The Ride-Hailing Company Uber Technologies Inc. Case Study - Accounting and Finance Assignment Help

Assignment Task:

Task:

In 2009, Garrett Camp and Travis Kalanick founded the ride-hailing company Uber Technologies Inc., (Uber). Being a first mover, Uber was considered a leader in the US ride-hailing industry. By 2015, Uber was exploring innovative solutions such as autonomous vehicles as part of its long-term business strategy to entrench its position as a market leader in the ride-hailing industry.2

Consequently, Uber invested in research and development (R&D) to revolutionize the ride-hailing market and develop better capabilities to compete and fulfill its promise of profitability to investors. For a technology giant like Uber, constant innovation was crucial to stay ahead of its competitors. However, problems occurred in the course of its autonomous vehicle development, when one of Uber’s autonomous vehicles was involved in a fatal accident with a pedestrian named Elaine Herzberg in March 2018.3

This incident forced Uber to examine its corporate strategy pertaining to its innovation portfolio. Should Uber continue to invest in autonomous vehicles; and if so, how should it proceed?

RIDE-HAILING AND THE AUTONOMOUS VEHICLE INDUSTRY IN THE UNITED STATES
The transportation industry was the main source of greenhouse gas emissions in the United States, with light-duty vehicles accounting for nearly 60 per cent.4

Uber and Lyft Inc. (Lyft) dominated the ride-hailing industry in the United States, with Uber retaining over 65 per cent5 of the market share in 2018. Autonomous vehicles could have massive implications for reducing emissions, but experts’ opinions were mixed on the net benefit of autonomous vehicles for the environment. Specifically, automated ride-hailing services provided by Uber could be more popular, reducing individual car ownership. However, these benefits could be undermined by consumers taking more car trips on average, rather than public transport or walking. In other words, consumers tended to drive more with more fuel-efficient cars, and self-driving cars increased tendencies to drive even more, potentially increasing overall energy consumption.6

In fact, the number of showing increasing demand for these services. The ride-hailing industry had become saturated, prompting many companies to explore innovative alternatives to differentiate themselves. Since 2016, more than 40 corporations were involved in autonomous vehicle projects across the United States.8 In the current ride-hailing business model, profitability was hard to achieve, with drivers contributing most toward overall costs.9

This motivated companies like Uber and Lyft to invest in research on autonomous vehicles to achieve long-term cost reduction.10 Huge R&D costs, safety issues, and regulations in different states were just some of the many concerns that Uber had to consider.

UBER’S VENTURE INTO AUTONOMOUS VEHICLES
Business Strategy

Uber repeatedly stressed the importance of autonomous vehicles to its future survival.15 Consequently, investment in autonomous vehicles was central to Uber’s business strategy of developing a so-called robotaxi fleet. Robotaxis were autonomous vehicles operated for an on-demand mobility service. They could reduce the fleet operator’s total cost of ownership by about 70 per cent. These vehicles eliminated driver expenses and produced efficiencies16 that would conceivably grant Uber a significant first mover’s advantage over the rest of the ride-hailing industry.

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