A subscriber orders a car through the Uber app.
It may be the nation’s leading ride-sharing service, but that hasn’t helped Uber deliver a profit.
The Silicon Valley start-up lost a hefty $1.3 billion during the first half of the year, according to a report by the Bloomberg news service which cited sources with access to a conference call the company had with its investors.
According to the report, Uber finance chief revealed that the ride-sharing service went $520 million into the red during the first quarter of the year, with another $750 million loss racked up during the April-June quarter.
While Uber runs the largest service of its kind in the U.S., it has faced resistance in some other markets, notably China, where it has battled with local competitor Didi Chuxing. That was apparently responsible for the bulk of the company’s losses for the first half of 2016.
An Uber self-driving prototype.
Uber recently waved a white flag, agreeing to sell its Chinese unit to Didi which is now the world’s largest ride-sharing service.
Another challenge for San Francisco-based Uber is the competition it has faced from Lyft, the second-largest entrant in the fast-growing ride-sharing field. That has put the brakes on efforts to increase fares in many major cities across the U.S.
(GM may want to buy Lyft. Click Here for the story.)
Uber turned a profit in the U.S. during the first quarter, according to the Bloomberg report, but lost money during the second quarter, in part due to subsidies it has offered its drivers.
The service has come under pressure from drivers and regulators in a number of states, two of which are considering legal challenges that could force Uber to reclassify its drivers as employees, rather than independent contractors. The company has been taking steps to overcome growing such concerns, this week announcing it has set up a Betterment IRA retirement program for drivers in Seattle, Chicago, Boston and New Jersey.
“Many Americans are having trouble saving for retirement,” said Rachel Holt, Uber’s North American region general manager. “We’ve talked to a lot of drivers. It’s something they’ve mentioned.”
GM CEO Dan Ammann (c), took a seat on the Lyft board following GM's $500 mil investment.
Uber actually hopes to take the driver out of the equation entirely. CEO Travis Kalanick has become a major proponent of autonomous vehicle technology, especially so-called Level 5 systems that would allow it to field fleets of completely driverless vehicles. Kalanick has estimated that such a model would allow Uber to charge less to shuttle passengers around than it would cost to own and operate a personal vehicle.
The ride-sharing service recently set up a research facility in Pittsburgh to test autonomous technology and this week announced plans to offer hands-free service in that city. It will continue to require an operator in the vehicle, however, in case of an emergency. Customers will be able to choose whether or not to ride in one of the self-driving vehicles but, as an enticement, the test run will carry no fares.
(For more on the Uber-Volvo test program, Click Here.)
That’s one of a number of additional services Uber is exploring. In some markets, it now offers Uber Eats, a food delivery service.
While the firm dwarfs Lyft, its largest rival, the ride-sharing service remains hotly competitive, as Uber discovered in China. And one reason is the push by automakers into the space. General Motors, for example, invested $500 million earlier this year in Lyft. Volkswagen has put money into the Israeli-based Gett, and other carmakers are taking similar steps.
Despite such concerns, Uber continues to shine with investors who have so far put about $16 billion of their money into the ride-sharing giant. Now operating in 76 countries, it is currently valued at around $70 billion.
(Nu autonomous taxi service beats Uber to the punch. Click Here for the latest.)