Uber Technologies which is not even a net income positive company took only five and a half years to surpass the valuation of 117-year-old Ford. The key reason behind this is that the people are buying the idea as much as the operation. In this article, we will discuss the reasons why Uber is worth more than Ford or more valuable than some other large automobile manufacturing companies.
Uber went IPO on May 10, 2019. They have a vision of the future in which labor will be allocated out by systems that match supply to demand in real-time. Workers will move fluidly between engagements, untied to traditional jobs. And at the same time, the market for transportation of all kinds will become unrelated from large asset purchases—such as cars—as well as public services. The new urban paradigm will be private, shared, on-demand services through which you call a ride, hop on a bike, or rent a scooter. In cities across the world, this will prove appealing and spread to other forms of logistics such as trucking, food delivery, shipping, drone delivery. Uber will take an ever-larger percentage of the total number of miles travelled rather than ride-hailing market share.
Some of the most recent funding that uber has raised are $500 million and $2.0 billion in funding in April 2019 and October 2018, respectively. This brought up its total capital raised till now to $24.7 billion. As of March 2020, the company is standing at a market cap of approx. $48.2 billion. The Company is ahead of iconic carmakers General Motors, Ford Motor, BMW, and Honda Motor in terms of valuation while almost catching up to other giant carmakers like Volkswagen and Tesla.
*Numbers are billions Source: ycharts.com
**Figures are as of March 31, 2020
According to the Statista research report, “Automotive Industry – Statistics and Facts,” Global sales of passenger cars are forecast to fall to 60.5 million units in 2020, down from a peak of 79.6 million in 2017. The reason for the downfall of the automobile industry is because of many reasons like big cities are too crowded, too many back-to-back changes in the industry, the share-based cab services etc. From the consumer perspective, the automobile industry is facing strong competition from the cab service providers as these are becoming more convenient, affordable, flexible, provides round the clock service, and have a variety of options to choose from. Also, many venture capitalists are betting their money on the cab service companies like Uber instead of carmakers due to the various advantages such as low fixed investment, fast revenue growth, high customer outreach, low operating cost, etc.
Keeping in mind all of the above-discussed factors, we can see a shift in the preference of travelling by people all around the globe and this is what Uber is now capitalizing on, making it more valuable than carmaker companies.
Author: Sandeep V. – Analyst