Uber US Return to Vehicle Allocation Business is the Only Way to Achieve Profitability

The first quarter financial results announced on the 5th by Uber Technologies Inc., a major US ride-hailing company, barely supported the sharp decline in sales of the ride-hailing service division by the growth of the food delivery division “Eats”. In terms of revenue, the mobile service division was in the black, while the food delivery division was in the red. That’s why Uber‘s return to the ride-hailing business is the only way to turn a profit.

Uber is slow to recover from the pandemic of the new coronavirus. First-quarter sales in the vehicle dispatch division fell 65% year-on-year. Treating a driver as an employee in the UK has settled a $ 600 million cost, putting pressure on sales. Excluding this factor, the vehicle dispatch division recorded a 41% decrease in sales and recorded adjusted EBITDA (earnings before interest payments, taxes and amortization) of approximately $ 300 million. On the other hand, sales of the food delivery division tripled from the same period of the previous year, but the profit and loss was a deficit of 200 million dollars.

Indeed, the food delivery sector has been a stumbling block to Uber’s profitability mainly because of intensifying competition in the market. According to research firm Second Major, Uber has a nearly 70% share of the US ride-hailing market, giving it an edge over rival lifts. On the other hand, while being in second place in the food delivery market, it is being chased by Grubhub by a small margin, and the leader DoorDash holds a 55% share and overwhelms both companies. The number of companies entering the food delivery market is increasing. Even if food service companies pay Uber for drivers and platforms, these fees vary. Uber, on the other hand, pays special allowances to drivers and rebates to food service companies, especially in highly competitive markets.

In addition, Uber is in the red on average for each food delivery order. There is also an inconvenient situation in which departments within the company compete for drivers. Drivers in the dispatch department usually also deliver food to home. Uber will add $ 250 million in incentives this year due to a shortage of drivers, which could be even higher.