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The deal is probably similar to the way an airline buys planes. E.g consider when Ryanair bought 200 737s for $22Bn [1] which is about the same in it's entire
by adamt 11y ago
The deal is probably similar to the way an airline buys planes. E.g consider when Ryanair bought 200 737s for $22Bn [1] which is about the same in it's entire market cap.
An order like this is probably:
* For a delivery spread over 10+ years
* The vehicles will almost certainly be leased/finance
* Each vehicle will probably assume a 5+ year working life and have a residual of about perhaps 25% of list after 5 years given the likely mileage
* There will be a big initial discount given the size of the order
So assume each car, is $100k new, but given an order that size is perhaps a 40% discount. So that's a $60k sale. After 5 years, the car is perhaps worth 20k.
So the unit economics are that each car costs (before financing costs) 40k over 5 years, or $8k a year. This is a relatively low cost given the number of rides it can take and the cost of the driver who will be driving it.
On that basis is doesn't sound that expensive.
[1] http://corporate.ryanair.com/news/news/14908-ryanair-places-order-for-up-to-200-new-boeing-737-max-200-aircraft-worth-up-to-22bn/?market=en http://corporate.ryanair.com/news/news/14908-ryanair-places-...
- rgbrenner 11y agoThe average taxi puts 70k miles per year on their car. So after 5 years these will have 350000 miles. Its not going to be worth anywhere near $20k
- hayksaakian 11y agoso they pay 800,000,000 per year for 5 years?
- pikachu_is_cool 11y ago$40,000/car * 100,000 cars = $4B. that's only a 20% discount over the course of 5 years.
- jmatthews 11y agoIn the states the franchise laws do not allow Uber to buy directly from the manufacturer. Also, the margin on an S class sold in the US is approximately 15%, not 60%.
- mmakunas 11y agoGreat analysis but this makes it sound even less likely. Going from zero marginal costs to something like this seems totally against their current model.
- dexterdog 11y agoIt seems like it would make more sense for a partner company to be the one that has all of this in the books and Uber just leases from them.
- danvoell 11y agoThanks for the breakdown, it was a helpful analysis.
- BinaryIdiot 11y ago> After 5 years, the car is perhaps worth 20k. No way. Absolutely no way. Looking online I'm seeing estimates of 300,000 to 500,000 miles per year in a taxi. If Uber is even NEAR that max, this car is going to have 300,000 miles on it. Hell even 150,000 is a ton of miles on a used vehicle. Looking at KBB with a base S-Class that's 5 years old with 300,000 miles you're looking at roughly $12k in "good" condition (because, let's face it, people are going to be in this thing constantly and "good" is the rating the majority of used cars are in when they're sold). Then factor in that Uber is not going to become a used car company (at least I would imagine they wouldn't) they're going to have to sell even lower than KBB to a third party so that third party can make any money. So I'd bet one of these cars would end up selling for $6k to $8k depending on mileage and condition after 5 years.
- cbr 11y agoLowering the sale price to $7k only bumps the per-year cost to Uber from $8k to $10.5k.
- BinaryIdiot 11y agoTrue which is a $250k difference if my numbers are even correct (I mean I think they're closer than parent's but who knows). But $250k isn't that much when the company is a billion dollar company.
- jaycroft 11y agoA difference of 250m, rather than 250k, which again, I guess still isn't that much for a 60 billion dollar company. Total depreciation on these is going to eat up up a billion in value a year, or only about 2% of market cap, assuming they keep or grow their valuation.
- BinaryIdiot 11y agoOh man how could I make such a mistake? I got thrown off by the lack of zeros. I can't even edit it. :(