Ride-hail firm Lyft is set to debut on the Nasdaq stock market today (29 March) with shares priced at US$72, ahead of the initial guidance range of $62-$68 amid expectations of high demand. Dave Leggett, Automotive Editor at GlobalData, a leading data and analytics company, offers his view:
“Ride-hail or ride-share start-ups are widely seen as emerging disruptors in urban areas as more people – especially young people – take advantage of apps on smartphones to meet personal transportation needs on-demand and move away from traditional mobility modes – such as car ownership.
“Ride-hail firms like Lyft – and its bigger rival Uber – have emerged quickly to develop business models and presence on the streets. Lyft though, is still losing a lot of money, so it’s very much a jam tomorrow, not today, proposition for investors who are in for the long haul. One question is the pathway to profitability and timeline – unclear.
“Another big question surrounds removing the driver and transforming the ride-hail business model with autonomous vehicles. Potentially, cost per mile for passenger transportation is slashed with driver remuneration taken out, but the technology is still some way off being market ready. If the technology and regulatory issues can all be resolved, fleets of Shared Autonomous Vehicles (SAVs) still have to be funded, with associated acquisition and running costs – and it is unclear how much that could cost.
“It is also unclear how much demand there will ultimately be for ride-hail vehicle services globally, the future urban mobility landscape being shaped by a dynamic mix of transport modes. Car ownership is also not going to disappear anytime soon. And barriers to entry in ride-hail are low, so competition is an ever present threat unless a significant scale-based cost advantage emerges – a large SAV fleet could provide one.
“But investors may well determine that the Lyft share price has upside potential, ride-hail seen as a sunrise new-tech proposition, with long-term questions not sufficiently unsettling to knock sentiment.”