A lot of people think if their Uber/Lyft ride is cheaper than their traditional taxi because it's subsidized. The lower fare for the most part is due to extreme efficiency difference between a taxi company and Uber/Lyft.
1. Uber/Lyft don't own the cars. They are leveraging car owners capital
2. Uber/Lyft drivers are more efficient because they don't have to roam around the city to find a passenger and they get notifications for when to work. The system scales up and down on demand. No taxi company that owns cars can do this.
3. Uber and Lyft are more convenient for the passenger and it makes people to use them more. I can definitely see myself and people around me to use Uber/Lyft way more than taxi since they came along.
Uber and similar companies are purring cash into this growth because at the end of the day they can make a profit because they are more efficient. And no, it's not easy to make a clone. The network effect is huge!
Uber is fueled heavily by subsidies. I took an Uber pool to work, set price of $25. I was the only one picked up, but due to traffic it took ~1hr. The total price that the driver saw was ~60. Someone paid that driver the $35, and it wasn't me, it was Uber (venture capital). That is purely subsidizing and artificially lowering prices.
Underfilled pooling is not a great example though-- filling in load shortfall on pooling is a very efficient way to spend money, because you need to build the load, uber needs to only profit on average, and even if there was no subsidy at all there would occasionally be underfilled cars.
For all you know they did five other trips like yours but with three passengers and your "subsidy" was paid by them; and in exchange uber got a happy passenger and driver which will continue to support their business in the future.
Uber only uses subsidies when trying to break into new markets to expand. If they stopped expanding, they would become profitable rather quickly.
Many of their losses were due to the turf war in china, which is now over. They have a 20% stake in Didi now, which will almost certainly recover their losses.
>> Uber only uses subsidies when trying to break into new markets to expand. If they stopped expanding, they would become profitable rather quickly.
Are you sure that's true? That sounds like the marketing speak that Travis K. spouts, but I wouldn't be surprised if that weren't the whole truth. Like any other "startup", you can claim to be profitable pretty easily -- you just have to find a hand-wavy way to qualify that ("if you exclude debt and operating expenses we're net margin profitable!").
> 1. Uber/Lyft don't own the cars. They are leveraging car owners capital
In Singapore they tried out the model to own cars because car ownership is pretty low here in general ~10%. They bought cars at a massive scale. This model seems to be working for them and they have expanded this model to other countries. Check out Lion Car Rentals. 100% Uber owned.
A lot of people think if their Uber/Lyft ride is cheaper than their traditional taxi because it's subsidized. The lower fare for the most part is due to extreme efficiency difference between a taxi company and Uber/Lyft.
1. Uber/Lyft don't own the cars. They are leveraging car owners capital
2. Uber/Lyft drivers are more efficient because they don't have to roam around the city to find a passenger and they get notifications for when to work. The system scales up and down on demand. No taxi company that owns cars can do this.
3. Uber and Lyft are more convenient for the passenger and it makes people to use them more. I can definitely see myself and people around me to use Uber/Lyft way more than taxi since they came along.
Uber and similar companies are purring cash into this growth because at the end of the day they can make a profit because they are more efficient. And no, it's not easy to make a clone. The network effect is huge!