Published on September 20th, 2020 |
by Benjamin Schulz
September 20th, 2020 by Benjamin Schulz
Jeff bought Whole Foods. Could Elon Buy Uber?
The Uber share price has suffered since its IPO in May 2019 — for many reasons. The main reason is that a significant value within Uber was its ability to create a taxi service without being regulated like a taxi service. Of course, this is a sort of rogue practice on how to build a company — and similar to Facebook, it borders on the criminal (that’s the word we usually use when structurally breaking the law is at the core of the service). Uber continues to search for how to become profitable, and it’s difficult to see what the company can do other than raise prices (having to slowly follow the law), which would reduce usage — which works against its growth story. Taking that path would probably cut Uber’s share price even further.
But, in their spare time and with a lot of venture funding, Uber has also created a great app — supported by the important network of drivers (reportedly 5 million drivers, with a US-to-international ratio of 1:3). The drivers create a lot of usage data, as do the users, which like and are habituated to the service.
Could Tesla buy out Uber, and begin to solve some of its structural problems by supplying Tesla taxis to the Uber drivers? There is a wild idea why this would work — and there is also great reasoning from Ark Invest as to why Tesla should get into non-robo ridesharing. We’ve covered that in our own way on CleanTechnica as well, concluding that the “Ark Invest” research hits all the important points and Tesla should begin its own service. However, I believe Tesla should actually begin with an existing one — namely, Uber.
A large portion of the costs of the Uber service (next to the drivers) is the car payments, financing & depreciation, fuel, insurance, and maintenance. If we compare the associated costs of a very common Uber vehicle in the US (a Toyota Camry XLE) to a Tesla Model 3, we see that the electric car would perform financially a lot better — on average saving $0.80 to $1.20 per trip (with some very rough calculations, we find savings of $10,500–15,000 on 75,000 miles gives us $0.14 to $0.20 per mile, or $0.80 to $1.20 per trip at a 6 mile average per trip).
With 1.6 billion trips per quarter (and 6 miles an average per trip) and an estimated quarterly loss of $1.1 billion, if all of these trips were completed in a Tesla Model 3, those saving on the balance sheet of “Uber by Tesla” would turn it into a profitable company ($0.2–0.7 billion per quarter). And that would even allow for slight increases in driver compensation — creating a better service for everyone.
Why would Uber like to sell Uber rideshare? Looking at the numbers, they seem to suggest that it’s probably best for the CEO to somehow get rid of Uber rideshare (at a few billion dollars) and keep Uber Eats (later combining Uber Eats with another food-delivery company). If we estimate that Uber will lose 50% of its share price in the next 12 months, and we estimate both the Uber and Tesla CEOs have an understanding of this, it would make sense to sell the Uber ridesharing company today at something like $8–9 billion, which is only a small part of Tesla at the current Tesla share price — which makes it realistic for Tesla to consider. Having Mr, Khosrowshahi stay on at “Uber by Tesla” to oversee the transition could be an additional asset — and would also give him an attractive out and access to Tesla stock options (instead of slowly decreasing Uber stock options).
And Tesla could create a simpler vehicle trim in a distinct color (think “Tesla taxi”) that it could first offer the drivers doing the most trips. This would immediately give Tesla the largest ridesharing fleet in the world, producing deep insights into where a robotaxi service could have the biggest impact. Within 3 years or so, it could also become an electrified (and possibly robo-ready) ridesharing fleet.
For Tesla, this is easily within its long-term vision, which is globally supported by its very high valuation and cheap access to long-term capital. And, Tesla is in the very unique position that it could offer current drivers a certain income as the degree of automation rises, as those drivers oversee multiple vehicles. Even if human oversight fully fades away from the driving experience, the “drivers” could receive the revenue equivalent that their former car generates for a certain period (like 4 years — which, again, the capital markets would allow a company like Tesla). This would give a driver a realistic timeframe for a new orientation. Such a positive “social contract” could become very important in convincing regulators and governments to embrace fully autonomous ridesharing.
We can estimate it would also “save” 2.5 kg of CO2 emissions per trip (assuming 0.4 kg per mile) and 16 million tons of CO2 per year (given a mostly electrified fleet by 2024). Those would be some nice targets to achieve.
Data reference of Uber usage here.
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