I think this is utter BS. the reason Lyft and Uber are not profitable is that they keep fighting a war for customers with each other! The last time I compared a taxi to a Lyft it was $17 versus $34. Lyft could easily charge 50% more except Uber is trying to kill them by wasting investor money!

I think it's completely right.

I virtually completely stopped using Lyft//Uber since they increased prices in SF. I know a lot of other people that stop using them also. Most rides are above 15$ which is above what I'm ready to pay to get somewhere in the city. I walk, use my bike or drive whenever possible. The new price point simply doesn't make sense anymore.

And in most places, customers are way more price sensitive than I am.

>You literally cannot profitably transport people at the prices they're offering

That's not my understanding of the figures, which say that they're charging plenty enough to cover the costs associated with the ride, but are blowing lots of money on aggressive marketing. The transportation costs (i.e. driver pay and customer service) are not what's killing them.

"incentives", i.e. discounts/coupons for passengers or pay bumps for drivers, are a huge part of those marketing costs. So while they're rolled under the marketing budget they fundamentally are a distortion of the price they need to pay drivers or amount they need to charge passengers to become profitable.

A lot of these "marketing" costs are clever ways of hiding costs of providing rides as separate line items.

Yes, but if they were all driver incentives, there would be no revenue according to the model they're using. Customer incentives, on the other hand, are hidden in operating costs and not placed in the cost of revenue where they probably should be.

I was in an empty pool ride for 45 minutes taking me from inner Boston to the suburbs and I paid $5. Unless I'm wrong, that's below minimum wage so someone somewhere is subsidizing the difference

Why would they care about self-driving if most of their drivers are making little more than the cost of operating their vehicle?

Economies of scale kick in when you own the fleet. I'm also not sure about the statement "most of their drivers are making little more than the cost of operating their vehicle".

If owning the fleet was valuable, there's not much (probably just labor law and some issues with the mythos) stopping Uber et al from owning the vehicles the drivers drive.

I think self-driving is the cold fusion of the 21st century, but the reason unlicensed taxi companies are pursuing it is because if, by some miracle, it comes to fruition, it might make their business viable, but it would be hard to compete with an automaker running autonomous taxis when you have to buy your autonomous taxis from the automaker you're competing with. If they can build it on top of existing cars, it makes it more possible to compete; and if they end up with an enabling patent, it means they'll probably survive in some form.

Drivers have an acquisition cost in marketing too. And will quit eventually if they keep losing money.

Semantics. Cars don’t cost that much to operate. Uber doesn’t cost that much. The portion going to the human take home pay minus car value depreciation and other expenses is small, but a substantial chunk of it.

Cars cost a huge amount of money upfront and require a tremendous amount of maintenance to operate, and that's before we get into insurance and accidents.

Right now, all of these are fully on the drivers. This will turn around if Uber rolls self-driving cars worldwide.

Having looked into the finances of car share companies I can vouch that the fleet costs are just huge blots of red ink on their finances

Uber wouldn't work if they owned the fleet - it's a huge advantage to just be the app + ops + acquisition costs

Right, eventually the drivers will figure out that they are the losers in this scheme. People really don't understand just how much it costs to own a car, especially one you drive 30k miles a year.

Taxi cab companies are incredibly corrupt as they are run like your local cable TV service! With all the customer satisfaction and low prices and quality service that that entails! I believe that Lyft and Uber can easily beat the corruption of the taxi cab market and still provide rides at a good price and profitably.

Because this is untrue? Even the most pessimistic estimates have drivers making a substantial amount more than 0; the complaints are that they don't make enough to justify their hours of labor. Removing this labor cost would be non trivial, esp once the cost of a self-driving fleet stabilizes.

They do make profit on each ride, but not when you account for administrative overhead (which is huge because of their ridiculous headcount).

Which would mean they do _not_ make a profit on each ride.

randyrand is talking about gross margin; you're thinking about earnings. You can have a positive gross margin and negative earnings. There's no point arguing about whether this does or does not constitute making a profit in some absolute sense - just understand that both are true.

Charitable interpretation is that the parent is talking about Uber's gross margin, which is presumably fairly high.

Let's split the difference:

They make profit from some rides. And the amount of profit matters, too.