Uber Reports Big Losses Caused by Growth First Business Model
Ridesharing giant Uber is bleeding money to the tune of $1.27 billion in the first six months of 2016 because of driver subsidies meant to keep fares low.
Uber reported losses of over $1.2 billion during the first six months of 2016, indicating a changing ridesharing landscape.
This massive shortfall, according to Uber’s head of finance Gautam Gupta, is caused by driver subsidies. In an effort to maintain its top position while still offering competitive pricing to customers, the ridesharing giant has reportedly spent at least $1 billion in China alone in subsidies for drivers.
Investor speculation concludes that Uber is pursuing a “grow first, ask questions later” model, seeking to secure total market dominance before pivoting to profitability, likely at the expense of the driver subsidies which are at the root of current losses.
The advent of self-driving cars may end Uber’s current business model
Uber’s current model utilizes thousands of drivers as independent contractors with their own vehicles. However, this model may become obsolete very soon. nuTonomy, a ridesharing company, debuted autonomous, self-driving taxis in Singapore this Thursday.
Google is still very much the original in the autonomous vehicle field, and while it remains dedicated to producing fully self-driven cars, rivals such as Tesla and BMW may force it into the semi-autonomous game instead of making the full jump from driven to not.
Not unaware of these developments, Uber is rushing full speed ahead with its own self-driving car model. If this is successful, it could leverage Uber’s position as the industry leader to catapult the whole ridesharing business into full autonomous vehicle mode.
Other ridesharing companies looking for a piece of Uber’s pie
While Uber weathers the storms of trailblazing an entire industry, its rivals eagerly look to claim its title as king of transportation. Arcade City, a decentralized ridesharing company that promises future blockchain integration, successfully moved into Austin, Texas after Uber and Lyft were forced to leave due to regulations.
Arcade City, which initially debuted a rudimentary app, later took it down while a new app was under development, running instead on a series of Facebook pages. The new app is slated for release in just a few days.