Price wars are expensive — just ask the team at Uber, which has put $800 million in losses on the board during the third quarter of this year. Those big loss figures come care of a price war with rival ride-hailing service Lyft in the U.S. and heavy spending on new expansions.
The news figures also point to underlying improvement since Uber gave up and admitted defeat in its expensive battle for market share with Didi Chuxing in China.
That admitted loss and retreat has reportedly saved Uber a massive amount — as it is no longer is bleeding money to ride subsidies within China. Uber was able to book a net profit, stemming from the value of the Didi stake it has assumed.
The victory is a bit pyrrhic however, since it has also meant giving up on the huge growth potential from the world’s biggest ride-hailing market.
Plus, Uber has some work to do — reports emerging today indicate that it is facing heaving losses even after pulling back from China. As of Q1 this year, Uber had a positive cash flow in developed markets, comprising the U.S., Canada, Europe, Australia and New Zealand. However, it fell back into cash flow losses as its war of attrition with Lyft carried on.
Uber has also ramped up spending on new technology and other innovation initiatives. That has upped the red ink — but could lead to some profitable lines like self-driving cars in the future.
Uber’s switch to cash flow profitability in its more mature markets was widely taken by investors and analysts as proof that it was entering a new phase where its earlier race for growth would start to pay off.
But the Q3 number indicated that things are not quite that simple, as Uber’s competitors are not quite ready to cede the field here in the U.S. — even if Uber had to cede the fight in China.