Corporate investors funding Uber, Lyft more keen on data rather than quick returns

SAN FRANCISCO: Investors including Japan's SoftBank and Google-parent Alphabet are fuelling a drive to a ride-sharing future, betting on start-ups such as industry giants Uber and Lyft which have failed to deliver profits.

The frenzied pace of investment suggests optimism over a new model that has disrupted local taxi and transport operations around the globe.

A recent Goldman Sachs study projected that the worldwide ride-sharing market could grow eight-fold by the year 2030, reaching US$285 billion (S$388 billion) annually.

Lyft, which is Uber's main rival in the United States, raised a billion dollars in a recent investment round led by an investment arm of Alphabet.

That means the Google parent now has investments in both Uber and Lyft.

Meanwhile, Uber's board of directors has approved a plan that opens the door to a colossal investment by Japanese telecommunications giant SoftBank.

Another major player in the sector, Didi Chuxing in China, bought Uber's operations in China last year and has invested in Lyft and India's Ola as well.

Didi has become Asia's most valuable start-up, worth some US$50 billion based on a recent funding round.

Uber's new chief executive has vowed to take the company, valued privately at nearly US$70 billion, public with a stock market debut by the year 2019.

Lyft, with a valuation near US$11 billion, is reported to be mulling a strategy to also go public.

Despite the staggering private valuations, smartphone-summoned ride services have yet to prove they can turn profits and have repeatedly run into roadblocks from regulators and traditional taxi operators in several countries.

Such red ink on balance sheets has not deterred investors with the resources of Alphabet or SoftBank, with amounts they have sunk into ride-sharing start-ups considered "pretty modest", said Mr Jack Gold of J. Gold Associates.

He said that high-powered investors may be less interested in quick returns from the day-to-day business of on-demand rides and keener on getting their hands on data gathered by the operations.

Such data can also be a treasure trove to mine in the development of self-driving cars, which have been touted as the future of urban transport.

Human drivers are considered a prime expense for ride-sharing firms, which Goldman Sachs research found to be a "significant contributor" to the lack of operating profit.

Fully autonomous vehicles could eliminate about 6.2 million drivers in the workforce and the self-driving car is expected to be "the trigger to transform" ride-sharing operations, according to Goldman Sachs.

IHS Markit analyst Jeremy Carlson said the dream of "autonomous mobility on demand" is starting to come into view, which can be a game changer for ride-sharing.

"That fed a lot of investment into it," he said. - AFP