Uber’s Emergency Landing
Uber has ditched its flying taxi dreams and settled on more familiar ground, quite literally. Will its investment in delivery logistics pay off or will it follow the ways of Elevate? Automate Pro Europe’s editor, Joel Davies looks into the ride-hailing company’s recent history and the course they’ve plotted for themselves. This feature originally appeared in Automate Pro Europe magazine 1. All information was correct at the time of publication.
Uber Freight and Transplace recently entered into a definitive agreement for Uber Freight to acquire Transplace for approximately $2.25 billion, consisting of up to $750 million in common stock of Uber Freight’s parent company, Uber Technologies, Inc. and the remainder in cash.
Upon the announcement, Lior Ron, Head of Uber Freight said, “This is a significant step forward, not just for Uber Freight but for the entire logistics ecosystem. This is an opportunity to bring together complementary best-in-class technology solutions and operational excellence from two premier companies to create an industry-first shipper-to-carrier platform that will transform shippers’ entire supply chains, delivering operational resilience and reducing costs at a time when it matters most”.
You’d be forgiven if you weren’t up to date on the American shipping, hauling and logistics industry and don’t share Ron’s excitement. You’d also be forgiven if you hadn’t heard of Uber Freight before, but not if you thought it was a ship-hailing app. It’s not. Instead, it’s Uber’s USA-based shipping and hauling platform (Uber Freight launched in Europe in 2019 but was then sold to Berlin-based Sennder in September 2020).
Designed much the same way as its taxi app, Uber Freight is a logistics platform that launched in 2017 as the world’s largest digitally-enabled carrier network. The business counts over 70,000 carriers in its network and thousands of shippers as customers, from small businesses to Fortune 500 companies, including AB Inbev, Nestle, LG and Land O’Lakes.
If you’ve got yourself a 53’ dry van, reefer or flatbed, you can jump onto its app as a carrier, where it will show you load suggestions you can pick up on a map and with the tap of a button, you’re doing the job. Carriers can also search by trailer type, location, pick-up date and length of haul, as well as refine loads by deadhead, rate per mile, price and weight. In addition, carriers can rate the facilities they pick up from and deliver to on a scale of 1 to 5, with the option to leave a written review.
It currently only allows carriers with a 53’ dry van, reefer or flatbed to operate but announced in July it would expand into the less-than-truckload (LTL) market, catering for smaller-sized carriers and shipments. As a shipper using the app, you can view past, present and future shipments, getting real-time GPS tracking on loads, instant marketplace pricing, and performance metrics around operations at facilities.
The Flying Car Conundrum
Before we get further into the “why?” about this deal, we must first travel back to late 2020. In case you can’t or refuse to remember, Donald Trump is President, the UK is part of the European Union and COVID-19 was nearly a year into fruition. Amid this helter-skelter backdrop, business continued and Uber gave up on its dreams of flying.
Phrased as an “expanded partnership” between the two parent companies (of which Uber holds no stock), the company sold Uber Elevate, its flying taxi/eVTOL/UAV department to Joby Aviation for $75 million. In addition to a previous $50 million, it took the total to $125 million.
Uber didn’t exclusively state why it gave up on Elevate but its sale came at the same time it sold its autonomous vehicle division, Advanced Technologies Group (ATG), to the start-up Aurora Innovation for $4 billion. The company cited the need of making a profit, which neither of the branches was doing, but was also slowed by several issues, including the 2018 killing of a pedestrian by its autonomous car and a legal entanglement with Google suing the company over the self-driving project, Waymo.
For Elevate, the largest issue may have come from the fact that whilst many companies are vying to corner the new urban airspace market that’s about to boom, few are that close to clinching the magic formula. Not only is the technology proving tricky to get right, as new tech tends to be, but the novel concept is surrounded by red tape from governing and regulatory bodies who, so far, are wary of giving out the required design and production approvals.
This is because creating a small, flying eVTOL isn’t enough, as it is with a car. New infrastructure, such as landing pads, terminals and transport systems need to be thought up, tested, approved and built. This is not to mention the fact that people will be flown, by pilots or autonomously, through cities and townscapes faster than ever before for the first time. Without roads, signs or traffic lights, how will that work safely? What side of the sky will they fly on? Who gets right of way? These are the questions governments are scratching their heads over. The rules of the sky haven’t been written yet.
Another issue Uber faced and a trend in the sector, is that big companies have struggled to get off the ground (pardon the pun) with eVTOLs. Airbus, Porsche-Boeing and Hyundai have at one time said they were developing the technology but have either given up, not issued recent updates or barely made it out of the concept stage. Instead, it’s start-ups, whether scrappy or well-backed, that are making headway. The single, dedicated focus on developing one product might be the secret to their success but I’m sure the aforementioned companies have better minds than mine working on the conundrum.
However, it was Volocopter, the German eVTOL manufacturer, that recently became the first company of its kind to get both essential documents from the European Union Aviation Safety Agency. It gives them the basis to actually fly, which it hopes to do in time for the 2024 Paris Olympic games. Alas, even they had to acquire another company to get the documents, so it’s a difficult place to be, even for start-ups that live and breathe the technology. Ultimately, trying to perfect two new major technologies, the futures of which are uncertain, at the same time, was seemingly too much for Uber.
So, the company turns to the ground. The task before them is simpler. That in part is because delivery logistics is older, better established and more familiar for the company already used to delivering people. When announcing the acquisition, Uber said it was creating “one of the leading logistics technology platforms, with one of the largest and most comprehensive managed transportation and logistics networks in the world”. This statement is true.
Transplace offers a similar SaaS platform for shippers as Uber Freight does, boasting $11b freight under management, 530 million annual transactions and 62,000 users on the platform. The platform’s “Control Tower” area shows the status of shipments, from “past due to be delivered” to “at-risk”, “tracking on time” and “delivered”. This is coupled with an interactive tracking map and all the metrics you could shake a stick at.
Discussing the combination of companies, Uber Freight said it would “optimize the movement of freight across the entire marketplace and deliver best-in-class services to shippers, while also unlocking opportunities for carriers”. Specifically, the company said shippers would get more access to technology solutions across all transportation modes and services, whilst carriers will have the ability to collaborate directly with shippers and access high-quality freight across multiple expanded service lines, including intermodal, cross border and Less-Than-Truckload.
“The acquisition will combine the world’s premier shipper network platform with one of the industry’s most innovative supply platforms, to the benefit of all stakeholders”, said Frank McGuigan, CEO of Transplace. “Our expectation is that shippers will see greater efficiency and transparency and carriers will benefit from the scale to drive improved operating ratios. All in all, we expect to significantly reduce shipper and carrier empty miles to the benefit of highway and road infrastructures and the environment”.
With the two using such a technologically similar logistics-focused SaaS platform, it makes sense for Uber to absorb Transplace. The latter’s 21 years’ worth of data will likely be fed into Uber’s, as will its customer base. In fact, very little will change since Uber already has a better-designed platform. So what the company truly gains from the transaction is more customers and more data – the most valuable commodities to almost any company in 2021.
It further makes sense as a financial move. The transport sector has been hit hard by the COVID-19 pandemic. Uber, as well as other ride-hailing companies, reported a significant downturn in profit and are only now seeing customers return. However, fewer people on the streets doesn’t mean any less spending. Ecommerce spending skyrocketed (just look at Amazon) during the pandemic increasing the value and profitability of the delivery logistics sector. This likely explains Uber’s investment in the LTL market.
With the eCommerce boom in mind, it would be an easy mistake to question whether the move into the delivery service sector comes too late as countries re-open and consumers may flock back to brick-and-mortar stores. That is because what’s been discussed here so far is but a fraction of all the company’s dealings in recent times. Looking at its 2020 dealings, the trend toward delivery services, including in the consumer arena, was apparent. It included the acquisition of Mexico’s Cornershop (groceries) for $1.4 billion, Postmates (deliveries) for $2.65 billion and in early 2021, Drizly (alcohol delivery) for $1.1 billion. That’s a cool $5.15 billion for various types of delivery services, without the mention of its already popular Uber Eats food delivery service.
Put into perspective, Freight is just a sliver of Uber’s overall business, providing $302 million in gross bookings of the company’s overall revenue of $19.5 billion in gross bookings in the three months ending March 31. Although a big investment, the addition of Transplace is minor in the grand scheme as Uber continually builds a delivery and logistics empire.
The wings may have fallen off of Uber Elevate and its autonomous four-wheeled cousin but deliveries are simpler, they’re profitable and Uber already has its finger in just about every flavour of the pie. So leave fancy flying vehicles and driverless cars to the start-ups, because Uber’s back to basics. It’s back to people, food and objects.
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