Investors are asking can Uber make money because the ride-share giant is planning to issue stock. Moreover, critics are asking is Uber good for the economy because of its lack of profitability.
To explain, Uber has filed the paperwork for an initial public offering (IPO), The New York Times reports. However, Uber admits it lost $1.8 billion in 2018.
Uber interests investors because analysts estimate its value at $100 billion. Moreover, Uber generated revenues of $11.3 billion in 2018. Thus, Uber could make money soon. On the other hand, Uber’s revenue growth is slowing.
Is Uber Good for the Economy?
Uber’s lack of profitability raises serious ethical, financial, political, and social questions.
For instance, the average American Uber driver makes around $20,000 a year, Recode calculates. Hence, the average American Uber driver makes $11,066 less than the Real Median Personal Income in the United States.
To clarify, the Federal Reserve Bank of Saint Louis estimates America’s 2016 Median Personal Income at $31,066 a year. Importantly, this figure represents the annual income of the average American.
Thus, Uber drivers do not earn enough money to finance a middle-class lifestyle in the United States. Hence, critics charge Uber offers no lasting benefits for society.
Does Uber Avoid Taxes?
Thus many Uber drivers could qualify for a wide variety of government benefits for the poor in America. For instance, Uber drivers can qualify for Medicaid; America’s single-payer health insurance scheme, for the poor in many states.
Moreover, lawyer Jolyon Maugham alleges Uber does not pay British taxes in a lawsuit, Fortune reports. In particular, critics charge Uber does not pay National Insurance payroll taxes that fund government pensions in the United Kingdom.
Hence, critics allege taxpayers are financing Uber’s operations. To elaborate, Uber avoids payroll taxes by paying its drivers as contractors. Contractors are exempt from payroll taxes in the USA and the UK.
However, Uber competitors like taxi companies collect payroll taxes. Consequently, Uber has an unfair advantage over competitors.
Does Uber Harm Workers?
Additionally, many critics charge that Uber harms workers by transferring its operating costs to drivers.
To explain, most Uber drivers provide their own vehicles, fuel, and insurance. Meanwhile, Uber provides a platform that connects drivers with passengers. In exchange, both drivers and passengers pay Uber a fee for the connection.
Consequently, most of an Uber drivers’ income goes to car-related expenses. For example, California Uber driver Peter Ashlock cannot afford to repair or replace his car, The New York Times reports.
Is Uber Promoting Debt Peonage?
In contrast, American tax cab companies provide drivers with vehicles. Thus, taxi drivers can receive more take home pay than Uber drivers.
Moreover, many Uber drivers need to take out loans to borrow vehicles. Hence, many Uber drivers use most of their earnings to cover loan payments. Not surprisingly, some critics call this situation debt peonage.
To clarify, debt peonage occurs when all of a worker’s earnings goes to paying debts. Hence, the worker needs to borrow more money to survive and never gets out of debt.
In addition, critics charge many Uber drivers rely upon payday loans to pay expenses. To explain, a payday loans is a short-term obligation, that the borrower must repay on his or her payday. Generally, payday loans come with high-interest and strict repayment requirements.
Is Uber a Good Investment?
Under these circumstances, critics will label Uber a bad investment. Interestingly, stock prices indicate Mr. Market agrees with the critics.
Specifically, the market priced shares of Lyft (NASDAQ: LYFT) at $56.54 on 15 April 2019. Shares of Lyft, Uber’s biggest American competitor, first traded on 29 March 2019.
However, Lyft shares were trading at $72 to $78 on 29 March 2019. Thus, Lyft’s share price fell by around $20 two weeks.
Like Uber, Lyft loses money and faces charges of underpaying drivers. For instance, Lyft lost $911 million in 2018, Bloomberg reports. Hence, ridesharing apps could be bad for both investors and drivers.
Carmakers are Better Investments than Lyft and Uber
Consequently, neither Lyft nor Uber is a good investment. However, there is a group of moneymaking transportation stocks in a position to profit from ride-share’s growth.
Those companies are automakers which make money and pay their workers a good wage. For instance, the healthiest American automaker; Ford Motor Company (NYSE: F), reports a gross profit of $14.606 billion on revenues of $160.338 billion for 2018.
In addition, Ford reports a net income of $3.677 billion and an operating income of $2.203 billion for 2018. Impressively, Ford had $33.951 billion in cash and short-term investments on 31 December 2018.
Automakers are Value Investments
Meanwhile, the Italian-American Fiat Chrysler (NYSE: FCAU) reports a gross profit of $17.702 billion on revenues of of $126.218 billion, for 4th Quarter 2018. Moreover, Fiat-Chrysler records an operating income of $5.66 billion and a net income of $4.147 billion for 4th Quarter 2018.
Thus, automakers make money and they pay dividends. For instance, Ford will pay a 15₵ dividend on 3 June 2019. Moreover, Fiat-Chrysler will pay a 75₵ special dividend on 2 May 2019.
Finally, automakers are cheap, Ford was trading at $9.30 a share on 15 April 2019. Meanwhile Fiat-Chrysler shares were trading at $16.18 on the same day. Under these circumstances, I consider Ford and Fiat-Chrysler value investments.
Automakers are a Socially Responsible investment
Plus, automakers are a socially responsible investment because they pay workers a good wage.
For instance, the average Ford assembly worker earns a base pay of $18 an hour and $7,500 in additional pay a year, Glassdoor estimates. Hence, Glassdoor calculates a Ford worker makes $43,000 a year. In addition, the average Fiat Chrysler production worker in Toledo, Ohio, makes $39,696 a year, Indeed calculates.
Moreover, an autoworker need not buy and maintain a vehicle to do his or her job. Hence, the autoworker takes home more money and keeps more of that money. Thus, automakers are better for workers.
Auto Stocks are the best Investments for Ride Share
Interestingly, automakers like Ford and Fiat-Chrysler are cashing in on ride-share without losing money.
To explain, automakers make money from ride-hailing by selling and financing the vehicles the drivers use. Thus, Ford and Fiat-Chrysler will make money from ride-share even if Uber or Lyft collapses. To elaborate, I think ride-share is here to stay but Uber and Lyft could collapse.
Moreover, both Fiat-Chrysler and Ford are investing in ride-share related technology. In particular, Ford and Autonomic are developing the Transportation Mobility Cloud.
In detail, the Transportation Mobility Cloud mines data from autonomous vehicles. Ford can use that data to develop its own ride-share solutions, or vehicles for ride share. In addition, Ford can sell data to ride-share companies like Uber and Lyft.
Autonomous Vehicles are the future of ride share
Plus, Ford plans to invest $3 billion in Ford Autonomous Vehicles LLC; its self-driving car venture. This venture will make money from ride share because autonomous vehicles are the future of ride share.
Accordingly, Ford Autonomous Vehicles plans to sell a self-driving commercial vehicle; probably a Ford Transit van, in 2021, Automotive News reports. There is a market for such vehicles because Alphabet (NASDAQ: GOOG) is buying over 62,000 Fiat-Chrysler Pacifica vans for its Waymo autonomous car venture, Reuters claims.
Hence, Fiat Chrysler is already profiting from Alphabet’s (NASDAQ: GOOGL), Waymo One Ridesharing experiment in Phoenix, Arizona, USA. To explain, Waymo One uses self-driving vans for ride-share.
Therefore, ride-hailing could be a good investment but Uber and Lyft will not. Instead, Uber or Lyft could run out of money and collapse. Consequently, an automaker like Ford will buy Uber or Lyft at some point. Investors need to investigate automakers and stay away from ride share if they want to make money.