From AVs to contactless deliveries – Uber’s rollercoaster 2020
- The company is looking to excise money-losing parts of its business as it seeks to become profitable, causing major change in its structure
Ride-hailing pioneer Uber had a very uneven 2020 by all accounts, facing multiple challenges, not least of which was the fact that users were not ordering ride-shares as they were stuck at home for a big chunk of the year.
The coronavirus surges in Uber’s active markets effectively hobbled the ride-sharing industry for months. At the same time, current CEO Dara Khosrowshahi is still on a mission to edge Uber closer towards profitability, which the company has sacrificed since day one in efforts to garner market share and to secure its brand identity.
Uber Technologies Inc reported three loss-making quarters from January to October this year, amounting to US$5.8 billion so far in 2020, roughly equivalent to the pandemic period when the company had to let go of 3,700 employees.
While its core business floundered more than usual, the same lockdown restrictions that laid low ride-sharing worked in favor of its food delivery division Uber Eats, with people ordering from home on a more regular basis. Uber Eats enjoyed a 190% spike in revenue in Q3 2020 compared to the same period last year, helping to offset some of the pressure on the present management.
It was under the previous CEO Travis Kalanick, however, that Uber first started looking at self-driving cars as the possible future of the company. If Uber could get autonomous vehicles to work before others, Kalanick believed the company could evade a future where human-piloted taxis like Uber’s were no longer needed.
Unfortunately, this week, the self-driving unit was sold to self-driving-tech developer Aurora for an undisclosed amount, joining the sale of its Jump electric-bicycle division to scooter firm Lime and the just-announced deal to flog its Elevate flying taxi project to a startup called Joby Aviation, as Khosrowshahi continues to offload business entities in the hopes of improving its bottom-line.
The company also sold part of its logistics arm, Uber Freight. Despite the piecemeal dismantling of various components that were once going to make Uber the “Amazon for transportation”, spokesperson Sarah Abboud told Wired that Uber “remains committed to commercializing self-driving transportation on the Uber network through industry partnerships,” and the terms of the Aurora deal appear to support that.
Uber will invest US$400 million in Aurora as part of the deal, bringing Aurora’s valuation to US$10 billion and tripling its workforce with the addition of 1200 employees from Uber ATG. Uber’s current CEO Khosrowshahi, will also take a seat on Aurora’s board, signaling an intention to get back involved as self-driving taxis move closer to becoming a reality.
But will Aurora actualize autonomous cars that are reliable and thoroughly-tested (an Uber self-driving test tragically killed a pedestrian in 2018) ahead of the likes of Google-backed Waymo, Didi Chunxing, and Tesla, as former CEO Kalanick feared? That could determine the survivability of Uber’s self-driving vision.
Back in April, Uber had to hastily release its Uber Connect delivery service in a select few US cities and a couple of other countries, to enable the sending of essential items to nearby recipients. Just this week, Uber Connect was made available in thousands of new locations, including 2,400 American cities like Atlanta, Detroit, Las Vegas, and even Honolulu, Hawaii.
The wider arrival of Connect has been timed to coincide with the year-end holidays for the US and much of Europe, marking Connect as the other bright spot alongside Uber Eats, in what has definitely been a roller coaster year for the ride-hailing giant.
As the post-coronavirus landscape looks more favorable in 2021 as potential vaccines could see economic conditions improving next year, this could see Uber’s core ride-sharing operations return to more regular conditions as folks resume going outdoors for work and recreation.
But a drastic improvement in one of the company’s verticals could see a converse effect in another. For instance, resuming outdoor activities means that people will also eat out more, which could help drive the food delivery segment down.
Market analysts are also predicting a similar upending in stocks. Companies that performed well this year as a result of the pandemic such as Zoom Communications, Crowdstrike, and DocuSign Inc. have all been downgraded as analysts predict potential “performance headwinds” for these stocks next year.
And, as vaccines give the market some optimism, an economic rebound is expected sometime in 2021 for the big tech firms, including Uber and San Francisco-based Lyft.
The roller-coaster ride might not be over for Uber’s entities yet, but in the short term, losing billions is nothing new for the company. Uber is estimated to lose US$8 billion by the end of this year – which is roughly equivalent to how much it lost in 2019.