Uber is projected to lose $3 billion in 2016

Yes, you’re reading this right: Uber is projected to lose $3 billion in 2016. So how good was your year? Did your business make money? Did your business lose money? Did your business lose $3 billion? No? Uber did.

This is according to a Bloomberg report issued right before the holidays. Of course, these are just estimates because the company is privately held. But it’s known that the company lost about $580 million in the first quarter of the year and most believe another $800 million in both the second and third quarters. These numbers don’t include the losses the company incurred in China where it was forced to pull out due to regulatory squabbles. The company has earned the honor of losing the most money in the shortest time ever, according to a report earlier this year in Gizmodo. No one from Uber volunteered to accept that award – or comment to the publications on the latest numbers for that matter. Few businesses could sustain such staggering losses even over a short period of time. So what is going on?

James Dennin, a writer for Mic, blames it partially on the higher minimum wage trend across the country which is forcing the company into “subsidizing” (i.e. paying) its drivers so much that even as revenues are increasing, the profit margins per ride are still not enough to cover overhead, marketing and the huge investment the company is making in autonomous vehicles. Management is banking that its self-driving cars will reduce their drivers and bring the company’s income statement into the black…assuming that the self-driving cars actually work reliably and that the company will get the necessary permissions to operate them.

Uber’s playing a risky game. If it raised prices enough to earn a reasonable profit, then it would likely drive away customers, and put many drivers out of work. Even if the company succeeds in developing autonomous vehicles, many drivers would be out of work. Unfortunately, neither scenario seems like good news for the tens of thousands of independent contractors, freelancers and entrepreneurs who drive for Uber. wf