Kara Swisher, who writes for the New York Times as someone who covers technology, started her March 22 column with the line, “I will die before I buy another car.” She goes on to clarify that her health is fine; she’s simply at the forefront of the final days of the auto industry, where one need never purchase one’s own new vehicle again because incredible alternatives are already in place and picking up steam. She points out that car sharing is continuing to grow, then attempts to validate her point by claiming that Uber and Lyft are both close to foisting their stock onto the public — but without mentioning that neither company has ever managed to actually earn money.
She claims overall car ownership has fallen worldwide, but that’s not true. Last year new car sales worldwide hit an all-time record high and grew at 3.6 percent over 2017. At the end of her column she again asserts that she will never buy another car after she sells her manual transmission Ford Fiesta Turbo, named Frank. Fair enough; if I owned an old manual transmission Ford Fiesta, I might not want to own a car again, either.
Lately there’s been that steady drumbeat, almost a subversive war on the automobile, but the authors never take into account how the world’s industrialized economies actually get around to do business. Nor, for that matter, do they actually look at the alternative business models to see if they are even viable.
While the business media points out that Lyft claims to have tripled its customer base to over 18 million rides in 2018’s last quarter, that hasn’t translated to a profit for the corporation. No, Lyft lost $911 million last year and, in its IPO prospectus, said it can’t guarantee that it will ever make money doing what it does. Yet on just the second day of its road show to whip up investor enthusiasm, Lyft claims that it’s already over-subscribed the IPO, which would give the company an approximate $23 billion value. It gets better: Uber lost $842 million in just the last 90 days of 2018 and claims its IPO may well value the troubled firm at $120 billion.
At this point it’s worth asking the question, when did capitalism’s greatest love affair become companies that can’t figure out how to make money?
Worse, although it likely won’t have any impact on selling the stock in either company, Uber drivers in Los Angeles were wanting to go on strike this week, because that company cut their per-mile earnings by another 25 percent, to just 60 cents. They complain that they weren’t making a decent living at the old 80-cent-per-mile rate, and they long to return to the days when their pay was a full buck per mile. Not outdoing that, Britain’s Guardian carried a story on March 22 that Uber and Lyft drivers in the United Kingdom will push for unionization because some drivers are earning slightly less than $4 an hour. The good news, at least for those in Britain, is that those pitiful earnings have nothing to do with the mess that is Brexit.
This Fresh Wonderfulne$$
I’m a sport, so I again decided to look up the latest Uber fares to see if one can truly ditch their personal car, a la Ms. Swisher, and use only a ridesharing service. Turns out that Uber has just such a calculator on its website. I put in Aledo High School as a starting point, because many who live there work in Fort Worth, and the Star-Telegram Building on the receiving end so they can be prepared for all their employees’ using only Uber in the future. The UberX cost was $25.11 for that one-way, 19-mile trip.
Now, if you’re someone really important and feel the Black SUV Uber transport better suits your status, that service would set you back $92.82 for 19 miles; for this example, we’ll use the $25.11 transport. That math says, if you sell your car in Aledo and use UberX only to get to work and back home — no dry-cleaning, no Brookshires, no soccer weekends with the kids — for 51 weeks of the year, using Uber because you ditched your car will cost you an amazing $12,755.88 with no tips. We don’t even want to get into using Uber for your family road trip vacations.
Going in a different direction, the net cost of that Uber ride, according to their website for that one trip, is $1.32 per mile. The average person puts close to 15,000 miles per year on each vehicle they own up to retirement, and at that rate you’re now up to a net cost of $19,800 per year per vehicle with no tips. That’s a lot more money than Ms. Swisher paid for her manual transmission Ford Fiesta — and more than twice the estimated average cost of car ownership in America today.
Keep in mind, even at those figures Uber drivers worldwide are saying they can’t make a living, and Uber’s losses are breathtaking in scope: $1.8 billion last year alone.
How is that the future of anything automotive? The better question is, who is behind this nonstop barrage of hype trying to convince us that no private car ownership is a better plan?
“Brilliant” — for Whom?
A different story came into play last week. NBC News on its national website carried a story by Ben Kesslen about the brilliance of congestion pricing in order to reduce traffic during rush hours in major cities. Kesslen writes of Nick Sifuentes, who is a “traffic advocate,” driving into New York City and lamenting, “I should pay more for my choices.” Sifuentes’ Tri-State Transportation Campaign is pushing New York to adopt congestion pricing to make traffic ease up.
In his fourth paragraph Mr. Kesslen writes about congestion pricing, “First adopted by Singapore in 1975 … and has since been successfully adopted in Stockholm, London and Milan.” Just two days later Business Insider posted the Inrix ratings of the most congested cities in the world for traffic. Turns out that early adopter Singapore is listed as the 14th worst city in the world for traffic, which makes one question its 44-year punitive charges against its drivers. But London is worse: It comes in as the sixth worst city in the world for traffic congestion. Possibly if Mr. Kesslen had left out the adverb, “successfully,” and just written “has since been adopted” it would have been a more honest statement. London’s congestion charge has done nothing but put a daily and steadily rising driver’s tax on the gainfully employed trying to get to work and home again. The same obviously holds true for Singapore.
Further, both Singapore and London have exceptional mass transit systems, so one would think a heavy congestion charge might shift car owners into using those alternative means to get to work. But it didn’t and hasn’t; at least, not enough to change the mobility habits of most of their gainfully employed citizens.
The underlying message of all of these columns is the same. It’s anti-car ownership. But the promise of salvation going in a different direction is a false one, and no salvation at all. No one is going to give up their personal automobile to use a system that’s far less convenient and that costs over twice as much to get around in their world. That’s just using 4th-grade math, which I personally love because it’s the last time I got great grades.
So who’s really driving these misinformation campaigns? General Motors is currently making some of the largest profits in its history. But its share price today is right at $36 — or two bucks less than it was four years ago — which gives the worldwide and profitable automotive giant a market cap of $51.3 billion. GM made $8.1 billion in 2018; Uber lost $1.8 billion and costs twice as much or more per mile to use over the average cost of owning a personal car. And yet the market believes it will place Uber’s value at $120 billion and writers continue to claim that ride sharing is our future.
We’ve been hearing about how brilliant congestion pricing is at least since February of 2003, when London first put that charge into place. For the record, London’s price to drive a car within its city center zone started at just £5 per day; today it’s £11.50, or $15.20, and still London ranks as the 6th worst city in the world for congestion.
In the past if companies lost billions of dollars and never made a profit from the day they started, they went out of business. In the past the scientific method was used to validate hypotheses such as, “Charging people to drive into major cities will reduce traffic.” Obviously math, science, and logic are long since gone. Not to mention a stock’s price being based on a reasonably run corporation delivering regular and stable profits.
That was the past. Today, apparently, belongs to the venture capitalist who originally funded these money-losing propositions. Whether the company succeeds long term no longer matters; what’s important today for the original investors is the company’s valuation at the IPO. Cha-ching.
Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, bestowed by the Anderson School of Business at UCLA, and hosts the top-rated talk show, Wheels, 8:00 to 1:00 Saturdays on 570 KLIF AM. Email: email@example.com