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Businesses China The Almighty Buck Transportation

Uber Losing $1 Billion a Year In China (thestack.com) 105

An anonymous reader writes: Uber CEO Travis Kalanick has revealed that the ride-sharing company is writing off $1 billion a year in order to consolidate its place in the Chinese ride-sharing app market. Kalanick said in a speech at the Vancouver Launch Academy that Uber is deeply engaged in a fight for customers in the Chinese market, and that an unnamed competitor is "buying up market share." Uber's main rival in China is Didi Kuaidi, which invested $100 million in Lyft and Ola to last year in a consolidation effort against Uber's incursion into the market — which many believe to have occurred too late into the development of ride-share schemes in China.
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Uber Losing $1 Billion a Year In China

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  • by Anonymous Coward on Wednesday February 17, 2016 @12:30PM (#51527865)

    They're underpaying their workers worldwide to burn money in China? Talk about being sacrificed on the altar of capitalism.

    • by mlw4428 ( 1029576 ) on Wednesday February 17, 2016 @12:42PM (#51527951)
      I'm unclear why you're being marked down, it's not an untrue statement. Even if it's not intentional, it's certainly happening. Uber cut rates and while they offered a "guarantee' the prices posted are before Uber takes a 20% cut (again...even off of the "guaranteed fee"). Uber didn't drop their commission rate with the cuts and is, instead, spending gobs of money in China. This would appear, by any reasonable person, to look like they're exploiting their US-based Uber drivers. I can't see a good reason to really disagree with him other than to say "well maybe it's not intentional." And that's not really a disagreement about the nature of what his message throwing out.
      • by quantaman ( 517394 ) on Wednesday February 17, 2016 @03:15PM (#51529403)

        I'm unclear why you're being marked down, it's not an untrue statement. Even if it's not intentional, it's certainly happening. Uber cut rates and while they offered a "guarantee' the prices posted are before Uber takes a 20% cut (again...even off of the "guaranteed fee"). Uber didn't drop their commission rate with the cuts and is, instead, spending gobs of money in China. This would appear, by any reasonable person, to look like they're exploiting their US-based Uber drivers. I can't see a good reason to really disagree with him other than to say "well maybe it's not intentional." And that's not really a disagreement about the nature of what his message throwing out.

        I'm not a fan of Uber but I'm not sure this reasoning is really valid.

        Companies don't approach salary with the idea of "how much can I afford to pay this employee without losing money", they go "how little can I pay this person and still have them work for me".

        So Uber didn't cut rates for US drivers so they could spend money in China, they cut rates for US drivers because it made them more money.

        Second it's not really revenue from US operations that they're using to fund their extension into China and much as it's money from their investors who think they'll get a payoff from cornering the Chinese market (while preventing a Chinese Uber from emerging and hitting their current markets).

        • However in recent tax cases they have stated that they aren't making any money so they shouldn't have to pay tax (stage one of the tax dodging cycle). It's pretty obvious in this case they are throwing away money they don't have to chase a market they don't need then using that as an excuse to avoid paying taxes. I'm sure the "Tax is theft" crowd will be along with their excuses before too long.
    • by c ( 8461 )

      They're underpaying their workers worldwide to burn money in China?

      It's also possible they're overcharging customers worldwide or short changing shareholders. Someone's paying, though; that $1 billion isn't being shat out by unicorns.

      • by gstoddart ( 321705 ) on Wednesday February 17, 2016 @01:34PM (#51528401) Homepage

        that $1 billion isn't being shat out by unicorns.

        How so? The entire rest of their business model is.

        Decreeing you're not covered by regulations because you say so is pretty much all unicorn shit. The entire company is predicated on wishful thinking and unicorn shit, and loudly saying "la la la, we're not a cab company".

        It must be awesome to be able to just unilaterally decree that the magical unicorn shit makes you exempt from any regulations you wish didn't apply.

        • by AK Marc ( 707885 )
          They have been declared by NYC to not be a taxi company. They've won more suits than they've lost (they haven't lost that many, despite the Slashdot coverage). They are compliant by degree of the government in many areas. So why do you have a problem with a company being legal?
        • That said, even in the US there are plenty of multi-billion dollar industries all pretty much based on magical unicorns (subverting existing regulation)... Such as online sporting pools, because they aren't "gambling" they are entertainment... online casinos for pretty much the same reason... probably a host of weird financial "vehicles" on Wall Street, because it is gambling, or entertainment, or whatever... All of the above perhaps because enough politicians palms have been greased... Which is pretty muc

  • by Anonymous Psychopath ( 18031 ) on Wednesday February 17, 2016 @12:34PM (#51527887) Homepage

    I was just there a couple weeks ago and everyone was using Didi, and there were several conversations around how it was similar to Uber. Which no one there had heard of. Until I read this I didn't even know Uber operated in China.

    • Yeah good luck taking on the Chinese market. Look what Alibaba did to Ebay. China supports its own companies, and Uber is not a Chinese company, yet.
      • But don't you know Alibaba was a Softbank/GoldmanSach/Yahoo company [wikipedia.org], and registered in Caymen Island? Your conspiracy theory doesn't fly.

        • by Anonymous Coward

          No, it's not. That is a shell company with an agreement with the _actual_ Alibaba that the real company will move its profits there. It is illegal under Chinese law for foreigners to own stock in certain categories of companies. The Internet is one such category. Anyone who bought shares in the Cayman Island version of Alibaba does not actually own anything in regards to an actual company.

          • Usually the shell company owns the trademark, the domain name and intellectual properties, those are the most important assets for an online company, the domestic entity owns the operating license. The head (legal person) of the domestic entity also signed a contract to turn over all interest in the entity to the shell. Else what do you think VC's investing in?

    • by AK Marc ( 707885 )

      there were several conversations around how it was similar to Uber. Which no one there had heard of.

      How were they talking about Uber when they never heard of it?

      • there were several conversations around how it was similar to Uber. Which no one there had heard of.

        How were they talking about Uber when they never heard of it?

        I was part of the conversations.

    • And that's exactly why it has to spend $1 billion there. Welcome to the game of start-ups.

  • Ride sharing? (Score:5, Insightful)

    by smooth wombat ( 796938 ) on Wednesday February 17, 2016 @12:37PM (#51527923) Journal
    the development of ride-share schemes in China.

    Isn't ride sharing where one is already going to a specific location and someone asks if they can come along, maybe picking up the cost of tolls for the ride? Or has the definition of ride sharing changed to mean directly contacting someone to have them pick you up at a specific location so you can be driven to a location where the person was not otherwise going and you pay them a fee and maybe give them a tip for their work?

    At least the scheme part is right.
    • by Punko ( 784684 )
      Shhhh! Please don't start spreading truths. the marks will be upset if you point out that the Uber concept is to disguise a taxi service under a better term.

      And by marks, I don't mean the foks being taken in a vehicle to a destination, I mean the investors being taken for a ride by Uber Inc.
    • Re:Ride sharing? (Score:5, Insightful)

      by gstoddart ( 321705 ) on Wednesday February 17, 2016 @01:15PM (#51528213) Homepage

      Or has the definition of ride sharing changed to mean directly contacting someone to have them pick you up at a specific location so you can be driven to a location where the person was not otherwise going

      Pretty much "ride sharing" in this context means "illegal cab company who decrees they aren't covered by regulations because they have doused themselves in unicorn piss".

      Nothing about Uber is a ride sharing service, it's a bootleg cab company. Their insistence on an alternate reality is bullshit, in all contexts.

      • Re: (Score:2, Informative)

        by AK Marc ( 707885 )
        Nope. A taxi company picks up people on the street by hail. Uber doesn't. By definition it isn't a taxi company, no matter what your personal hatred of them warps your beliefs to.
        • So every Uber driver that has ever driven a rider happened to be going to the EXACT SAME PLACE that the rider was going? And then they just happen to change their mind about what they are going to do that day and just happen to be going to where the next rider is going? Sounds like they are taxiing people around to me. taxi: a boat or other means of transportation used to convey passengers in return for payment of a fare.
        • It's a car for hire service, it isn't your buddy giving you a ride because he's going in the same direction.

          It's a fucking commercial car service, claiming it's a ride sharing service is complete bullshit. By definition it's not "ride sharing". It's a car, for hire ... the rest is semantic horseshit.

          You're a commercial vehicle for hire, like it or not, you need a commercial license, commercial insurance, and have to adhere to the applicable laws covering a commercial vehicle for hire.

          No amount of sophistr

        • Nope. A taxi company picks up people on the street by hail. Uber doesn't. By definition it isn't a taxi company, no matter what your personal hatred of them warps your beliefs to.

          Our local taxi companies use Apps. Does your definition mean they are no longer a taxi company? They call themselves a taxi company, Do you want their number to them them they aren't?

          I think its pretty important you set them straight.

          • by AK Marc ( 707885 )
            So your local taxi company won't stop if you hail them (and they are available and all that)? Then it's not a taxi company.
        • "Nope. A taxi company picks up people on the street by hail. Uber doesn't. By definition it isn't a taxi company, no matter what your personal hatred of them warps your beliefs to"

          Taxi firms in New Zealand pick you up via hail, from taxi ranks and if you ring them and ask their robot phone service.
          Uber are a taxi service.

          Then again it is not the USA so I must be wrong.
          • by AK Marc ( 707885 )
            The only one legally allowed to pick you up on a hail is a taxi. That's what defines a taxi service. That they provide more doesn't mean they aren't a taxi, or that anyone else that does the same thing must be a taxi. If you look at the charges against Uber drivers (yes, they've arrested or ticketed a few, at least in Auckland), it's for responding to a hail.

            It's not that you are wrong because you are in NZ, but you are wrong because you are wrong. If a taxi company were to take packages as passengers
      • It's indicative of a larger problem - trying to distinguish between behaviors which only differ in people's minds. Or, what is the intent of the driver? Functionally, both ridesharing and illegal cab company are the same thing: One person gives another person a ride. The difference is entirely within the mind. In one case the driver was going there anyway and decided to pick someone up. In the other case, the driver decides to go there because of the person he picks up.

        So the problem really isn't th
        • As long as the driver expects (in their mind) that they will be paid for taking a rider somewhere, they are a taxi.

          taxi: a boat or other means of transportation used to convey passengers in return for payment of a fare.
      • Of course, but it's hard to draw the line somewhere.

        Can I not give a friend a ride? Can I have him pay for gas? Can I have him pay me for my time? Does it have to be my friend? (good luck proving that in court) What if it's a friend of a friend? What if there's a computer involved to keep track of friends and rates and locations? What if there's a company involved that sells software that does something to organize that?

        Now, of course Uber is a taxi company that just has a different model. They are. But a

    • by mjwx ( 966435 )

      the development of ride-share schemes in China.

      Isn't ride sharing where one is already going to a specific location and someone asks if they can come along, maybe picking up the cost of tolls for the ride? Or has the definition of ride sharing changed to mean directly contacting someone to have them pick you up at a specific location so you can be driven to a location where the person was not otherwise going and you pay them a fee and maybe give them a tip for their work?

      At least the scheme part is right.

      Its "ride sharing" in the same way that me selling beer from a carton on the street is "drink sharing" or a lady who offers sex for money is just "body sharing".

  • by DogDude ( 805747 ) on Wednesday February 17, 2016 @12:39PM (#51527929) Homepage
    Uber is an app. An app that's already written and finished. How the HELL do they burn through so much money? I know that most of the dot-coms are just robbing the dumb investors, but to lose this amount of money is truly astonishing.
    • Advertising, paying drivers to drive for them instead of taking commission...
      • Advertising ... and perhaps an envelope full of cash left on a table here and there?

        China is 83rd in the world in the 2015 Corruption Perception Index. Slightly Behind India. Number 1 is Denmark, 2 is Finland. Canada is 9. Germany 10 tied with the UK. The US is 16

        • by vovin ( 12759 )

          Perception is not reality. Having china even close to India on that score is highly discourteous the rampantly and openly corrupt in India.

    • It's easy to spend vast amounts of money if your objective is to drive competitors out of business. For example, they could charge their customers less than what they need to pay their drivers. Of course, then the trick is earning the money back.

    • by idji ( 984038 )
      Uber is far more than the two apps. People who work for Uber have to customize their data for each airport and important location - e.g. which entrance to a hotel are uber drivers allowed to wait at, which exit door from the airport are you waiting at. Where are the toll roads and what are their costs. What receipt processing cloud services do business customers use so that uber can directly send receipts to those solutions. They have to customize per city/region which services are available. There is a hug
    • Uber is an app. An app that's already written and finished. How the HELL do they burn through so much money?

      Uber is a company [wikipedia.org]. Uber the company has an app which is also called Uber. Uber the company has marketing, sales, legal, administrative and a lot of other costs. The actual percentage of Uber's expenses from building and maintaining the app is probably something around 10-15% of their total expenses if their books are like any other software company. Most of the expenses for any software company are not in engineering. This is true for Microsoft, Oracle, and pretty much any other software company you c

      • by Anonymous Coward

        No...You can bet more than 15% of Microsoft's expenses are engineering. Uber is a taxi company that has an app. Taxi companies don't usually spend a whole lot on engineering.
        I work at a software development company. The split between developers/other employees is something like 80/20. We don't really pay for marketing, most sales are from word of mouth. Sales people cost us nothing(literally, they only make money if they sell for more than our asking price). I've worked in other places that did reason

    • by Anonymous Coward

      My question exactly. The app should be "done" (besides perhaps, some language/region specific tweaks). How they could *lose* (let alone even *spend*) $1B is completely beyond my comprehension.

      My intution is that they are writing off other losses (occuring in other markets) in their China books through some accounting tricks for a nefarious tax-avoidance purpose.

    • by mjwx ( 966435 )

      Uber is an app. An app that's already written and finished. How the HELL do they burn through so much money? I know that most of the dot-coms are just robbing the dumb investors, but to lose this amount of money is truly astonishing.

      Uber isn't an app, that's just the public facing part. Tip of the iceberg so to speak.

      Uber is a business process which relies on ignoring laws and undercutting legitimate competition. There's no profit in a race to the bottom and Uber seems completely unaware of this (either that or its a scam where the owners of the company intend to get out with as much VC money as possible and live in a country with no extradition treaty al a Skase).

  • Desperation (Score:5, Insightful)

    by fluffernutter ( 1411889 ) on Wednesday February 17, 2016 @12:47PM (#51527989)
    Uber will have a problem in any market where it is already standard to take advantage of impoverished desperate people. They have just been surviving in North America because they found an untapped resource of desperate 'workers' who have not been taken advantage of yet due to the recent years of poor economy. We're all headed for the conditions that poorer nations are in, really.
  • The problem I see with uber is there is no major deterrent for other companies to enter the market. A uber driver could easily be recruited for another ride share program. It is more like groupon than tesla.
    • Yes, this is what is going to ultimately be their downfall worldwide. They are going against entrenched power. If they succeed, what will they have accomplished? Only removing barriers to entry that would prevent someone from competing with them.

      What I find more interesting, though, is all these companies pouring money into China, thinking they're going to control a piece of that market. Don't they pay any attention? It might work in Africa, where anyone with more guns can win. It won't work in China. China

    • The normal cycle of things is to disrupt, dominate, then protect.

      Upstarts hate regulations, and try to find away around them, as they disproportionately hurt little guys than big guys (same amount of lawyer time spread over fewer sales). Once they get a chunk of the market however they want more regulations. If the law only supports the business model they want to pursue it removes risk (of competition). Regulatory capture ensues, where the regulators become dependent on the big companies rather than sit

  • It's a lot to commit in a country where their popularity and brand won't be as "heard" as in lax media censorship-bound locations. Then again, it's a market where having 10% share is enough to break-even that billion, real easy, as soon as the ride-share thingie gains full traction (pun intended).
  • ...a domestic company doing the same quasi-legal activity, in a country that many describe as embodying neo-mercantilism. I don't see things ending well for Uber.
  • I will guarantee that I can lose at least $2 billion a year in China!
  • by k6mfw ( 1182893 ) on Wednesday February 17, 2016 @08:12PM (#51531489)
    I guess like most people who didn't RTFA and get right to bitching about Uber and cabs in general, I figured to post this insightful comment by Chris Johnson. Also I could not help but read how one person says he will happily buy a new Tesla and use Uber income to pay for the vehicle (and another falling for the "gig economy?"):

    Sure, a bit. Uber's the same thing. It's designed to make maximum use of crazy people and force the others to live up to that standard or be fired.

    I'll define 'crazy Uber people' not as 'danger to customers', but 'people who are bringing more value in terms of vehicle, skill and desire to please, than they are getting back in pay and benefits'. So the crazy Uber person is the one who keeps buying a new Lexus or whatever, vacuums their car three times a day and busts their ass to outperform all the other Uber drivers, so they can continue to win out over anybody else seeking to be a driver.

    The key factor is that they are giving more than they get back, in the belief that they're cornering some kind of market or buying in to something important.

    If you make a business that relies on people like this, you can demolish anybody else because you've worked out how to get voluntary unpaid labor, like the Amazon exec who was said to use her own money to hire subcontractors to do more. As long as there are people who are willing to do that, the market breaks and Amazon/Uber get to do what Wal-Mart did in small towns, break the back of other market participants so they can't break even or continue.

    Another way to be a crazy Uber person is to put more depreciation and wear and tear on your car than you can afford to repair (or replace). It's easy to be crazy in these ways. It's externalities which are easy to overlook. These Amazon/Uber business models are designed to leverage that kind of crazy as hard as possible, and kick out everybody who's not willing to lose (one way or another) on the deal. Psychology is useful in getting people to buy into this stuff.

    As they say, a cult.

  • I did not expect this, but kudos to Chinese people for "fixing" the Uber problem. How long can they sustain such an annual loss?

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