1. Uber blames drivers’ subsidies for $1.27 billion loss

Uber blames drivers’ subsidies for $1.27 billion loss

Following a loss of $520 million in the first quarter of the year, Uber is reported to have lost $750 million in the second quarter of 2016, including an approximate of $100 million in the United States.

By: | Published: August 26, 2016 10:45 AM
uber, uber india, uber china, lyft, didi, uber losses, uber drivers, uber incurs losses, uber blames drivers Uber’s losses in the first half of the year amount to .27 billion. (Reuters)

Following a loss of $520 million in the first quarter of the year, Uber is reported to have lost $750 million in the second quarter of 2016, including an approximate of $100 million in the United States. If calculations are right, then Uber’s losses in the first half of the year amount to $1.27 billion. It has been reported that subsidies for Uber’s drivers are responsible for the majority of the loss. Uber’s net revenue grew nearly 18%, from about $960 million in the first quarter to $1.1 billion in the second with the bookings growing from $3.8 billion to more than$5 billion. Uber’s losses and revenues have grown as the company has expanded its global ambitions. At 7 years of age, the company has lost at least $4 billion.

The company could see a fall of losses in this half of the year. The company cut a deal in July with Chinese Didi Chuxing, its largest global competitor. Didi gave Uber a 17.5% stake in its business and $1 billion to invest, changing with Uber’s retreat from the country. Uber is estimated to have lost $2 billion in its two years in China. The ride-hailing giant’s backers range from Benchmark Capital to the investment bank Goldman Sachs. To sum it up, Uber has more than $16 billion in cash and debt. The company is known to have redistributed $1 billion to the Chinese working class in the form of subsidies to the drivers, during its time there. Uber Chief Executive Officer Travis Kalanick, wrote a letter announcing the company’s departure from China saying that Uber has invested billions in the country and yet to turn a profit.

Uber has also been in a tussle with Lyft Inc., which has contributed to its enormous losses. Uber believes that 84 to 87 percent of its market exists in the US. Lyft had then claimed that its market share in major US cities is more than 20% and is on a substantial growth since last year. A Lyft spokesperson stated that Uber’s alleged market share was a misleading statistic given that they offer service in more market than Lyft. Uber is expected to lose more money in the US but its competitor Lyft is leading in the matter. Uber has $8 billion in the banks and is about to receive $1 billion in cash from Didi. The company is also known to have $2 billion credit line and a $1.2 billion loan. The company might be taking the losses in order to achieve disproportionate scale but when the company makes a profit, remains to be seen.

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