Lyft, that hot-pink little rival to Uber, sold stock to the public late last month with a gobsmacking valuation of $22 billion. That's about two-thirds of the value of Ford Motor Co., which is very good at making money on pickups and SUVs. Lyft's profits? Stuck in reverse.
The company's revenue doubled last year to $2.2 billion, but its losses swelled to $911 million. That's a negative 41 percent profit margin.
Stock investors are wary of automakers, which get by on single-digit margins in the best of times. But it can be a little maddening to see a money-losing company such as Lyft showered with cash while GM's and Ford's record profits elicit little more than angry yawns from Wall Street.
I know investors want to get in early on a new piece of the transportation ecosystem. But shouldn't it have to be a profitable piece?
To my eyes, Uber and Lyft revealed two important economic truths:
- The so-called ride-hailing business (formerly known as "taxis") could be greatly improved through technology, especially in finding and paying for rides.
- The barriers to entry in the taxi business turned out to be surprisingly low, as these companies flouted livery laws and costly taxi medallions.
That second point is no small one. Lyft and Uber proved that there are no moats in new mobility. So I'm baffled that the global investment community takes a look at Uber and reckons, yeah, it must be worth something north of GM and Tesla combined.
Automakers are caught in the crossroads: Investors won't tolerate falling profits, but they also demand inspiration for a glorious future, even if it means investing billions of dollars before profits appear likely.
I admire Fiat Chrysler's capital-light approach, but maybe GM can pull off the ultimate industrial jiujitsu: use profits from its Lyft stake to develop a Cruise-powered robotaxi service that runs Uber out of the market. Then maybe even Wall Street will salute Mary Barra, Dan Ammann & Co.