Uber lost $1.6b and the year's only half over

The ride-hailing company - valued at more than US$62 billion by investors - posted significant revenue growth in the second quarter of this year, the source said, including a 31 per cent jump to more than US$5 billion in second-quarter bookings.
The ride-hailing company - valued at more than US$62 billion by investors - posted significant revenue growth in the second quarter of this year, the source said, including a 31 per cent jump to more than US$5 billion in second-quarter bookings.PHOTO: REUTERS

Bulk of losses from subsidies to attract riders and drivers, especially in China, says source

NEW YORK • Uber has upended the transportation industry in the span of a few years. But the ride-hailing company has been losing a lot of money while doing so.

Uber recorded losses of about US$1.2 billion (S$1.6 billion) in the first half of this year, according to a person briefed on the company's financial data, who spoke on the condition of anonymity.

More than half of those losses, or about US$750 million, accrued in the second quarter of this year, said the person. An Uber spokesman declined to comment. Bloomberg previously reported on Uber's financial information.

The numbers underscore the difficulties that Uber and companies of its ilk face when trying to build and expand globally.

As Uber has opened operations in numerous cities around the world, it has needed to spend to recruit drivers, to market its service and to take on regulators and established taxi companies. The company has also paid for driver and rider incentives in the form of subsidies.

As a result, Uber has been on a fundraising streak. The company, valued at more than US$62 billion by investors, has been raising billions of dollars every few months.

  • US$62b Uber's value.

    US$960m Net revenue in Q1.

    US$1.1b Net revenue in Q2.

    US$1.2b Losses in the first half of this year.

    US$750m Losses accrued in Q2 alone.

In June, the company garnered US$3.5 billion from Saudi Arabia's Public Investment Fund, one of the single largest investments ever in a private technology company.

Much of Uber's heavy losses in the first half of the year were attributed to the company paying subsidies to attract riders and drivers, especially in China, according to two people with knowledge of the matter.

Uber spent the last two years fighting a war in China against Didi Chuxing, the incumbent ride-hailing giant in the country.

Both companies spent billions of dollars subsidising rides in the race to gain market share, said the sources, a practice that could not be sustained in the long run.

That spending came to an end earlier this month, when Uber agreed to sell its subsidiary, Uber China, to Didi. Didi also agreed to invest US$1 billion in Uber Global.

The deal curtails Uber's biggest cash drain over the coming quarter, according to the person briefed on the company's finances.

Still, Uber will continue spending elsewhere. The San Francisco-based company has stated publicly that it is willing to spend to fight competition in some of its most advanced markets, like the United States, where it is battling its rival Lyft.

But there are some bright spots in Uber's financials. The company posted significant revenue growth in the second quarter of this year, the source said, including a 31 per cent jump to more than US$5 billion in second-quarter bookings, a method of accounting that includes the money paid out to Uber drivers.

Net revenue - the amount Uber gets after paying out commissions to drivers - was roughly US$960 million in the first quarter, before jumping to US$1.1 billion in the second quarter.

NEW YORK TIMES

A version of this article appeared in the print edition of The Straits Times on August 27, 2016, with the headline 'Uber lost $1.6b and the year's only half over'. Print Edition | Subscribe