Musings On Markets

While there is much to issue about the continuing future of the ride sharing business, there are a few facts that are much longer debatable no. Ride sharing continues on its growth path: Ride sharing is continuing to grow faster, attended more places and can be used by more people than most people thought it would be able to, even a year or two ago. The speed of development is picking up. Uber took six years before it reached a billion rides in December of 2015, but it took only six months for the business to get to two billion rides.

It is globalizing fast: In the same vein, ride sharing which started as a SAN FRANCISCO BAY AREA experiment that grew into a US business has become global in simply a short time, with Asia rising as the epicenter for future growth. Didi Chuang, the Chinese ridesharing company, completed 1.43 billion trips just in 2015 and it now promises to have 250 million users in 360 Chinese cities. Ride sharing is acquiring deep roots in both India and Malaysia also, and it is making advances in Latin and Europe America, despite regulatory pushback.

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Expanding options: The options in ride posting are becoming wider, to attract an bigger audience even, from carpooling and private bus services to attract mass transit customers to luxury options to get more upscale customers. In addition, ride sharing companies are tinkering with pre-scheduled trips and multiple halts on single trip gain to meet customer needs. Devastating the position quo: All of this growth has been damaging for the status quo.

Even hardliners in the taxicab and old time car service businesses know that ride posting is not going away which the means of doing business have to change. In short, there is no question that the car service business as we realize it’s been disrupted and that there is no heading back to the days of the past.

If you possess a taxi cab or an automobile service business, the question is no more whether you will eventually lose business to trip posting companies but how quickly, even with the regulatory regulators standing in as your defenders. Disruption is simple but earning money off disruption is difficult, and ride sharing companies would be exhibit 1 to back up the proposition. While the ride posting option is to remain and will continue to develop here, trip sharing companies still have not figured out a genuine way to convert trip posting earnings in income.

In causeing this to be statement, though, I am counting on drabs and dribs of information that are coming out of the prevailing trip sharing companies, almost all of whom are private. Raising capital at a hefty pace: Within the last two years, the ride sharing companies have been active in raising capital, with Uber at the forefront and Didi Chuxing behding close. In the graph below, I list the capital raised collectively by players in the ride sharing business during the last 3 years and the pricing attached to each company in its latest capital round.

At wealthy prices: As the desk above signifies, the investors who are placing money in the ride writing companies are willing to pay hefty prices for their holdings, without signs of a significant pullback (yet). Uber, at its current pricing, is being priced greater than GM or Ford. Note that I take advantage of the term “pricing” to indicate what investors are attaching as numbers to these businesses because I don’t think that they have the eye or the stomach to really value them. If you are baffled about the comparison between “value” and “price”, please see my post on this issue.