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Lyft keeps Uber from making a profit, CEO says

Tracey Lien, Los Angeles Times on

Published in Business News

Fierce competition from Lyft is holding Uber back from profit in the United States, Uber CEO Dara Khosrowshahi said Thursday.

Khosrowshahi said ride-hailing competitor Lyft's heavy spending on subsidies to keep the cost of rides low has forced Uber to continue doing the same, leading to financial losses.

"The U.S. is very competitive right now, between us and Lyft, so I don't see the U.S. as being a particularly profitable market for the next six months," he said in an interview.

When asked what will happen after six months, Khosrowshahi said: "It depends on where the competition goes. Right now, we have a situation where Lyft is spending very aggressively to gain share."

Financial documents for Uber and Lyft that have leaked over the years have shown that despite bringing in enormous revenues from millions of car rides, both San Francisco companies continue to operate at a loss because they spend heavily on subsidies.

Subsidies are one of the ways ride-hailing companies can gain market share. Drivers will typically work for the company that offers the best financial incentives, while passengers flock to the service that charges the least.

In China, Uber met its match in Didi Chuxing, the incumbent ride-hailing company that outspent its rivals to attract drivers and passengers. Uber conceded the China arm of its business to Didi last year in a $35 billion deal.

 

In the United States, though, neither Uber nor Lyft has shown interest in conceding. Uber remains the market leader, and it has more money; to date, it has raised about $15 billion in debt and equity at a private valuation of about $70 billion.

Lyft, meanwhile, raided $1 billion last month in a round led by Alphabet Inc.'s investment arm CapitalG, which values the company at $11 billion.

The goal for both companies is to cut back subsidies. In some overseas locations, Uber has been able to do that, Khosrowshahi said, leading to profitability in those markets. With Lyft nipping at its heels in the U.S., though, it could be a while before Uber is in the black.

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