Uber profit

**kreme** · August 17th, 2015 03:40 PM

Based from the uber driver I've talked to last wed, the operator fee to ltfrb is 10k then 500 sa driver.

And di narin daw ganung kalaki yung kita unlike a few months ago, since yung dati nyang taxi company napinasukan, nag branch out daw then nag pasok naman ng 20+ cars sa uber. Di na daw sya magugulat kung wala ng mag mag renew or kumuha ng bagong franchise for taxi kung mas mura naman mag uber.

**Calistro** · August 22nd, 2015 12:00 AM

Okay, so I haven't gotten hold of that acquaintance who owns an eon used for Uber but spoke with a driver this week. He said he had quit his job to daily drive his Innova for Uber service. Last month's net income for him was around 50k

**jut703** · August 23rd, 2015 04:44 AM

Pardon the lengthy post, but I'd like to know your thoughts on the computations I've made regarding Uber's profitability. I've tried to factor in all costs, and tried to be realistic with my assumptions on the details of the operations. The model seeks to find out the expected net monthly income should one decide to join Uber as an operator.

1. Vehicle Acquisition and Amortization Costs
For the purposes of this discussion, I've chosen a brand new Hyundai Accent 1.6 E CRDi MT as the Uber car, because of its reasonable price (728k) and extremely thrifty consumption. For most who will venture into Uber, they will most likely finance the vehicle. I assumed a 20% DP and 80% loan over 60 months, with an effective annual interest rate of 9.5%, or roughly 26% in 5 years. This puts your monthly amortization at P12,231/month. However, to be able to account for the upfront DP cost in our PnL, I've divided the P145k down payment into 60 months, or P2,427/month.

TOTAL VEHICLE COST: P14,658/month

2. Operational Assumptions
Before computing the other variable costs (fuel, maintenance, salary), we must first establish the following constraints and assumptions of our Uber day-to-day operations:

•Average Distance Per Trip: 8 km – this is an assumption based on the mix of users who take Uber from their homes to their offices (usually about 10 km one way) and those who travel from one destination to another within the same CBD (e.g. from Serendra to Valkyrie, less than 5 km away).

•Average Time per Trip: 32 minutes – this is based on the assumption that the average speed for the trip is about 15 km/h, which is the usual average for moderate to heavy traffic in Metro Manila

•Average Idle Time per Hour: 15 minutes – this is the assumed idle time from dropping off one passenger, to roaming around and locking in another passenger (usually about 5 minutes away). This is necessary in the computation to compute for the working hours of your hired driver, and consequently the trips per day he can achieve.

•Given the above assumptions, and the constraint that your driver will only work 12 hours per day (including a 1 hour lunch break as well as the idle times in between trips), you will be able to complete roughly 14 trips per day.

•Also, our driver will only have 26 working days per month, to give him rest days which will coincide with the coding day of the vehicle.

3. Revenue Computations
UberX’s rates are as follows – P40 flag down, P5.70/km travelled, and P2.00/minute of idle time. We will assume that the vehicle is idle (stoplight, stuck in traffic, etc) for 40% of the entire trip. Factoring in all assumptions so far, we will have an average Gross Revenue per Trip of P111.20. From that amount, Uber has a 20% surcharge, leaving us with a Net Revenue per Trip of P88.96.

These costs apply to regular trips only, and will be multiplied accordingly depending on the surge value. From experience, surges usually cost 1.5-4x of a regular trip, so we have established an average Surge Rate of 2x. We also expect that there will be a surge from 8am-10am, and 5pm-9pm, or a total of 6 hours, meaning that 50% of our trips will be Surge Trips.

TOTAL MONTHLY REVENUE: P48,572/month

4. Day-to-Day Costs (Fuel, Maintenance, Connectivity, Salary)
From the operational assumptions established above, we can derive that the vehicle will travel 2,912 km/month. From here, we can compute the following costs:

a.Fuel – we will assume that the Accent can do 12 km/L in moderate to heavy city driving, and that the price of diesel is at P30/L. Based on these assumptions, we will spend P7,280 per month on fuel.

b.Maintenance – we will assume that the operator won’t be availing of Hyundai’s overpriced maintenance, and will instead have his car maintained at a reputable service center. PMS will be done every 5,000 km since the vehicle is subjected to extreme conditions. In every PMS, we project to use 6L of oil (P300/L), plus a new filter (P600), and labor costs (P650), or roughly P3,050 per PMS. Based on our distance travelled per month, we assume a PMS Cost of P1,776/month.
Aside from the usual PMS, we will also factor in the cost of tires, as these are one of the most expensive consumables of a car. At P2,500/tire and given our monthly distance covered, we expect to have 3 tire changes over the course of 5 years. Evenly divided into 60 months, we will have a Tire Cost of P500/month.
Lastly, we take into consideration the fact that car maintenance is more than just oil and tires. We will assume that every 20,000 km, we will replace some parts or fluids for the car, with an average cost of P7,500 (on top of the usual PMS cost). This gives us a Parts Replacement Cost of P1,125/month.
In total, we expect to spend P3,401 per month on maintenance of the car.

c.Connectivity – we expect to spend P1,000 a month for the driver’s internet connection, and another P500/month for the cost of an iPad mini plus other costs, for a total of P1,500 per month.

d.Driver Salary – we will give our driver 30% of the fare per trip. With 14 trips per day, where half are surge trips, he will earn P701/day, or P18,215 per month.

TOTAL OPERATIONAL COSTS: P30,396/month

To recap, we have the following figures:

TOTAL MONTHLY REVENUE:P48,572/month
TOTAL MONTHLY COSTS:P45,054/month
TOTAL MONTHLY NET INCOME:P3,518/month

From here, it’s easy to see that the chances of good profitability of venturing into UberX are very slim. However, there’s one clincher that keeps Uber operators afloat financially these days – Uber Incentives.

Based on the info provided in another thread, Uber currently gives out a P100/trip incentive for all operators that are able to hit the minimum requirement of 50 trips per week. Based on our assumptions, this will give us a total bonus of P36,400 per month. We will then have a Net Income (incl. bonuses) of P39,918 per month.

From this exercise, we see that there’s some truth to the claim of others that Uber is a profitable business to venture in. However, I have 2 big reservations on this:

1.You are dependent on incentives to earn – without those bonuses, you will barely break even. It’s quite worrying that the only way you’ll earn is through incentives which Uber can remove anytime.

2.Supply will eventually catch up with demand, and incentives will most likely be removed – right now, everyone thinks that Uber is the next pearl shake or milk tea, and more and more people are signing up to be Uber partners. That’s well and good, since currently demand far outpaces supply. However, you have to look at a horizon of at least 5 years. Can we really be sure that incentives will be there to stay for the next 5 years? Can we really be sure that we can still do 14 trips per day once supply and demand reach an equilibrium point? The fact that Uber has really low barriers to entry (anyone with a relatively new car and a driver can sign up) means that it’ll definitely get saturated.

In fact, with the way things are going, Uber is actually headed towards the direction of regular taxis. Sure, we have a very good feedback system with Uber, but once the company decides to cut on the incentives, operators will inevitably scrimp on maintenance and driver wages, leaving us with tattered cars and so-so drivers. We can’t tell for sure when this time will come, but if you’re just about to enter Uber, you better hope that it doesn’t come until you’re able to pay off your amortization completely.

Because of these reasons, I’m inclined to think that venturing into Uber isn’t exactly the wonderful proposition that some people make it out to be. I’d appreciate any comments on the assumptions and computations, and I’d love to know your opinions on the feasibility of Uber. Have a great day!

**glenn manikis** · August 23rd, 2015 07:32 AM

Ha you need at least 20 units to join uber? That's anti poor... Only business men with huge capital can venture into this business... It's quite obvious ltfrb is favoring someone... Parang bus Lang yan.... You need a min. Of 10 buses to apply for a franchise...
Kaya ngayon kung maliit Lang puhunan mo hindi ka makaka pasok sa negosyo na yan...

Nung nakita ng LTFRB na Maganda kitaan sa uber... They are making it Impossible for small capitalist to venture into UBER... Sooner or later yan 10k na franchise fee na yan magiging 100k na yan... I'll bet my ass it will happen...

**dreamur** · August 23rd, 2015 09:34 AM

Bro jut, did you consider insurance, registration and driver's govt. contributions?

**lsalapare** · August 23rd, 2015 12:36 PM

*sir Jut,

If I may add to your post, computations are actually based on distance & time, meaning even if the car is on idle (stop light, traffic, etc.) the meter still runs.

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*sir Jut,

If I may add to your post, computations are actually based on distance & time, meaning even if the car is on idle (stop light, traffic, etc.) the meter still runs.

**ninjababez** · August 23rd, 2015 01:06 PM

Originally Posted by lsalapare

*sir Jut,

If I may add to your post, computations are actually based on distance & time, meaning even if the car is on idle (stop light, traffic, etc.) the meter still runs.

dito na yata yan bro sa #3

3. Revenue Computations
UberX’s rates are as follows – P40 flag down, P5.70/km travelled, and P2.00/minute of idle time. We will assume that the vehicle is idle (stoplight, stuck in traffic, etc) for 40% of the entire trip. Factoring in all assumptions so far, we will have an average Gross Revenue per Trip of P111.20. From that amount, Uber has a 20% surcharge, leaving us with a Net Revenue per Trip of P88.96.

These costs apply to regular trips only, and will be multiplied accordingly depending on the surge value. From experience, surges usually cost 1.5-4x of a regular trip, so we have established an average Surge Rate of 2x. We also expect that there will be a surge from 8am-10am, and 5pm-9pm, or a total of 6 hours, meaning that 50% of our trips will be Surge Trips.

- - - - - - - - - - - - - - - - - - - - - -

Originally Posted by lsalapare

*sir Jut,

If I may add to your post, computations are actually based on distance & time, meaning even if the car is on idle (stop light, traffic, etc.) the meter still runs.

dito na yata yan bro sa #3

3. Revenue Computations
UberX’s rates are as follows – P40 flag down, P5.70/km travelled, and P2.00/minute of idle time. We will assume that the vehicle is idle (stoplight, stuck in traffic, etc) for 40% of the entire trip. Factoring in all assumptions so far, we will have an average Gross Revenue per Trip of P111.20. From that amount, Uber has a 20% surcharge, leaving us with a Net Revenue per Trip of P88.96.

These costs apply to regular trips only, and will be multiplied accordingly depending on the surge value. From experience, surges usually cost 1.5-4x of a regular trip, so we have established an average Surge Rate of 2x. We also expect that there will be a surge from 8am-10am, and 5pm-9pm, or a total of 6 hours, meaning that 50% of our trips will be Surge Trips.

**jut703** · August 23rd, 2015 06:12 PM

Originally Posted by glenn manikis

Ha you need at least 20 units to join uber? That's anti poor...

There's no minimum requirement of cars to be an Uber Partner. Perhaps you're referring to Premium Taxi, where operators need to have at least 25 card (no smaller than 2.0 displacement).

Originally Posted by dreamur

Bro jut, did you consider insurance, registration and driver's govt. contributions?

Not yet bro, thanks for that. Adding insurance (20k per year for first 2 years, then decreasing by 20% per year for the next 5 years), you'll be spending roughly 79k for insurance for 5 years, or an additional P1,317 per month.

Registration is approximately 2k per year, or an additional P167 per month.

As for SSS/Pag-Ibig/Philhealth contributions, I originally assumed that the driver will consider himself as self-employed and make the contributions himself. If we follow the setup where the employer also has contributions, at an average salaryof P18k per month, we'll be entailing an additional P1,090/month for SSS, P225/month for Philhealth, and P360/month for Pag-Ibig, for a total of P1,675/month. With these benefits though, perhaps it's possible to haggle down the driver's share to 25% of gross revenues.

But still even then, the income without bonuses is still way too small considering the costs of operation. It's hard to feel secure when the only thing keeping your business afloat is the support from Uber.

Nasa 40k per month nga ang neto mo, pero what these Uber operators don't realize (or disclose) is that they're almost 100% subsidized by Uber.

Originally Posted by lsalapare

*sir Jut,

If I may add to your post, computations are actually based on distance & time, meaning even if the car is on idle (stop light, traffic, etc.) the meter still runs.

The formula I used to compute the fare charge is:

40 (flagdown) + 5.70 x (total km travelled) + 2.00 x (average minutes per trip x 40% assumed idle time per trip)

This gives us the P111/trip average charge to the rider.

**dct** · August 23rd, 2015 07:54 PM

May nasakyan akong uber isang beses. Aminado siyang incentive lang talaga kaya malaki ang kita. Last 2014 oct nov dec daw walang incentive. Kaya nga-nga lang mga uber drivers. Abonado pa sa hinuhulugang brand new car

**shadow** · August 23rd, 2015 09:42 PM

Originally Posted by glenn manikis

Ha you need at least 20 units to join uber? That's anti poor... Only business men with huge capital can venture into this business... It's quite obvious ltfrb is favoring someone... Parang bus Lang yan.... You need a min. Of 10 buses to apply for a franchise...
Kaya ngayon kung maliit Lang puhunan mo hindi ka makaka pasok sa negosyo na yan...

Nung nakita ng LTFRB na Maganda kitaan sa uber... They are making it Impossible for small capitalist to venture into UBER... Sooner or later yan 10k na franchise fee na yan magiging 100k na yan... I'll bet my ass it will happen...

This is what the disinformation james deakin created.