Uber’s Losses: A Calculated Bet on the Autonomous Future and where does Elon come in to it?

Uber’s journey since its inception has been one of incredible growth, bold moves, and massive losses. The ride-hailing giant is well-known for its ability to attract extraordinary levels of venture capital with $22.2bn of investment since 2010, despite years of running in the red and accumulating over $30bn in total losses. It’s a curious case in the business world, as most companies cannot afford such sustained financial losses. So, what exactly is Uber's game plan?

The Cost of Uber's Current Model

To understand Uber’s long-term strategy, it’s crucial to unpack the costs that weigh them down. The company’s operating expenses are enormous, including:

• Driver Fees: As a ride-hailing platform, Uber relies heavily on an extensive global driver network. Paying out a significant portion of ride fares to drivers remains one of Uber’s most substantial outgoings.
• Insurance: Ride-hailing insurance policies are expensive and complex, covering drivers, passengers, and vehicles. Uber is on the hook for this across all markets.
• Legal Fees: Navigating the legal landscape, from regulatory disputes to worker classification lawsuits, drains Uber financially and requires ongoing attention.
• Operational Costs: Global expansion and operations, including marketing, technology infrastructure, and local compliance, contribute to Uber’s rising costs.

Massive Investments: Betting on a Market That Doesn't Exist Yet

Despite these losses, Uber has continued to attract investors willing to pour billions into the company. Many may wonder why such confidence persists. Uber is not just a ride-hailing company—it's positioning itself as a cornerstone of future urban transportation.

The Long-Term Play: Autonomous Vehicles

I believe that the key to understanding Uber’s strategy is to recognise its potential bet on autonomous vehicles. While today’s business model is costly due to human drivers, insurance, and legal battles, Uber is playing a long game that could eliminate most of these expenses.

Here’s why Uber’s position in a world of autonomous vehicles could be game-changing:

1. No More Driver Fees: The largest current cost—paying drivers—disappears when autonomous cars come into play. Uber could fully control a fleet of autonomous vehicles, significantly reducing the costs of ride operations.
2. Increased Profit Margins: By owning and operating autonomous vehicles, Uber can significantly increase its profit margins. Today, drivers take up to 75% of the fare. With autonomous cars, the majority of revenue would go directly to Uber.
3. Market Leadership: Uber has built a massive, globally recognized brand. It has deep market penetration and an app that millions use daily. When autonomous cars become mainstream, Uber will already have the infrastructure, brand trust, and user base to dominate the market.
4. Technology Investments: Uber has been investing heavily in autonomous driving technology, along with partnerships and acquisitions. These investments may not pay off today, but they position the company to be a leader in the autonomous vehicle space.

The Future Landscape: Autonomous Uber and Smart Cities

Uber’s vision extends beyond merely transitioning from human drivers to autonomous cars. The future of urban transportation is smart cities, where interconnected systems allow for efficient, on-demand mobility. Uber, with its already robust data, mapping, and user behavior insights, is in a prime position to shape and benefit from this future.

Imagine a city where:

• Self-driving Ubers integrated with AI, communicate with each other to optimise traffic flow.
• Riders use Uber’s platform not just for cars but for an integrated network of autonomous buses, bikes, and scooters.
• Uber’s logistics platform moves both people and goods more efficiently than ever before.

Conclusion: Playing the Long Game

Uber’s financial losses are staggering, but the company is not focused on profitability in the short term. Instead, it is positioning itself as a dominant player in the transportation landscape of the future—a future where autonomous cars rule the road. By playing the long game and investing in a market that doesn’t yet exist, Uber’s strategy may very well pay off in the form of unprecedented profitability.

Only last week, Elon Musk unveiled his autonomous future vision. Robots and autonomous vehicles. Elon even mentioned that when you own an autonomous vehicle, whilst you aren't using it, it can be out making you money...

Are we going to see Tesla buy Uber and build a fleet of vehicles privately owned and 'Rented' by the ride hailing giant? Will Uber take over the whole logistics industry? So much possibility!

The question remains: when will that future arrive, will Uber be the one to lead it, and will we see more companies building now for a future not yet arrived?