Uber is a ride-hailing company that operates as a multisided platform business model. It connects drivers (supply) and passengers (demand) to offer cheaper transportation and an additional source of income. Uber’s app allows users to request a ride, track the driver’s location, and pay for the ride electronically. Uber’s business model is based on taking a percentage of the fare charged to the passenger. Uber also offers food delivery services through its Uber Eats platform.
Dara Khosrowshahi’s, the CEO of Uber has a vision of doubling Uber’s value in approximately three years while still operating profitably. He has shaped the core of its business but also expanded the company beyond ride-sharing into food delivery and freight logistics. He also emphasizes the necessity of achieving profitable growth within the tech industry.
Uber Technologies net cash provided by operating activities for the twelve months ending September 30, 2023 was $ 2.762 Billion, while posting a 21% increase in global bookings. Investors have taken notice; Uber’s stock price has more than doubled year-to-date.
“The growth flywheel we built, coupled with rigorous cost discipline, is enabling us to generate strong leverage to exit the year with tremendous momentum and reliable execution.” says the CEO, Dara Khosrowshahi. Dara has managed to boost revenue and optimize costs and capacity at the same time.
Since taking the helm of Uber in August 2017, Dara has raised Uber prices considerably faster than the rate of inflation while limiting increases in operating costs. Including the most recent quarter despite soaring inflation in auto operating costs. As a result, the US ride-hail business drove almost a third of its total global year-on-year operating cash flow increase.
In achieving this performance, Uber’s AI algorithmic pricing management platform has been crucial. This has enabled auction pricing economics and capacity allocation to play its role in boosting supply side efficiency. Uber has also used smart financing techniques such as using convertible senior notes to hold down interest rates. Finally, Uber benefits, from platform network effects, consumer brand recognition and pricing power. This demonstrates a business with a strong moat; tested and proven during the pandemic and recent period of rampant inflation.
Analysts argue that EVs could be the key to a back-to-the-future business model, especially since electric-powered autonomous vehicles are showing more signs of life as a ride-hailing strategy. Research and development will produce rapidly falling costs in autonomous driving, which will soon push operating costs below $1 a mile. Furthermore, Dara Khosrowshahi has committed Uber to operate an EV only platform by the year 2030.
Uber, therefore, is part and parcel of the great energy and mobility transition ongoing around the globe. This in turn will continue to drive demand for Generative AI, robotics, microchips and lithium-ion battery energy storage.
