Uber will take ‘years’ to make a profit, CTO says
Updated 0723 GMT (1523 HKT) July 9, 2019
Uber will take at least “a few years” to become profitable, according to one of the ride hailing firm’s top executives.
The industry right now “is very competitive,” Uber’s chief technology officer Thuan Pham said at a tech conference in Hong Kong on Tuesday. “We have local competitors everywhere trying to aggressively expand to grow their business, and we have to compete vigorously.”
Uber (UBER)is fending off rivals like India’s Ola and China’s Didi Chuxing in many of the 700 cities where it operates, and holding onto top spot in the market often means dropping prices.
The ride-hailing company posted a loss of more than $1 billion in the first three months of this year, and analysts surveyed by Refinitiv forecast it will continue losing billions well into next year.
In mature markets like the United States, where rival Lyft (LYFT)has also gone public, Pham predicts multiple companies will soon start to co-exist in a profitable way.
But even when Uber does become profitable, he says the company’s business model is unlikely to rake in huge profit margins.
“Our model is more like Amazon, where we have lots of transactions and maybe make a few pennies per transaction,” Pham said.
Amazon (AMZN) made a record profit of $3.6 billion in the first three months of 2019, though its revenue growth has slowed. For years, the company was known for bleeding money as it invested heavily in its businesses and rapidly increased revenue.
Uber, which went public in May this year, faces an uphill battle to win over Wall Street investors concerned about its history of steep losses and slowing revenue growth.
The ride-hailing firm is hanging its hopes on on self-driving cars, spending aggressively to develop the software and tech needed to bring autonomous cars to market.
“When that technology works, that’s when price point will drop significantly, and then the market will expand much quicker. And we have an active effort on that technology,” said Pham.
Uber’s self-driving car unit secured $1 billion in fresh funds in April, just before the company went public. The cash boost valued Uber’s Advanced Technologies Group at $7.25 billion.
The era of autonomous cars and the regulations that will govern them is still a few years away. Uber’s efforts were set back when a self-driven Uber SUV struck and killed a pedestrian in Tempe, Arizona, in March 2018. Officials said earlier this year that Uber would not face criminal charges over the incident.
Until self-driving cars are the norm, Pham said, Uber has to offer new services that get more people using the app at a lower price point, like the Uber Bus service launched in Egypt and Mexico last year.
All that means Uber investors should buckle in for a long ride.
“If people invest in Uber, they should be long-term investments,” said Pham. “We’re not in this business for the profit in the next year or two, we’re thinking about changing the landscape of transportation.”
“That’s going to take years if not decades to fully realize,” he said.
Shares in Uber closed down 1.3% in New York on Monday.