The second-biggest ride-sharing company in the US is having a bumpy journey. Lyft’s shared taxis are not compatible with a pandemic. Rider numbers are down from 23m to 12.5m. Time for potential buyers to start sniffing around.
Co-founder and chief executive Logan Green insists bright days are ahead. He told investors on the fourth-quarter earnings call that Lyft anticipated a “strong rebound in demand”. This, along with Lyft’s exemption from California’s new gig worker employment rules, is why the share price is up more than 140 per cent since October.
Optimism is a prerequisite for executives and investors in ride-hailing. How else to keep banging the drum for an industry that remains lossmaking after about a decade of operation? Look at the numbers, however, and gloom is hard to dispel.
Lyft made a full-year net loss of $1.8bn on $2.4bn of sales. The only reason there is less red ink than the previous year is because Lyft put a screeching halt on spending. Costs were cut by $360m. The group has largely removed the driver and rider incentives necessary to remain competitive with Uber. These will return. Once the top line grows, so will losses.
The draw for bidders would be Lyft’s potential role in driverless cars. The $17bn company is not building vehicles, but an entire self-driving system. At the end of last year it said customers could be using its app to hail driverless cars by 2023.
Stop Lex if you’ve heard this one before. Tesla promised a million robotaxis on the road by 2019. General Motors said it would have self-driving taxis by 2020.
Regardless, investment on this is picking up. Amazon has bought self-driving start-up Zoox. Apple has hired Tesla’s former chief executive of self-driving operations. Microsoft recently joined a $2bn investment in GM’s autonomous driving company Cruise.
If the ventures succeed, Lyft’s consumer-facing app could be just the thing to turn driverless cars into a viable commercial proposition. Lyft might then be worth more to a bidder than to the public market.
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