraft.
Still unprofitable, with little to look forward to right now in the future of ride sharing, 2020 still doesn’t seem to hold much respite for the once-great company.
More Uber crime controversy
Late last year, a report was released by the company regarding Uber’s violence problems, which disclosed thousands of counts of sexual assaults, dozens of auto-related deaths, and nine murders. It made for grim reading and sent shares down 3% the same day, but at least Uber was highlighting the issue and looked to take steps to limit the problem.
However, less than two weeks into the new year and there is already a high-profile case out of Fontana, California after an Uber driver was accused of sexually assaulting a passenger. Of course, horrible acts such as this can happen anywhere, unfortunately, but Uber will need to step up efforts to protect its customers.
So far, the company is trialing several screening processes for its drivers, including selfie check-ins, and from this year, audio-recording rides to improve passenger safety.
Uber’s licensing woes
Less than two months after losing its important London operating license, a court ruling in Colombia means that the company will have to stop operating in the country by the end of January.
Colombia is an important gateway market for the company into South America, as it has more than 2 million customers and 88,000 drivers in the country. Uber has retaliated that it will fight the ruling and blamed the lack of regulatory action on ride-hailing in the country for the company’s exit.
“Uber was the first company to offer the country an innovative and trustworthy mobility alternative. Today, six years later, Colombia is the first country on the continent to close its doors to the technology,” the company said.
Moving further north, Uber is also facing problems in its native U.S., particularly in California, where a recent law made it more difficult for companies to qualify their workers as contractors rather than employees.
Threat of competition
Aside from its main competitor, Lyft, Uber has a potentially bigger problem on the horizon: the return of the taxi.
It is estimated that the taxi business in Los Angeles is down 75% since 2012, due to the rise of ride-hailing companies. Now though, the Los Angeles Department of Transportation is looking to revive the traditional taxi system where passengers will be assigned rides through a centralized dispatch that connects all the cabs in the city. Passengers can call or use an app to get a cab and will know the price before booking.
The idea is to make the process more like ride-hailing, and if taken up in other cities around the U.S., Uber could be in serious trouble.
What’s next for Uber?
The obvious solution for Uber’s problems is its self-driving car unit, which was valued at more than $7 billion by investors in 2019. Big tech companies such as Tesla (NASDAQ: TSLA), Nvidia (NASDAQ: NVDA), and more have been venturing into the space for some time, with Uber attempting to keep pace. The company has been working on automated driving with Alphabet (NASDAQ: GOOGL) owned Waymo for several years now. However, it has not been a cheap endeavor, costing more than $1 billion as of April 2019, and Uber will need to step up its game in order to develop a fleet of self-driving cars that could make it a profitable market-leader.
Despite its poor showing though, Uber was not even in the top 15 of the worst-performing stock of last year, which included the likes of Macy’s (NYSE: M), TripAdvisor (NASDAQ: TRIP), and Kraft Heinz (NASDAQ: KHC). However, if it does not find a solution soon and diversifies, it may continue on a downward spiral through 2020.
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