A slogan commonly used within truck drivers: “If you bought it, we brought it.” It means every product you buy in a store is transport by trucks. In this place, you can see the importance of the trucking industry in the global economy. In the year 2020, the market size of the trucking industry in the US is 1 trillion dollars. Uber sought the opportunity.
In 2017, Uber launched “Uber Freight.” Uber Freight connects truck drivers with shippers, similar to the economic model of its ride-hailing app. In the early days, if a shipper wants to transport cargo, they always need to find a freight broker as a middleman to communicate to drivers. Uber Freight makes the process less complicated, and there are no more middlemen(or it becomes the middleman). When truck drivers are using Uber Freight, they will see a bunch of lists of shippers that want to ship cargo. Drivers can decide whether to load cargo by route, price, weight, distance, etc.
When a driver is shipping cargo, an average of 20% is deadhead, which means there is no cargo on the truck. Because of the time wasted and the money spent on gasoline, drivers always want to reduce deadhead time. Uber Freight solves the problem.
On Uber Freight, drivers can consider many factors to determine their schedule. Uber Freight provides the information of shippers include price, weight, distance, route, facilities, rate per mile(money made for each mile of driving), and of course, the distance of deadhead. It becomes a handy tool for drivers to manage the schedule and make decisions. It is just like its ride-hailing app, which solves the problem for taxi drivers when there are no passengers. When shipping ends, both shipper and driver can rate each other and make comments, let others make better decisions in the future.
Detention is a common term in the trucking industry. You might think of the detention when you’re a kid at school. But it’s different, but it’s the same idea. When shipments are not ready to be loaded, the truck driver is “detained” and must wait for the freight to be prepared. In the US, the standard is to have trucks loaded in 2 hours. After that, shippers need to pay the truck driver for every hour they wait. This is called Detention Pay, or Detention Fee. Truckers can request detention pay on the app and get $75/hour for detention.
To solve the detention problem, Uber Freight came up with an innovative idea. Powerloop. Powerloop is a trailer pool model that enables carriers to access preloaded trailers or unload loaded trailers and get empty ones. It hugely reduces the detention time for truckers and increases efficiency. In 2021, powerloop is available in California, Texas, and Oklahoma.
Furthermore, Uber Freight launched Uber Freight Plus in March 2018. Uber Freight Plus, a program that gives app users access to discounts on services they need. Uber Freight gives help on their biggest expense: fuel, phone bills, and buying and maintaining the truck itself.
Financial Outlook
Morgan Stanley estimates that Uber Freight shares 99% of gross revenue with carriers. This is far more than the industry standard, somewhere between 80% to 85%. The reason Uber is sharing such a high portion of revenues is to build up their customer demands. It’s not a new strategy; many companies use the price-cutting strategy to gain market share in the early stage. But what comes after is a tremendous loss and a harder chance for the company to turn into profit. Morgan Stanley estimates that Uber Freight will still share 97% of its revenue with carriers in 2023.
Uber Technologies Inc still does not turn their revenue into profit, nor does Uber Freight this business. But some people metaphorize their Uber Freight business like Amazon’s Web Services. It means when Amazon first launched its Web Services, it is a tiny part of their business and grew into their profit engine.
I believe Uber Freight will become a bigger part of their business in the future. In 2020, the market size of the global ride-hailing business was 52 billion. On the other hand, the market size of the trucking industry in the “USA” is approximate 1.1 trillion dollars, far more than the size of their ride-hailing business.
Opinions
Uber’s biggest competitor is not Lyft; it’s Tesla. Tesla owns the world’s best autonomous cars and trucks, and also electric. Tesla’s launch of Tesla Network will soonly beat Uber and Lyft. When Tesla cars reach fully autonomous, owners of Tesla cars can rent their cars to others when they are not driving.
The same in the trucking industry, Tesla can replicate the same business model of the Tesla network into the trucking industry. By using their own productive Semi trucks.
I believe self-driving cars and trucks are the future of transportation. Using the Internet of Things (IoT), Big Data, and Artificial Intelligence (AI). Future transportation will become fully autonomous and working all by themselves. Tesla will be the leading company in transportation and earn the most money because they do not need to pay the drivers.
In my opinion, Uber selling its own self-driving business tantamount to giving up its company’s future. Unless Uber found a good way to compete with Tesla, the company and Lyft will be easily ruined by Tesla.
