Sometimes in economics, the way up is down first. That’s what Uber is counting on. The company known primarily for its ride-hailing service is losing money. The loss is part of a plan that Uber hopes will pan out big in the future. It’s investing more than it’s earning in two areas: food delivery and developing driverless cars.
Around the world, Uber provides rides to customers who can’t or don’t want to drive themselves. Revenue in that area is coming in well. In fact, business nearly tripled in the last three months of 2019 as Uber picked up more passengers worldwide. Total ride income reached $4.1 billion—an increase of 37% in a year.
But even with those gains, the San Francisco-based giant lost $1.1 billion in the 2019 fourth quarter. The loss was due to high costs for growth in the other developments.
Company CEO Dara Khosrowhsahi says the future is bright for Uber. He says the company is on track to turn those losses into profits soon. By the end of 2020, Khosrowhsahi says, Uber will be profitable overall once again.
Uber Eats is the division that focuses on food delivery. It lost $461 million in the last quarter of 2019. But that’s a much smaller loss than Uber Eats reported for the same period in the year before—despite growing competition in the food delivery business.
In the United States, Uber has focused on getting as many restaurants on board with its delivery service as it can. Today, almost 400,000 restaurants list Uber for delivery orders, so hungry homebodies lift no more than the phone to get their favorite foods brought to them.
But growth comes with challenges too. Uber counts on using drivers who provide their own cars and work as independent contractors. The drivers are not company employees. Contractors are in business for themselves. They offer their services (driving in this case) for a rate of pay. But they don’t get employee benefits like paid time off, health insurance, or social security. That saves Uber money.
A new California law makes it harder for companies to use contractors instead of employees. Uber and other businesses have challenged that law. But ongoing labor issues in the huge but demanding California economy only increase the appeal of driverless cars. Perfecting the driverless car could free Uber from paying human drivers. It could also free the company of the restrictions coming down from state governments.
For a driving-driven business like Uber, losing money now for those freedoms later may be worth it in the long run.