how does Uber lose so much money if it realistically doesnt do anything besides run an app, like the cost of depreciation, repairs, and fuel is all driver side and Uber just takes a cut from each transaction how can they be so in the red

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how does Uber lose so much money if it realistically doesnt do anything besides run an app, like the cost of depreciation, repairs, and fuel is all driver side and Uber just takes a cut from each transaction how can they be so in the red

In: Economics

They’ve been investing a huge amount of money in driverless vehicle research. The eventual goal is to eliminate the Uber drivers.

They also subsidize rides in new markets and take a loss there to edge out existing taxi competition.

Uber makes money every time a driver takes a fare. There really aren’t that many fares to be had these days, so Uber isn’t making as much money.

Uber also has fixed costs and repairs for their servers (for the actual hardware, for the software, for offices). All of which still need to be paid, regardless of how much cash they have coming in the door

So most cities regulate taxi service, and Uber just showed up and began operating outside those regulations. That meant lots of lawsuits, lots of government lobbying to get laws changed on local and state levels, etc.

Additionally, the had to spend a ton to build up enough of a base of drivers and customers. Drivers don’t want to drive unless they can make enough money, so things like new driver sign-on bonuses were offered. Additionally, to build up a customer base, they offered all sorts of discounts to customers. These expenditures made sure they could quickly build up enough drivers to supply customers a quick ride and enough passengers to make driving worthwhile for drivers.

All these are expenses that are high up front, but will decline rather quickly once laws are settled, markets mature, etc.

They have servers, software engineers, customer support personnel, in other words, they have to pay a lot of salaries and hardware maintenance.

They also have this ridiculous idea that they can lead the way in driverless car technology. They are wasting a lot of money on this research.

Uber is a growing company.

Companies that are growing and expanding tend to burn through cash because its not cheap to grow.

Any money they make is immediately dumped into R&D for driver less cars, servers, programmers, promotions to encourage people to sign up as a driver or to use their services.

Sometimes, instead of taking a cut from the transaction, Uber will take a loss. Like, the customer will pay $7, and Uber will pay the driver $10. This happens a lot when Uber has special deals trying to get new riders or when Uber starts serving a new area. Uber will offers big discounts for new riders, or big pay bonuses for new drivers, so that Uber loses money with every ride for a while. This also sometimes happens when shared rides are happening. A rider asks for a shared ride, and Uber sets the cost at $7 and to pay the driver $10, expecting that another person will ask for a shared ride, and thus get put into this ride for another $7. But if no suitable ride is asked for, Uber just eats the loss and the rider gets a solo ride for below cost.