Aside from non-compliance with taxes, Uber drivers face incredible risk when working in cities or countries that have banned the company. In various countries, Uber is outright forbidden. 6 In others, there is a call for regulation in the industry or for the governments to declare the car-sharing app illegal.
Perhaps the biggest hurdle is Uber's failure to mandate that their drivers obtain the same license types as professional taxi drivers even though Uber drivers offer many of the same services as professionally licensed taxi drivers.
Uber's profit problem
Approved drivers work as independent contractors to fulfill rides and deliveries, and Uber pays them while taking part of the fare as revenue. Uber's most significant problem so far is its inability to actually make money.
Uber's advantages include door-to-door convenience, safety, and reliable quality. Uber's disadvantages include its surge pricing and the negative effects of replacing steady jobs with gig work.
Even before new leaks emerged revealing bare-knuckle expansion tactics at ride-hailing giant Uber, the app was dogged by controversy over harassment, hacking and standoffs with the authorities over its workers' rights. This is what we knew about Uber, founded in 2010, before the joint media investigation.
Uber's Threats
Customer and Employee Retention: With competition on the rise, customer and employee retention can prove to be a challenge for Uber. Any financial incentive from its competitor is enough to steal its customer base and employees.
Not a profitable business model
One of the key talking points, among value investors and on-lookers alike, is the fact that Uber has failed to produce a single profitable quarter since it began trading publicly. In fact, Uber lost $8.51 billion in 2019 and $6.77 billion in 2020.
Ride-share giant Uber is the latest Silicon Valley wunderkind to prove that correct. The company lost $1.2 billion over the last three months, in large part because of poorly performing investments in other businesses.
Growth Opportunities Tapped by Uber
Uber knew who are those people who needed the taxi right on time. Realizing the pain points of the customers was essential and that is what Uber did before the launch of their great taxi app. And to transform the cab hiring service, they simply resolved the pain points.
Uber has faced increased scrutiny of its safety practices in recent months as some critics complain the company hasn't done enough to protect both riders and drivers who use the app. Many riders have alleged sexual harassment and other types of misconduct, sparking lawmaker scrutiny.
Uber's Profitability
Uber has a gross profit margin of 35.7%, which changed some -7.3% from three years ago, indicating that the business is still struggling with the cost structure. These results may further shift in the future, if gas prices and other inflation impacted inputs keep rising.
Since going public in 2019, Uber has been locked in a pattern of steep financial losses, ranging from the billions to hundreds of millions of dollars on a quarterly basis.
According to a report by Public First commissioned by Uber, earnings for driver-partners and indirect effects like car maintenance created economic value worth ₹44,600 crore in India in 2021.
Uber and Uber Eats created an estimated $1.2 billion in economic value and produced $1 billion in consumer surplus in 2021 (equivalent to 0.3% of GDP).
But with Uber's rise, society began to see that we were able to slip into a stranger's car largely without being harmed. This opened the door to share more of our resources with others, from our fashion accessories with StyleLend, to bikes with Splinter, to food services with Feastly, and even our homes with Airbnb.
Recent studies have found that when Uber and Lyft enter a market, their fleets are more polluting than autos on average, contribute to more traffic congestion particularly in the central cities, undermine public transit systems and devastate the local taxi industry.
Some of Uber's problems were on public display. Drivers sued over their legal classification, saying Uber should treat them as employees–with the attendant benefits–if it was going to do things like set the price they could earn per mile. Some complained they weren't even making minimum wage.
Although Uber is undoubtedly one of the most lucrative ventures in the world, their journey in Russia was not able to replicate the growth they saw in other areas of the world.
Summary. Uber has a great well-run business and a future mega-cap. Uber's ecosystem is unparalleled, and Uber One is a game-changer. The unit economics are great, and profitability is around the corner.
Uber's entrance broke the monopoly that taxi drivers had in each city, particularly in airports. Uber's unique innovation to create an app in which supply and demand of transportation services could be met through a digital platform embodies how a traditional industry can be disrupted from day to night.
Uber International Expansion: Local Regulation Challenges
But they were also pretty common throughout its expansion. Aside from the challenges of local culture and infrastructure, one of the highest risks that Uber faces when it comes to international expansion has to do with complying with local standards and laws.
Uber classifies its driver payments as a "cost of revenue" in the company's financial statements. Uber spends 46% of its total revenue each year on these costs, which causes Uber's business losses.
Since the first Uber ride in Sydney in 2012, Aussies have taken more than 700 million Uber rides and ordered more than 450 million meals via Uber Eats – and the platform has provided flexible earning opportunities for more than 725,000 drivers and delivery partners.