Uber is losing money as fast as it is winning it. The most valuable startup in the world is facing financial struggles since 2015, and 2016 seems to be leading to the same way. Apart from that, Uber is threatened by fierce competence and was forced to sell its assets in China when the company realized it had lost the battle in Asia.
Bloomberg reports that head of finance Gautam Gupta told investors on Friday that Uber’s losses increased since the first quarter. The second quarter reached $750 million loss in contrast to the $520 million losses in the first quarter, leading to a total loss of $1.27 billion. The independent taxi service is not as stable as it was thought and even in the United States, the company is trying to keep its reputation in the market.
Only in the U.S. Uber lost $100 million, after Uber CEO Travis Kalanick stated that operations were stable. Home losses are particularly concerning.
Competitors are threatening Uber, and they won the battle in China. And they could be taking the fight to America. According to Gupta, a significant part of the losses globally are the result of subsidies that were giving to its drivers to keep low prices. The strategy was that lower prices would keep customers using Uber services, but competitors are eclipsing the original ride-hailing service.
Uber was fighting a battle with its Chinese competitor Didi Chuxing. Thus, most of the subsidies were sent to Uber’s drivers in that country. But the efforts could not defeat the Chinese ride-sharing company and Uber was forced to sell its China business to Didi for $35 billion. Didi gave Uber a 17.5 percent stake in its businesses and a $1 billion investment in exchange for Uber’s retreat. Uber had to stop struggling with Didi Chuxing. Otherwise, next quarter losses would be even bigger.
The company had lost at least $2 billion in two years in China, but after the sell, Uber will not reflect any losses from the Asian country in 2016 third quarter.
Lyft: Competitors are also fighting Uber in the United States
Unfortunately, competitors are also entering Uber’s market in the U.S. Lyft is another company that offers share rides in America. Due to the competence, both services have to lower their fares, and this means more subsidies to their drivers. Uber told investors on Friday’s call that the company is willing to spend what it is necessary to maintain its market shares in America.
According to Uber, they have between 84 percent and 87 percent of the market in the U.S., a significant advantage they are not willing to lose.
A spokeswoman for Lyft wrote in an e-mail that Uber’s alleged market share is not accurate and skewed statistics given that they offer service in more markets than Lyft. Uber’s competitor in America says it has more than 20 percent of the market shares.
Despite who has more shares in the American market, both Uber and Lyft will be losing money in the country. The thing is that Lyft, which is a smaller company than Uber by trip volumes, would be losing more money than the famous startup.
Bloomberg published in April an article that said Lyft confessed keeping its losses under $50 million a month, a total of $150 million in a quarter. In contrast, Uber U.S. losses totaled about $100 million in the second quarter.
Uber is still valued at $62.5 billion and in July, the company delivered 62 million rides versus Lyft’s 13.9 million.