Uber Sets Its Sights on Trucking -- WSJ

The ride-sharing giant is chasing profitability in the freight sector ahead of planned IPO

By Greg Bensinger

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 18, 2018).

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 18, 2018 02:47 ET (06:47 GMT)

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