This is a major blow for Uber, which had hoped to
reach profitability by the end of 2020. The coronavirus crisis and the resulting lockdown measures
are already having a significant impact on the ride-hailing company’s business . On March 19, its CEO, Dara Khosrowshahi, attempted to reassure the public.
Uber’s business has been severely impacted by the crisis
The lockdown measures are impacting the entire economy, and transportation companies in particular. In the United States, spending on Uber fell by 20% in just one week. In the cities hardest hit by the virus, such as Seattle, Los Angeles, and New York, there were 70% fewer trips.
Several measures have been taken: the Uber Pool feature, which allowed users to travel more cheaply with strangers on similar routes, has been removed. The $150 million marketing and incentive budget has been cut. In the United States, according to Les Échos , a message appears when the app is opened: ” Only travel if necessary. Help flatten the curve .”
A message that, strangely, doesn’t appear on the French version of Uber. France currently has nearly 11,000 cases, while the United States has just over 14,250. This message seems minimal given the seriousness of the situation, but Uber is simultaneously facing a worrying stock market situation.
Uber shares fall, Khosrowshahi reassures investors
The stock market impact was immediately felt. Between February 20, the company’s peak performance, and March 18, Uber’s stock lost approximately 64% of its value. This is undoubtedly what prompted Dara Khosrowshahi to speak out.
He explained to investors, ” We are very fortunate to have a strong cash position with approximately $10 billion in unrestricted liquidity at the end of February .” This news may seem surprising given that Uber has never had a profitable quarter.
The ride-hailing company’s teams modeled an extreme scenario of an overall 80% reduction in the number of rides until the end of the year. According to their projections, Uber would have $4 billion in cash reserves and $2 billion in revolving credit.
Furthermore, the CEO emphasized that Uber Eats’ business was booming, stating, ” Our Eats business is a vital resource right now, especially for restaurants that have been impacted by lockdown measures .” In France, while restaurants are closed except for delivery services, it’s still possible to see Uber Eats delivery drivers on the streets.
All of these announcements seem to have slightly reassured investors, as the shares have recovered some ground to stabilize around 50% of their value on February 20.
And what about the drivers?
For drivers, who are particularly exposed to the risk of infection, financial assistance is available in the event of a confirmed case of COVID-19 or mandatory quarantine. This is an important message, given that Uber drivers are officially considered independent contractors. This status will likely change in France, since shortly before the crisis, the Court of Cassation ruled in favor of a driver , declaring him an employee of the ride-hailing company.
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