Few businesses could sustain such staggering losses even over a short period of time. So what is going on?
James Dennin, a writer for Mic, blames it partially on the higher minimum wage trend across the country which is forcing the company into “subsidizing” (i.e. paying) its drivers so much that even as revenues are increasing, the profit margins per ride are still not enough to cover overhead, marketing and the huge investment the company is making in autonomous vehicles. Management is banking that its self-driving cars will reduce their drivers and bring the company’s income statement into the black…assuming that the self-driving cars actually work reliably and that the company will get the necessary permissions to operate them.
Uber’s playing a risky game. If it raised prices enough to earn a reasonable profit, then it would likely drive away customers, and put many drivers out of work. Even if the company succeeds in developing autonomous vehicles, many drivers would be out of work.
Unfortunately, neither scenario seems like good news for the tens of thousands of independent contractors, freelancers and entrepreneurs who drive for Uber.