The word “automotive” is everywhere around us – not only on the road, but also all over the news, and in innovation labs on academic campuses. But, what are the highest valued automotive startups and how large is the gap between Uber and other similar companies in capital raised, growth strategy, and competitiveness?
Zirra, a startup that has developed AI and machine learning technology to effectively analyze the private tech market, recently analyzed the top five automotive startups. The insights below are a product of an analysis made with the help of AI technology and a network of experts. We added some facts and analysis provided by news outlets and other research firms to complete the picture.
1.The five highest valued automotive private tech companies are all ride-hailing apps. Startups focusing solely on hardware or self-driving cars such as Zoox or Faraday Future don’t enter the exclusive list, nor do software companies such as Moovit or CityMapper. The five most valued companies in the space combining hardware, software, and more.
2. Uber controls the global landscape with a $52 billion valuation, according to Zirra, while Chinese Didi Chuxing, in which Uber also has stakes, is worth about $31.5 billion. Zirra estimates valuations for private tech companies based on accessible data and a network of experts. Lagging behind Uber and Didi are local apps such as Lyft ($5.5B) in the U.S., Grab ($4.2B) in Southeast Asia, and Ola ($3.8B) in India.
3.According to Zirra, some of these companies are overvalued. Calculations using Zirra’s algorithms suggest that Uber and Ola are overvalued at about 24%, while Grab is undervalued at 40%.
4.Uber has a competitive advantage over the rest regarding capital raised ($15 billion) and global deployment. Uber is also the only company experimenting with a fleet of autonomous vehicles, and the only one that has completed acquisitions of AI and self-driving car companies (Geometric AI and Otto). Uber’s carpooling’s service, UberPool, is by far the most advanced among the five biggest ride-hailing apps. The pooling infrastructure allows Uber to test better its self-driving car fleet. Lyft has a car-pooling infrastructure as well, but isn’t operating a self-driving fleet yet.
5.By merging Uber’s division in China with local app Didi Chuxing, Uber renounced taking over the People’s Republic of China, but got in exchange a 20% stake in Didi and $1 billion in cash to subsidize rides to accelerate its growth at the expense of Lyft, Grab, and Ola. Also by merging with Didi, Uber dismantled the “anti-Uber coalition” that was originally constructed by Didi, Lyft, Grab, and Ola to share the users and keep them from choosing Uber.
6.Didi is not only an ally of Uber but also a competitor, after investing $100 million in a Brazil’s ride-hailing app 99, a local rival of Uber.
7.Uber and Lyft’s financials were uncovered for the first time: According to The Information, Lyft lost about $600 million in 2016, after generating $700 million in revenue (after payouts to drivers). Uber made about $6 billion in revenue but lost $2.8 billion. The two companies are expected to become profitable, but that depends on the nature of the competition between the two in 2017 and 2018. The fiercer the competition, the more money they bleed.
8.Consolidation will continue in 2017. As 2016 ended with the crescendo of the Uber China-Didi merger, 2017 will probably mark further consolidation. Smaller companies with a short list of investors and a constant need for cash, such as Lyft and Ola, might (continue to) search for buyers.
9.ABI Research forecasts that global ride-sharing bookings will exceed $100 billion by 2020 and $300 billion by 2030 growing at an average of 18%. However, ABI states that the market could face potential disruption from the advent of driverless taxis, which are currently making their way into the marketplace and could overpower the ride-sharing market.
Uber is possibly on its way to an IPO, as the company makes giant steps to become profitable. It is already profitable in developed countries, and ceding the Chinese market in exchange of 20% of Didi Chuxing’s shares stopped the company from bleeding money in that market. But, Uber didn’t renounce their aspirations for a global presence. The company is still investing hundreds of millions of dollars in its Indian subsidiary to compete with the local rival in the $10 billion market.
Uber is also making the right moves towards an artificial intelligence based autonomous cars fleet. Within few months it acquired self-driving trucking company, Otto, launched UberFreight service, and initiated a full-scale pilot of self-driving cars in Pittsburgh and San Francisco, although by law they are mostly driven by drivers with hands on the steering wheel. Most recently Uber bought the mysterious AI company Geometric Intelligence and brought its founder to lead Uber’s AI lab. But Uber is not alone in this race, as Google has accelerated its autonomous cars go to market, Baidu has a similar project in Beijing, while manufacturers such as Ford and GM, and many startups such as Faraday Future and Zook are in the race as well. In addition, Uber’s mission to lobby for legalizing UberX in some states in the U.S, as well as in Europe and India is still in full motion. Valued by investors at about $68 billion, Zirra’s AI technology for analyzing private companies values Uber at $52 billion. In the event the company goes public, Zirra values Uber at about $69 billion, higher than GM and Ford.
According to a The Information, Uber generated $6 billion in revenue in 2016, while it lost $2.8 billion. In 2015 Uber’s revenue was close to $2 billon, while it lost $2.5 billion. The same news outlet claims that Uber may have at least three years’ worth of cash before it needs to raise more money privately or go public. It should have roughly $7 billion in cash, and should spend yearly less than its cash burn at 2016 which was $2.8 billion, thanks to the end of its Chinese mission. The Information adds that Uber is still not profitable in the U.S and developed markets, which is probably in thanks to the competition with Lyft. Uber still subsidizes heavily drivers and riders. [Read here for the full Company Analysis Report on Uber.]
The Chinese ride-hailing app took over the local market after acquiring Uber’s China division, winning the campaign for China, but is very far from global domination. Zirra’s algorithms value Didi Chuxing at $32 billion, a number that expresses Didi’s victory in China. But the list of red flags regarding its future is noteworthy: there were new regulations implemented by central and municipal governments and, until very recently, Didi has been reluctant to expand globally.
However, Didi has recently announced a strategic investment in Brazilian ride-hailing startup 99, making South America its first territory outside of China. That puts Didi in a direct conflict with Uber, now a stake holder in Didi, which already has a presence in Latin America.
In addition, Didi and Uber’s merger made Baidu a shareholder (2.3%), and since the Chinese search engine is already managing an autonomous cars pilot at Beijing, it is quite possible that the two will cooperate.
The completion of the rivalry between Uber and Didi, eliminated subsidies from the market which brought drivers and passengers to drop the service. According to market researcher analysis, Didi’s active users decreased by 31%. Didi is trying to compensate for the loss of drivers by contracting taxi companies, a move that has attracted criticism from the media, claiming Didi is not a ride-sharing app anymore.
According to The Information, Blackrock estimates that Didi’s revenue in 2016 reached $3 billion, and it expects Didi to generate $7 billion in 2017.
Lyft was gravely hit by the Uber-Didi merger, as Lyft was a close ally of the Chinese ride-hailing app.
That might have led Lyft to try and sell itself for as much as $9B in a roadshow that took place this past summer. Its failure to do so was not merely a bad sign, it was also a consequence of the partnership it had already bonded with GM before that.
Lyft, ranked third in Zirra’s highly valued companies list, is still a company in a momentum of growth. It is expected to generate more than $400 million in net revenue this year, though it would have a net loss of substantially more than that amount. There are 315,000 drivers listed in the service and 5 million active riders. Also, according to SimilarWeb, Lyft is on its way to close the gap with Uber in the application stores.
Lyft has a strong asset besides its drivers and passengers: It is the second largest automotive fleet management software in the U.S. that can manage any self-driving or car-pooling services fleet in the future. Lyft partnered with GM a year ago, which paid $500 million (for 9% stake, valuing Lyft at $5.5 billion), and chose Lyft to manage its future autonomous cars fleet. According to The Information, The rise of self-driving cars would also improve the economics of Lyft’s business, as drivers now take 75% to 80% of gross revenue. In five years from now, Lyfts’ founders could find themselves managing a fleet of self-driving taxis developed by GM and Cruise. That would be a very prestigious place to be.
Nevertheless, there are some risk factors that Lyft has been facing for some time: Uber’s truce with Chinese Didi supplied Uber with enough cash and patience to wage a bigger war over Lyft in the U.S. by subsidizing rides. Additionally, Lyft is still a local ride-hailing app that doesn’t strive to operate outside of the U.S. Further, the future is pretty unclear regarding who will rule the combination of ride-hailing and self-driving combination. Lyft made a bet on GM and Cruise. It is a low-risk bet, but it is a bet after all. [Read here for the full Company Analysis Report on Lyft.]
While Uber fiercely fought Didi in China and Ola in India, Singapore-based Grab excelled in taking over the entire southeast Asian territory. Despite some Uber presence in the region, Grab grabbed Singapore, Indonesia, Malaysia, The Philippines, Thailand, and Vietnam. It is active now in 34 cities in the region, claiming over 24 million app downloads and more than 500,000 drivers. Grab offers motorbike taxis on demand and access to licensed taxis.
Nevertheless, Uber has still plans for southeast Asia. After the merger with Didi, the ride-hailing behemoth now has more time and money for its southeast-Asian conquests. Uber has also acquired three other companies during its growth process and has strong operations and user base within the South Asian market.
Lyft, (operating in the US), Ola (operating in India), and Didi Chuxing (operating in China) would be typically considered as competition, but the three have formed a partnership with Grab which allows each to provide their users with only one app yet access the partner services when traveling to those specific countries, as what is informally known as the “anti-Uber coalition.” However, Uber’s merger with Didi in August 2016 has called into question their loyalty to the anti-Uber partnership. If Didi draws back from the partnership now that it has a stake in Uber, it could weigh very heavily on Grab, which is still facing very heavy competition from Uber in their market.
After Uber finished its business in China, it must show to the world its strength in the rest of Asia. Per The Information, the competition with Uber is about to get tighter. Didi, a potential buyer, said it isn’t interested in extending into southeast Asia. Uber, however, is heavily funded after gaining an extra $1 billion from Didi’s merger deal, and is more advanced in its technology. Services such as UberPool or the autonomous vehicle presented at San Francisco by Uber is something Grab can only dream about at this stage. According to the news site, Grab’s revenues are estimated at $80-$95 million per year, with a $100 million net loss. The good news is that burn rate has fallen to around $10 million a month. Uber is generating 10%-20% less revenue in the region than Grab, but it’s gaining ground on Grab. Uber heavily subsidizes new drivers and riders. It has also partnered with banks to give car and motorbike loans to drivers that are loyal to Grab and are performing well.
Also operating within the region is Go-Jek, which was founded in 2010. Go-Jek has already made one acquisition and had raised $550 million before being acquired by MVCommerce in October 2016, but as for today, it is present mainly in Indonesia, the largest and highest growing economy of southeast Asia.
In addition to Lyft and Didi, Grab has created partnerships with the self-driving car nuTonomy, and Tokyo Century, a Japanese leasing company. In addition, in December 2016, Honda Motor Company forged a partnership with Grab and stated that it will be investing in Grab. The two companies will still have to figure out the nature of their cooperation, but it seems that they both want Grab to manage a fleet of Honda’s motorbikes in the future.
Two key people have recently joined Grab and are having an effect on its strategy: CTO Wei Zhu, who was previously a chief Facebook engineer and the creator of Facebook Connect, and President Ming Maa, a former Softbank executive, who is taking over the financial management of Grab and could take it to an IPO in the future. Although the round in which Honda participated valued Grab at $3 billion in September 2016, Zirra estimates Grab’s valuation to be about $4.1-$4.2 billion. [Read here for the full Company Analysis Report on Grab.]
Ola Cabs, the largest ride-hailing service in India, offers multiple transportation services including regular and luxury car service, auto and bike rental service, rickshaw service, bus shuttle, and their most recent offering: ride sharing. The Softbank-backed startup has great momentum. The number of drivers has grown significantly, from 10K in 2014 to 100K in 2015, and last year it reported to have 200K drivers. Ola has stated that it has plans to reach one million drivers on their platform by 2018. Ola is already operating in 100 cities in the subcontinent.
Its biggest and most significant competitor is, of course, Uber. After merging Uber China into Didi Chuxing the last summer, Uber is more eager to conquer India, showing the world that hasn’t renounced the whole area. At the end of December 2016 , two months after Didi-Uber’s deal, Uber co-founder and CEO Travis Kalanick stated outright that he has no desire to invest in or merge with Ola in any way, which seems to indicate that Uber is confident they can overtake or equal Ola’s market share within India. This could spell trouble for Ola, since Uber is better funded and has a much larger global presence and name recognition. Uber is quickly rising in India, and their luxury car service offering is already more popular than Ola’s.
Due to challenges from Uber, Ola has begun to expand into other avenues of service than simply providing rides, such as OlaCafe, a food on demand service, and OlaMoney, a partnership with YES Bank where customers can press a button for instant cash to be delivered by Ola.
One of Ola’s strengths has been their presence in the smaller towns, something which Uber has stated they are not as interested in. Ola believes its services can have the most impact in these places and is therefore seeking to further their presence there.
But, Uber is not the sole competitor, although it is the biggest threat. Jet Fleet, a luxury car ride company, is becoming popular and is challenging Ola’s luxury car service, and Jugnoo, a rickshaw ride service with $16 million in funding and two acquisitions is presenting an alternative to Ola’s rickshaw service. Meru Cabs is the most popular of the general city cab services within India, and has raised $75 million thus far.
Ola has faced significant problems in the last couple years such as technical issues with their app, molestation of riders by drivers, and leakage of personal customer information. It has been riddled with bad press that has affected their image. The company has responded by offering free coupons and limited discounted rides among other services in order to keep their clientele from choosing another company, which has significantly increased sales and marketing expenditures.
Although Didi is now expanding into Latin America and Lyft will probably expand into Canada, Ola is not currently interested in expanding overseas. Looking at southeast Asia, the market is already taken by Grab, another Softbank-backed company and China is already 100% ruled by the unshakeable king Didi. Didi itself decided just recently to expand for the first time out of China to Latin America. In addition, Ola is locked within the “anti-Uber coalition” a partnership created with Didi, Grab, and Lyft, and is expected not to compete with them directly. [Read here for the full Company Analysis Report on Ola Cabs.]
How does Zirra value private companies?
The Zirra valuation process uses AI and machine learning technology and it involves both intrinsic and relative valuation algorithms. The intrinsic data includes revenue and expense estimations, traffic trajectories, investment history and velocity, based on aggregated sources. In the relative analysis, data is compared and benchmarked with a database of 1,200 companies with correlation to stage, space, size, and trajectory.
It then produces a map of competitors based on the data set, rated by the degree of direct competition, its size, threat, and proximity of the shared customer and partner base. Results are sent to relevant experts in our expert community, which is currently 450 experts strong and growing. Experts comment on both quantitative analytics (scores and metrics) and qualitative analytics (risks, opportunities, competitors).
Where do we get the data from?
Data is extracted from 85 different data sources, regularly updated (daily to weekly). Sources include both open and licensed directories such as the company website, Bloomberg, LinkedIn, SimilarWeb, and Adwords. It can be “derived data” such as Glassdoor reviews, consumer reviews, sentiment analysis from open web articles; or other data points such as academic researches, stock indexes, and macroeconomic parameters.
Why did we do it?
The private tech industry is one of the most secretive and mysterious – yet it is rich and growing rapidly. Those who are working in the startup ecosystem themselves, entrepreneurs, venture capitalists, reporters, are suffering from serious disinformation regarding the economy that surrounds them. The result of this panoply of secrets, taboos, and mysteries is enormous disinformation surrounding the startups market. Here at Zirra, we decided to do something about that. We have made it our mission to bring transparency to the private tech market.