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.