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Jon LeSage

Jon LeSage

Jon LeSage is a California-based journalist covering clean vehicles, alternative energy, and economic and regulatory trends shaping the automotive, transportation, and mobility sectors.

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Will Uber Rise Again?

Uber

Former Expedia CEO Dara Khosrowshahi is tackling the toughest job of the year: taking the helm at ride-hailing giant Uber as the very existence of the firm is called into question.

Uber has seen explosive growth in major cities in the past half-decade, and now one of them has just asked the company to leave. London, considered the most important global market for taxi and livery services, has banned Uber from picking up ridership in the city.

The company took another blow when it shuttered its auto-financing wing after taking losses on loans to Uber drivers seeking to own cars for passenger delivery.

Khosrowshahi was hired this month by Uber board members eager to squash the controversy and conflict associated with founder and former CEO Travis Kalanick. In late June, Kalanick was pressured to leave, led by venture capital firm Benchmark.

Kalanick and other company executives were previously unable to raise around $14 billion in private equity, but investors balked following a year troubled by an intellectual property lawsuit by Waymo, Google's self-driving car unit. There were also firings of several Uber managers stemming from sexual harassment charges by a female former employee.

Uber investors and board members have high hopes for the company to recover from the calamities. They hope to see market capitalization return to a high level with a possible initial public offering on the stock market. Related: Is It Time For OPEC To Turn The Taps Back On?

Uber still has a growing number of riders who relish the convenient, quick, affordable rides—all from a few taps on their smartphones.

The Uber brand was tarnished this year, but is still associated with the future of mobility services in much the same way that Tesla is linked to electric vehicles.

Younger consumers are much less interested in owning vehicles than their parents were. They're taking jobs in cities around the world and want to avoid traffic jams and the hassle of finding parking spots. Uber and a few of its competitors have diminished those stress points for millions of consumers for fares much lower than taxis.

Uber's main competitor in the U.S., Lyft, has gained competitive advantages from its archrival's difficult year. Ford Motor Co. just forged an alliance with Lyft to develop self-driving ride services in the next few years. That follows a Lyft deal with Waymo, and last year’s sizable investment from General Motors.

Business has been strong enough for Lyft to expand its services to another 100 U.S. cities this year, and the company now operates in about 300 cities. Related: In A Bold Move, Saudis Raise Crude Prices For Asia

But Uber still has the lion’s share. Lyft delivers rides in the millions per year in the U.S., while Uber delivers about 10 million trips per day worldwide.

Automakers feel tremendous pressure to take their attention away from building and marketing new vehicles, and to add mobility services, autonomous vehicles, and alternative power trains to their business models. It's similar to how oil companies are investing heavily in alternative fuels and energy as strict global emissions regulations approach in the next decade.

Uber is seeing revived interest from financial backers. Softbank Group, a Japanese telecommunications and internet company, is raising about $1 billion by leading an investor group, with more funding expected to follow.

However, there’s a catch. According to sources familiar with the discussions, Softbank will block any attempts to bring Kalanick back to the ride-hailing giant. While Kalanick was seen as a driving force behind Uber’s meteoric rise, the former CEO’s combative stance has hurt support for bringing him back.

By Jon LeSage for Oilprice.com

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