Ride-hailing company’s losses grew at 46% to $600 million during full year 2016
San Francisco-based Lyft Inc., the second-largest ride-hailing startup in the US after Uber Technologies Inc., reported a loss of about $600 million in 2016, as reported by Bloomberg on January 13th, 2017. On the other hand, its revenue grew at a scorching pace of 250% to about $700 million during the year, far exceeding its 46% increase in losses. Lyft appears to have kept a promise it made to investors that it would cap monthly losses at below $50 million and is looking to turn profitable by 2018.
On the other hand, rival Uber is on track to exceed $5.5 billion in revenue in 2016. However, the company is expected to end FY16 with massive losses of about $3 billion, excluding interest, taxes or stock-based compensation. In the first nine months of 2016, Uber reported losses of over $2.2 billion, while it generated about $3.76 billion in net revenue. Even as Uber gears up for its IPO, the Company is stepping up operations in Asia, Europe, and Latin America to justify a valuation that’s already at $69 billion, the most for any venture-backed startup in the world.
Founded in 2012 and competing closely with rival Uber, Lyft spends heavily on discounts for riders and bonuses for drivers. These subsidies account for a large portion of the company’s losses. Lyft stated that it enabled 160 million rides in 2016, which implies a loss of $3.75 a ride. That is a significant improvement over 2015, when Lyft lost $7.77 a ride. Despite the heavy losses, Lyft has held its own and grown at a significant pace despite operating only in the US.
Lyft, which was last valued at $5.5 billion by investors, considered selling itself in 2016 and held preliminary discussions with General Motors Company (NYSE: GM), Alphabet Inc. (NASDAQ: GOOG), Uber, and others. Lyft President and Co-founder John Zimmer recently told The Wall Street Journal that the Company eventually plans to go public. Lyft has about $1.3 billion in cash on hand and unless it can cut spending, the company will need to raise more money in the next 20 months.
Despite its rapid growth rate, there have been many questions swirling around Lyft’s long-term financial health, particularly after it hired boutique investment bank Qatalyst Partners L.P., which is known for helping tech companies find a buyer.
Lyft ridership reaches 52.6 million in Q4 FY16
On January 04th, 2017, Bloomberg reported that Lyft logged 52.6 million rides in the US in Q4 FY16, up from 21.1 million a year earlier. In December 2016, Lyft recorded 18.7 million rides, more than double from the previous year and up about 13% from November 2016. On the other hand, rival Uber is guns ahead when it recently announced that it had roughly 78 million rides in December 2016 in the US, compared with 62 million in July 2016. For the full year 2016, Lyft said it more than tripled its total rides to 162.5 million.
Lyft tests self-driving vehicles with GM
Lyft plans later in 2017 to test autonomous vehicles that it is working on with General Motors, which injected $500 million into the Company in January 2016. GM and Lyft are working to develop a fleet of self-driving Bolt EVs that could be tested and used for ride-sharing purposes. That fleet is expected to be tested within a few years. Rival Uber, meanwhile, has been testing its own self-driving vehicles in Pittsburgh.
Lyft signs up for Express Drive program
On December 27th, 2016, Lyft announced that it has teamed up with General Motors’ Maven to sign up 350 drivers in metro Detroit for GM’s Express Drive program. The program allows Lyft drivers to rent used vehicles by the week rather than use their own vehicles on the job. Launched in Detroit in September 2016, Express Drive is available in 18 cities, including Chicago, Boston, Washington, D.C., Baltimore, Denver, Los Angeles, and San Francisco. Drivers can choose how long they want to stay in the program and can return their Lyft vehicle any time after giving 24 hours of notice. Lyft drivers who complete at least 30 rides will only pay a weekly fee. However, drivers with less than 30 rides per week will be charged 25 cents per mile, plus the weekly fee.
An estimated 25% of Lyft rides in metro Detroit are provided by Express Drive vehicles. Coincidentally, Maven and Uber are offering a program similar to Express Drive only in San Francisco. Under the new Maven-Uber program in San Francisco, Uber drivers can rent the GM vehicles starting at $179 per week, plus taxes and fees. There are no extra fees for personal use of the vehicles. Express Drive will be in a dozen major metro markets by the end of 2016 with more to come in 2017.
General Motors has about 5,000 vehicles deployed in its rental Express Drive program for Lyft drivers and early next year plans to add a few hundred Chevrolet Bolt EVs in two California markets. GM’s 2017 Bolt EV, an all-electric crossover with 238 miles of range, recently began production at the Orion Assembly Plant in Orion Township. Early in 2018, these EVs will be added to the Express Drive fleet for Lyft drivers initially in San Francisco and Los Angeles.
Lyft forays into grocery delivery
Retailing behemoth Wal-Mart Stores Inc. (NYSE: WMT) is looking to close the last-mile delivery gap with rival Amazon.com Inc. (NASDAQ: AMZN) by partnering with Uber and Lyft to launch a pilot grocery-delivery service. Wal-Mart started testing its grocery delivery service through Uber in Phoenix and Lyft in Denver late July 2016.
Lyft, which is growing faster and cutting losses more quickly than Uber, announced on January 13th, 2017, that it plans to take its brand global through a reciprocal app-sharing change that is aimed at providing travellers with better services in their local markets. Formerly Lyft customers traveling in Southeast Asia, India, and China could hail rides with the Grab, Ola, or Didi ridesharing services, respectively, via the Lyft app. Reversely, Grab, Ola, or Didi customers could use their accustomed apps in the US to hail a Lyft cab. Lyft formed the reciprocal agreements with the international companies in 2015. Now in each case customers will need to access the app for the service that will be providing the ride.
As Lyft and Uber continue to battle for riders while offering similar hailing and trip experiences in many cities, Lyft is working to obtain legal clearance to enter new markets like upstate New York, Houston, Austin, St. Louis and Kansas City. Lyft also expects a corresponding increase in losses as it works to ramp up both its supply of drivers and attract riders in these new cities.
The annual revenue in the US taxi and limousine business is about $20 billion annually, according to research firm IBISWorld. In the global ride-hailing market estimated at around $100 billion, Lyft is looking to increase its market share and brand loyalty by offering riders and drivers discounts and incentives. It remains to be seen if Lyft can remain nimble enough to outpace the growth of its competitors in the next two years, while shoring up its losses.