Uber Targets Trucking With New Trailer-Rental Business
October 17 2018 - 9:29AM
Dow Jones News
By Greg Bensinger
Uber Technologies Inc., in its ongoing quest to move beyond its
unprofitable business of connecting drivers with passengers, is
adding a new tractor-trailer rental business to help big-rig
truckers haul freight around the country.
The San Francisco company is set to announce a new division
called Powerloop that will connect small- and medium-sized carriers
with fully filled trailers from businesses such as brewer
Anheuser-Busch InBev SA. Uber has leased hundreds of trailers from
an undisclosed company and is renting them to carriers for $25 a
day, planning to profit from the difference.
It may sound like a departure from Uber's business of connecting
urbanites with rides around town, but Uber says the technology
behind its core app translates well to the shipping industry. Its
related Freight division, which alerts truckers with their own
empty trailers to waiting cargo loads through smartphones, has been
growing, expanding from Texas last year to nationwide.
For Uber, the success of Powerloop and Freight is important to
demonstrating the company is more than a one-trick product,
particularly as it eyes an IPO that banks are proposing could value
the company at as much as $120 billion next year, The Wall Street
Journal reported Tuesday.
Uber has found some success with prepared food delivery unit
UberEats, which is expected to be profitable before the core
ride-hailing business and potentially underwrite losses, according
to people familiar with the company's finances.
The Freight business is unprofitable, according to people
familiar with the matter. Chief Executive Dara Khosrowshahi has
said as recently as August it is on a pace to achieve $500 million
in revenue within the next year.
Regarded by the tech industry as cumbersome and labor-intensive,
the trucking business has attracted a number of startups aiming to
shake up the industry.
Venture capital and other investors have, according to market
research firm Armstrong & Associates, bet $662 million since
2011 on digital-friendly, load-matching startups such as Cargomatic
Inc., Flexport Inc. and Jeff Bezos-backed Convoy, which last month
gained a $1 billion valuation in a round led by Alphabet Inc.
Uber may be seizing on an opportunity as trucking capacity has
been strained amid a fast-growing U.S. economy. Rates for
last-minute truck transportation were up nearly one-third over the
summer from a year earlier, during what is typically a slow time of
year.
Uber said its matchmaking system will spare carriers from
waiting around as trailers get loaded with goods and allow shippers
to load them at their convenience, rather than waiting for trailers
to arrive. For now, Uber will be testing Powerloop in Texas, though
the company expects to expand it to other U.S. regions.
Among Uber's first customers is Anheuser-Busch, the brewer
behind Budweiser and Bud Light. On-demand rentable trailers could
cut the time carriers spend at a shipping site by 25%, said Ties
Soeters, Anheuser-Busch's vice president of logistics procurement
in North America. The brewer has already arranged for about 250
trailers of beverages to be hauled off using Powerloop as part of a
trial, he said. About 30% of Anheuser-Busch's U.S. volume is
live-loaded, or done while a big rig truck is waiting, said Mr.
Soeters.
Of course, trucking is far from a sure thing as manufacturing
could take a turn if the economy's growth slows. And Uber faces
stiff competition from a handful of big, tech savvy players, such
as C.H. Robinson Worldwide Inc. and Echo Global Logistics.
Armstrong & Associates President Evan Armstrong said the
Powerloop project potentially faces an uphill climb against the
biggest players. "Shippers could just as easily contract with the
larger trucking companies and negotiate prices" better than Uber
can offer, he said.
Write to Greg Bensinger at greg.bensinger@wsj.com
(END) Dow Jones Newswires
October 17, 2018 09:14 ET (13:14 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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