Uber to dedicate $200 million to developing freight business


On Monday, The Verge reported Uber would invest $200 million into its burgeoning freight division. The company intends to open a new Chicago headquarters for the business and hire 2,000 employees to staff it. Despite the ride-share company’s overall abysmal financial performance, it has maintained that its shipping segment is doing well.

Indeed, in August, Uber CEO Dara Khosrowshahi told investors “Uber Freight continued to see impressive growth and great progress in Q2 despite soft market conditions.”

Profit Through Product Variety

Despite launching an $82 billion initial public offering in May, Uber has never made a profit. Though the firm has promised shareholders it has the potential to dominate the $12 trillion transportation market, the firm reports billion-dollar losses every quarter. Furthermore, the corporation’s core business is continually threatened by costly revolts from its contract workforce.

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Accordingly, the firm’s leadership has seemingly chosen to pursue profitability by diversifying Uber’s offerings. In addition to its ride-share business, the company began offering food delivery service via Uber Eats in 2014. Forbes estimates that the segment of the corporation’s business will generate $1 billion in revenue this year alone.

Last year, Uber spent $200 million to acquire electric bicycle-sharing company Jump. While the division hasn’t brought in much revenue yet, the e-bike market is expected to reach $130.9 million in value by 2025. Bizarrely, the company also began offering a Barclays-backed credit card in 2017

Two years ago, the San Francisco-based company launched Uber Freight with an eye toward breaking into the long-haul industry. Like its ride-share business, the firm’s shipping segment matches truckers with companies that need to move cargo. Though the corporation hasn’t disclosed specifics, head Lior Ron said it’s the “fastest-growing business in Uber.”

While Uber’s trucking segment is promising, it likely won’t be a massive success unless the company begins utilizing self-driving technology.

Why Uber Freight Needs Autonomous Trucks

Though financial services is Uber’s most unlikely “other bet,” long-haul freight is a close second. As noted above, the company’s efforts to disrupt the taxicab industry have been financially unsuccessful. Moreover, the trucking field has hit a unique and challenging place in its history.

In June, the American Trucking Association reported the United States is experiencing a massive long-haul driver shortage. Although 3.5 million people work as professional truckers in the U.S., the high rate of demand means an additional 500,000 positions are open. While Uber Freight may help small trucking companies succeed without long-term corporate contracts, it doesn’t address the industry’s labor shortage.

Part of the problem is that it’s very expensive to break into the freight industry. The cost of completing a commercial driver’s license program is between $3,000 and $7000. Moreover, Atlas Van Lines notes that it spends around $185,000 a year to maintain each of its big rigs.

In terms of staffing and cost-effectiveness, Uber will likely need a self-driving solution to make its freight business viable. The company used to have an autonomous truck division but shuttered it amidst lawsuits and allegations of corporate espionage. As such, the firm will need to acquire a promising startup like Gatik or TuSimple to build a fleet of autonomous trucks.

Unfortunately, given Uber’s tendency to burn through cash at an alarming rate, it might not be around to see self-driving technology come into maturity.