In Wake of Ride-sharing IPOs, Car Rentals Look Better Financially
April 15, 2019
Enterprise, Avis and others still profitable while newer alternatives struggle
Recent moves by Uber and Lyft to hit the stock market for investment prospects might be making car-rental corporations like Enterprise and Avis a bit nervous, but the financial outlooks of the two ride-sharing firms indicate that profitability isn’t a goal that will be realized anytime soon.
While San Francisco-based Uber made its initial public offering (IPO) earlier in April, despite its claim of overall revenues totaling $11.3 billion, the company’s capital and operating costs were far greater, putting it in the red at roughly $1.8 billion. And while the gap in its overall losses in narrowing, the promises made by Uber that it will invest more in technology and research may result in shareholders waiting much longer before their returns on investment will be realized.
Additionally, Uber’s major ride-sharing competitor, Lyft has been performing poorly on the market since its foray onto Wall Street was filed late in 2018. Lyft’s IPO of $72 a share has been steadily decreasing months later, dropping by at least 15 percent. And after recording revenues of around $1.2 billion, Lyft is still operating at a loss of more than $900 million.
Meanwhile, Enterprise Holdings, which owns car rental companies Enterprise, National and Alamo recorded record profits of more than $24 billion in 2018. While the Avis Budget Group and Hertz were a distant second and third, posting profits of $781 million and $33 respectively, both results were significant increases over the previous year.
While the major car rentals claimed that much of the success was due to technological improvements and measures to diversify their fleet and consumer options, customer service was also a significant positive variable. And according to industry wags, treatment of clientele might be putting ride-sharing companies at a disadvantage.
A look at Consumer Affairs unveils hundreds of components from rude behavior to damaged luggage. But more seriously, Uber in particular has been in the crosshairs of a suspicious market over several instances of sexual assault on behalf of its drivers, with CNN reporting more than 100 incidents affecting the company in 2018. The perception of such a toxic culture being reinforced was further solidified by the removal of its CEOTravis Kalanick in January and corporate development head Cameron Poetzscher last October over similar allegations.
What also isn’t going to help is that while Uber is already outdistanced Lyft in terms of performance, and currently has the car-sharing market in its sights, it’s scorched-earth manifesto of taking on its fiercest competitors, car owners and public transportation, seems outlandish at best. It’s a point that isn’t about to be taken too seriously, since most of the major and profitable rental car companies have made it clear they’re in this cutthroat market to the bitter end.
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