Morning Markets: Getting people around is expensive.

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If you want to get people around in a car, bike, or scooter, it’s going to cost you. In fact, no one seems to know how to make the model make money. And the bills are starting to come due.

Three news items from the week underscore our point. First, China-based tech giant Meituan Dianping announced earnings on Monday. The company’s report included stiff losses from its bike-sharing group, Mobike (more here and here). According to China-watching publication Caixin Global, “newly acquired Mobike bike-sharing unit accounted for over half of losses last year.”

Meituan lost nearly $1.3 billion last year, making the Mobike deficit staggeringly large. When Mobike was an independent company, it raised over $900 million before selling to Meituan, one of its investors. Now it’s dragging down the larger company.

So, bikes aren’t looking good. (Mobike’s chief competitor ofo, which raised billions, is nearly dead). How about scooters?

Not so good either, I’m afraid. According to an article in The Information earlier in the week, Bird and Lime are locked in a market-share-versus-profit battle. Not that either company makes money, but Bird, one of two American scooter-focused unicorns, is looking to firm up existing markets, while Lime, the second scooter unicorn, is still expanding like heck.

This paragraph from the piece stands out:

Lime and Bird, each valued at around $2 billion by investors, have raised roughly the same amount of funding in the past year. Both have lost tens of millions of dollars in some months, and both met with Uber last fall to discuss the possibility of being acquired, before raising money privately. But the companies’ different strategies on spending their resources could dictate who gets to keep expanding, and who flames out.

They could both flame out, of course.

The companies occupy an interesting portion of the mobility market. While Uber and Lyft famously transferred capital expenditures to contractors by not owning the vehicles that power their fleets, Bird and Lime buy their own hardware. Next, Uber and Lyft can support longer, more valuable rides. Airport runs, and so forth. Bird and Lime appear limited by their hardware to support cheaper, short rides.

So Bird and Lime have to pay for hardware which quickly disintegrates (more here) while working hard to recoup material costs from slim margins. Toss in the cost of running a tech company at scale, powering mobile apps, and paying an army to recharge the scooters and things look difficult.

But we can’t have a discussion of the perils of mobility solutions without discussing the famously unprofitable ride-hailing shops. Enter Uber, which doesn’t want to pay for its own self-driving project. Once viewed as existential by Uber’s brass, the new team running the company want help financing the effort.

According to Crunchbase News’s Mary Ann Azevedo this morning:

The Wall Street Journal reported last night that Uber, more formally known as Uber Technologies Inc., was in “late-stage” discussions with a consortium that would invest in the startup’s self-driving vehicle division.

Reportedly, SoftBank’s Vision Fund and other investors, including at least one auto manufacturer that some are speculating to be Toyota, would end up with a minority stake in the unit at a valuation of between $5 billion and $10 billion. That Toyota would be involved isn’t shocking considering the automaker already invested $500 million in Uber as part of a deal to jointly develop self-driving car technology last summer.

Uber is highly unprofitable today (more here on the company’s latest earnings), and headed for a public offering. If it is going to go public, and stay an independent company, Uber will eventually need to either lose less money and solve slowing growth, or generate net income. Either way, the self-driving project isn’t about to generate revenue, and Uber needs to cut costs.

It’s somewhat funny that Uber, which has run through tens of billions, is now looking to trim costs. But hey, it’s 2019. Nothing is supposed to make sense.

Our moral this morning is that a blessing of unicorns are drenched in red ink, hoping that their quick gallop is enough to keep alive. And that investors are red-green colorblind.

Illustration: Li-Anne Dias.

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