Uber and Lyft's $ 13 billion combined losses have scared competition

SAN FRANCISCO >> A tariff war between Uber and Lyft resulted in losses of several billion dollars for the two companies fighting for passengers and drivers.

But in a way, this has been beneficial for investors who took the title of the newly listed companies: the losses have frightened the competition, giving the leaders a duopoly in almost every US city.

The two San Francisco companies have already lost $ 13 billion. And since there is no clear path to profits, no one else is really inspired to take up the challenge using the same model, which relies on people driving their own cars to pick up passengers who call them on a smartphone app, said Susan Shaheen director of the Transportation Sustainability Research Center at the University of California at Berkeley.

Even if another rival dares to enter the market, it would probably be difficult to raise enough funds to be a viable threat after Uber and Lyft have spent the last decade collecting billions of dollars from equity investors. risk. And over the last six weeks, they have raised an additional $ 10.4 billion in their recently completed initial IPOs.

"There is only one duopoly, because both companies have enough capital to compete, and no one else has," said Michael Ramsey, an analyst at Gartner.

This should remain the case until one of dozens of companies trying to create autonomous cars refines their technology in order to launch a network of robotic taxis that removes human drivers from the equation. This advance could allow them to reduce their rates below the prices currently charged by Uber and Lyft.

Google's spin-off, Waymo, has not concealed its intention of imposing on the brake-driven market with a fleet of autonomous cars built on the technology it has been working on for a decade. Waymo launched a phone support service five months ago with robotic vans in the Phoenix area, but only 1,000 people are allowed to use it.

In addition to being at the forefront of marketing robotic vehicles, Waymo also benefits from more money than Uber and Lyft combined. Waymo is owned by Google's parent company, Alphabet Inc., which has $ 113 billion in cash.

In its IPO document, Uber defined Waymo as a potential threat alongside Tesla, Cruise Automation from General Motors and Apple. Lyft also cited Waymo and Apple among the companies that could hurt its position as the second largest chairlift service.

But most experts believe that it will still be many years before autonomous driving technology reaches the stage where it can support a large fleet of robots.

Until then, the US duopoly should continue, giving Uber and Lyft the luxury of focusing on growth rather than profitability, analysts said. This means that US transmission rates are likely to remain below the actual cost of providing the service, a boon to consumers.

"These grants will continue as long as each company expects to win new customers at a lower price," said Alejandro Ortiz, Principal Analyst at SharesPost. "History is now growth, but growth is expensive."

Finally, the pressure from investors on companies to make money will increase, which will almost certainly require higher prices for their journeys.

Friday, Dara Khosrowshahi, CEO of Uber, hinted that it will take three to five years before the company focuses on profit. This calendar has not yet been well received on Wall Street. Lyft's shares fell 29% from the price of its IPO six weeks ago, and Uber flopped in its stock market debut on Friday while its shares fell by nearly 8% .

Markets with only one or two dominant players often create situations in which companies can abuse their power or try to stifle competition. Regulators and lawmakers around the world claim that this has already happened in many technology areas, Facebook having a seemingly impenetrable fortress in social networks, Google dominating research and Amazon controlling a large part of online shopping.

These have prompted calls to dismantle some companies, including Facebook, whose co-founder Chris Hughes recently claimed that his former company had become too powerful for the good of society.

For the moment, Uber and Lyft have used all the money raised by investors to keep their prices relatively low, creating an obstacle for smaller competitors without the capital needed to sustain massive losses.

Take Austin, Texas, for example. In 2016, Uber and Lyft withdrew from the city after voters approved the grimaces rule, including background checks on drivers' fingerprints. Four competitors intervened to participate in Austin, including two local companies. But the following year, Texas lawmakers passed a less stringent law than Austin, and Uber and Lyft returned.

Shortly after their return, three of the competitors, Boston-based Fasten, Phoenix-based local GetMe and Fare ceased operations, and the last, RideAustin, a nonprofit, lost thousands of its runners.

"It was a matter of a few months and these three companies were gone," said Chris Simek, associate researcher at Texas Transportation University A & M, co-author of a study on the impact of Uber and Lyft on training climbers in Austin. .

Uber has not been so effective at thwarting competition outside the United States. Over the past three years, he has brandished a white flag in Russia, China and parts of Southeast Asia, selling his services in these parts of the world to more powerful competitors.

Lyft has not expanded its operations outside of North America yet, so it faces no other competitor than Uber in the United States.

Via has managed to carve out a place for itself by exploiting a system of public journeys in New York, Washington, D.C. and Chicago. This contract allows it to provide transit services in approximately 70 cities worldwide. This is in New York, where Uber and Lyft also offer bundled services that carry multiple riders, as the competition is direct.

Via specializes in the transportation of six passengers at a time, mainly in vans, and is growing as it can carry passengers more efficiently, spokeswoman Gabrielle McCaig said. Nevertheless, the company is losing money because it is investing in the growth of its business, she said.

And it remains, at least for the moment, that Uber and Lyft will occupy the driver's seat.

"It's hard to see a third or fourth player coming up at this point," said Davidson analyst David D. White. "I think we are considering a duopoly in North America."