Investors keep pouring
money into smartphone ride-sharing services in the hope that they will someday
become profitable
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Investors including Japan's SoftBank and
Google-parent Alphabet are fueling a drive to a ride-sharing future, betting on
startups such as industry giants Uber and Lyft which have so far failed to
deliver profits. The frenzied pace of investment suggests optimism
over a new model that has disrupted local taxi and transport operations around
the globe.
A recent Goldman Sachs study projected that the
worldwide ride-sharing market could grow eight-fold by the year 2030, reaching US$285
billion annually.
Lyft, which is Uber's main rival in the United
States, raised a billion dollars in a recent investment round led by an
investment arm of Alphabet. That means the Google parent now has investments in
both Uber and Lyft.
Meanwhile Uber's board of directors has approved
a plan that opens the door to a colossal investment by Japanese
telecommunications giant SoftBank. Another major player in the sector, Didi Chuxing
in China, bought Uber's operations in that country last year and has invested
in Lyft and India's Ola as well. Didi has become Asia's most valuable startup,
worth some US$50 billion based on a recent funding round.
Uber's new chief executive has vowed to take the
company, valued privately at nearly US$70 billion, public with a stock market
debut by the year 2019. Lyft, with a valuation near US$11 billion, is reported to
be mulling a strategy to also go public.
- Data over dollars -
Lyft has raised fresh
capital to ramp up competition against US rival Uber, which is also looking at
new investments
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Despite the staggering private valuations,
smartphone-summoned ride services have yet to prove they can turn profits, and
have repeatedly run into roadblocks from regulators and traditional taxi
operators in several countries.
Aside from clashes with entrenched industry
powers, proudly disruptive Uber has earned a sulfurous reputation with a litany
of scandals, lawsuits and investigations.
Uber lost about US$600 million in the second
quarter of this year, after losing US$2.8 billion in all of 2016. Ridership
nevertheless is soaring. Such red ink on balance sheets has not deterred
investors with the resources of Alphabet or SoftBank, with amounts they have
sunk into ride-sharing startups considered "pretty modest," Jack Gold
of J.Gold Associates told AFP.
Gold said that high-powered investors may be less
interested in quick returns from the day-to-day business of on-demand rides,
and keener on getting their hands on data gathered by the operations.
"There is a major amount of data to be had
for analysis from all of the Lyft and Uber drivers. So investments in these companies are about
finding ways to leverage the installed base of drivers, and less about any
financial reward from existing operations," Gold said.
Ride-sharing services get to know about travel
habits, schedules, and profiles of passengers and drivers, typically analyzing
information with software to anticipate demand and improve service.
- Rides, not cars -
Companies like Waymo, the
former Google car unit whose CEO John Krafcik is seen here, are expected to
launch autonomous ride services which could change the game for ride-sharing
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Such data can also be a treasure trove to mine in
the development of self-driving cars, which have been touted as the future of
urban transport. Ride-sharing services are seen as promising early
users of the technology, letting people shun vehicle ownership in favour of
simply summoning rides whenever they wish with the machines doing all the work.
With cars navigating themselves, passengers will
likely spend more time immersed in on-board entertainment or services, likely
streamed via wireless internet connections. Google and other online titans
would profit from going along for the ride.
"Once we get to self-driving cars the need
to own one for most will evaporate, which means firms like Lyft and Uber will
effectively own the car market," said independent tech analyst Rob
Enderle.
"Google and SoftBank want a part of that
action."
Human drivers are considered a prime expense for
ride-sharing firms, which Goldman Sachs research found to be a
"significant contributor" to the lack of operating profit. Fully
autonomous vehicles could eliminate about 6.2 million drivers in the workforce,
according to Goldman Sachs.
The self-driving car is expected to be "the
trigger to transform" ride-sharing operations, according to Goldman Sachs. A Lyft unit devoted to the technology
collaborates with US car maker Ford, as well as with Alphabet's self-driving
car subsidiary Waymo. Uber has also been investing in autonomous cars,
its collaborations including one with General Motors, which is among Lyft
investors.
IHS Markit analyst Jeremy Carlson said the dream
of "autonomous mobility on demand" is starting to come into view,
which can be a game-changer for ride-sharing.
Originally published on DAILY MAIL WIRES
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