Uber Wants To End Car Ownership, But The Market Doesn't Buy It

Jun 6 2014, 5:48pm CDT | by

Uber CEO Travis Kalanick is an unapologetic controversialist, and when it comes to what he intends to do to the automotive industry as we know it, he doesn’t mince words. “Make car ownership a thing of the past” is how he has repeatedly articulated his company’s mission, most recently in a Q&A with The Wall Street Journal.

The occasion for that Q&A was Uber’s announcement of a new $1.2 billion funding round valuing the company at an astonishing $18.2 billion. The new valuation probably makes Kalanick a billionaire and elevates Uber above venerable transportation giants like Hertz, United Airlines, Fiat and TripAdvisor

The news that a company that aims to end car ownership has procured a ten-figure war chest to make its vision a reality ought to send chills down the spines of carmakers and their shareholders. So you would think, anyway. But there was no sign of fear in the performance of big auto companies’ stocks on Friday in the hours after the news broke.

Ford, GM, Volkswagen, Toyota, Honda and Tesla all closed the day up in trading (as did the Dow Jones & S&P indexes.)

What’s going on here? A few possibilities:

1. Uber’s future effect on car sales is already priced into car stocks. It’s been rumored for weeks that Uber was on the verge of another massive funding round, and Kalanick previewed his line about ending car ownership at the Code Conference last month.

2. Investors are focusing on the nearer term. For now, Uber is goosing sales of new cars, especially luxury SUVs, by guaranteeing loans and arranging sweetheart financing for drivers who couldn’t otherwise afford them.

3. The market just doesn’t believe Kalanick’s big claims. Americans love their cars, a lot. Are we really going to stop buying them just because it’s cheaper to let someone else drive you? It’s not economically rational for most people who own SUVs to own them, but that doesn’t stop us.

Also, even if car ownership does go away, Uber may not be the vehicle — pun intended — responsible for it. As I reported recently, Brad Burnham of Union Square Ventures believes sharing-economy companies like Uber and Airbnb that raise huge amounts of funding will be handicapped by the need to deliver margins that justify investors’ cost of capital, making them vulnerable to competition by more lightly capitalized entrants who copy their business models.

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

IPad Air Giveaway 2014 is Online
IPad Air Giveaway 2014 is Online
Our sister site I4U News is giving away a brand new iPad Air or if you can wait an iPad Air 2. This is an $499 value.
 
 
Your Parent Or Kid Moved In: Are You Covered?
A record 57 million Americans now live in multigenerational family households — double the number in 1980, according to a new Pew Research Center study. And I bet many of them have the wrong homeowner’s or renters...
 
 
Pandora Looks to Challenge Terrestrial Radio's Dominance in Cars
Pandora Media is one of the largest Internet radio providers in the U.S. with more than 75 million active users. While the company’s active user count has increased at a robust pace historically, it is likely to slow...
 
 
Are General Manager Salaries About To Skyrocket? Will There Be A Front Office Salary Cap?
Are General Manager Salaries About To Skyrocket? Will There Be A Front Office Salary Cap?
It’s January 2026. New York Yankees owner Hal Steinbrenner gets out of his driverless car and triumphantly marches before the gathered press to introduce his prized new free agent. It’s a record-breaking contract—over...
 
 
 

Latest from the Network

Keira Knightley was 'a goody two-shoes'
Keira Knightley was ''a goody two-shoes'' when she was younger. The 29-year-old actress claims she was a ''boring'' well-behaved child and never skipped school because she didn't want to upset her parents or teachers....
Read more on Celebrity Balla
 
Kat Dennings is in love with Kim Kardashian
Kat Dennings thinks Kim Kardashian's butt is ''amazing.'' The '2 Broke Girls' actress was ''very nervous'' when the 'Keeping Up with the Kardashians' star filmed a cameo for the show's 80th episode and was too shy to...
Read more on Celebrity Balla
 
Taylor Swift doesn't 'need some guy' for inspiration
Taylor Swift is ''figuring out how to cope'' with life on her own. The 'Shake It Off' hitmaker hopes her upcoming album, '1989,' will prove she doesn't ''need some guy'' to help her ''make a great record'' or to feel...
Read more on Celebrity Balla
 
Sarah Hyland is 'great'
Sarah Hyland says she is ''great'' after obtaining a restraining order against her ex-boyfriend. The 'Modern Family' star is happy to be focusing on her career again after a judge recently granted her a three-year...
Read more on Celebrity Balla
 
India re-elected to UNHRC for two years
United Nations, Oct 21 (IANS) India was Tuesday re-elected to the United Nations Human Rights Council (UNHRC) for the term 2015-2017 in a keenly contested election in the UN General Assembly in New York. Other...
Read more on Politics Balla
 
Spanish nurse cured of Ebola
Madrid, Oct 21 (Xinhua) Spanish nursing auxiliary Teresa Romero was pronounced cured of the Ebola virus disease according to World Health Organisation (WHO) guidelines after the results of a second test confirmed...
Read more on Business Balla
 
Gurdwara closed in Belgium
Brussels, Oct 21 (IANS) The mayor of the town of Vilvoorde in Belgium, Hans Bonte, has ordered the closure of the local gurdwara, Guru Nanak Sahib, for one month. Belgian media Tuesday charged that the Sikh temple "...
Read more on Politics Balla
 
Air strikes kill 28 militants in Pakistan
Islamabad, Oct 21 (IANS) At least 28 militants were killed when the Pakistani army launched an air strike in the country's northwest tribal town of Datta Khel Tuesday, military said. In a statement, Inter Services...
Read more on Politics Balla
 
Report reveals large-scale torture in China's 'Black Jails'
Beijing, Oct 21 (IANS/EFE) The use of hotels and factories as clandestine prisons where thousands of people -- mostly women -- are tortured to prevent their complaints against the government from coming to light has...
Read more on Politics Balla
 
Clinical trials of Ebola vaccine start Nov 1 in Switzerland
Geneva, Oct 21 (IANS/EFE) The World Health Organisation (WHO) announced Tuesday that it will begin clinical trials Nov 1 in Switzerland of one of the two anti-Ebola vaccines currently under development. WHO Assistant...
Read more on Business Balla