As a standalone business, Uber (UBER) is doing extremely well. Rides are growing, more people use the Uber app, and Uber Eats deliveries are climbing. Shares improved after the latest quarterly earnings, but the stock has been heavily beaten down over the past year. The whole problem sits on the horizon: autonomous vehicles.
The autonomy threat
The threat from self-driving cars is real and getting closer and more disruptive by the day. In Texas, driverless car registrations by Tesla (TSLA) have recently passed Waymo, owned by Alphabet/Google (GOOGL). Tesla has shown it can spin up robotaxis very fast and in several places at once. It is early, but Tesla is proving its vision-only, low-cost robotaxi production works where it is being tried. That is a big threat to both Uber and Waymo.
The whole Uber question comes down to timing. If you think autonomy arrives in the next 2 to 3 years, Uber is in big trouble. If you think it is 10 years away, Uber has time to pivot, maneuver, and build or buy its own autonomous vehicles to survive. My read: autonomy is coming faster and bigger than Wall Street expects.
Why even Waymo is at risk
Robotaxis cost so little to produce that the pricing pressure hits Waymo too. Elon Musk's constant focus is being the lowest cost with the lowest margins, which he did with Tesla cars and will do with robotaxis. Uber still has a role, but that role is unclear and shaky. The Uber app has always been revolutionary, yet its future is uncertain. That is why the stock cannot rally despite good numbers - investors do not know what the company looks like once self-driving takes full force.
Tesla's edge is technological. It is vision-only, and Tesla has millions of cars that have driven millions of full self-driving miles to prove safety and reliability. In theory, Tesla could open in new areas very quickly, without the same restrictions Waymo faces, though that is not yet proven in practice. Tesla will not give Uber time to figure things out. Waymo will keep expanding its service areas. With Tesla it is a "slowly then suddenly" shift.
The biggest tell
Uber is now lobbying Congress alongside the taxi companies to limit, restrict, and regulate driverless vehicles. That signals almost everything. The threat autonomy poses to Uber mirrors the threat Uber once used to displace the taxi industry. These former enemies now share a common enemy. Uber was aggressive, ignored or lobbied away regulations, and put many taxi drivers out of business. The same thing is now happening to Uber from Waymo and robotaxis, and Uber sits stuck in the middle.
Valuation problem
It is hard to justify a high multiple for Uber when you cannot tell whether the current growth rate can expand or turns negative quickly in 2, 3, or 5 years. You cannot put a 30-year multiple on that. Modeling Uber's future is tough for investors and for the company. It is striking to picture Uber, which still feels like a young company, becoming a dinosaur. The word "Uber" is now part of everyday language, used to mean any ride.
DoorDash and delivery
On the delivery side, Uber Eats is growing, but DoorDash (DASH) is growing significantly faster. Uber is losing delivery market share to DoorDash.
Should Google buy Uber?
A Reuters column suggested Alphabet/Google (GOOGL) should buy Uber to pair Waymo with Uber's platform. My advice to Uber's executives would be to find a partner that can deliver autonomous driving so Uber can compete. But I doubt Google or Tesla actually needs Uber. The price savings from driverless rides will change customer behavior on their own. People will happily download the Tesla robotaxi app or the Waymo app to save roughly a third to half off their rides, and once that happens, the market share is captured.
Uber's distribution is valuable, but it is about the only thing Uber has left to offer. Once autonomy takes over, that distribution becomes easy for giants like Tesla or Google to disrupt by showing big savings and safety. The pitch is simple: get into a car with no driver, no stranger who may not speak your language, and reach your destination for half the cost. That is a compelling reason to download an app. Not long ago, ride-hailing felt as wild as hitchhiking. Soon, riding in an empty, driverless vehicle will feel normal too.
