January 3, 2019 / 3:23 PM / 3 months ago

Breakingviews - Lyft, Uber IPOs will drain Tesla’s scarcity value

An Uber and Lyft car is seen in San Diego, California, U.S. May 18, 2018. REUTERS/Lucy Nicholson

NEW YORK (Reuters Breakingviews) - Initial public offerings by Lyft and Uber Technologies will drain Tesla’s scarcity value in the next 12 months. Elon Musk’s electric-vehicle maker, whose market value hit $64.8 billion in August 2018, has, to date, been virtually the only way to invest directly in the car industry of the future. But the two ride-hailing firms will give U.S. public shareholders who factor in environmental, social and governance concerns new options.

What started as very different business models — app-enabled taxi services and vehicle production — are now converging, also joined by traditional players like General Motors and upstarts like Alphabet’s Waymo. The common vision of the future is autonomous, electric-powered vehicles that are shared, not owned.

Tesla only produces electric cars, making it an obvious choice for environmentally conscious investors. Lyft and Uber, by contrast, currently rely on people driving predominately gasoline-powered vehicles.

But the two have a lock on other car-of-the-future components. Lyft, for example, had 1.4 million drivers at the end of 2017. Assume they drive just half of the historical average for traditional U.S. taxi drivers of 70,000 miles a year. That means the company co-founded and run by Logan Green was responsible for almost 50 billion miles driven in 2017 in America, five times more than Tesla owners have clocked globally in total. Uber accounts for even more. That’s critical data for the autonomous-vehicle race.

And ESG investment, as it’s known, is not just about the environment. The “G” is for governance, and here Tesla is a laggard. The majority of its directors are friends and family of Musk. A series of missteps culminated in the chief executive’s cack-handed tweets in August about a possible buyout, resulting in the Securities and Exchange Commission imposing fines and forcing Tesla to replace Musk as chairman.

Uber had a poor record under founder and former boss Travis Kalanick, too, although current CEO Dara Khosrowshahi has tried to turn a new page. At Lyft, by contrast, Green has been more of a cooperator than a bull-in-a-china-shop disruptor, working with authorities rather than challenging them and earning social bragging rights, too.

Lyft has also long invested in measures to offset its drivers’ fossil-fuel dependence. As of April all of its rides, Green says, are carbon neutral. For ESG-mindful investors eyeing the car market, a publicly traded Lyft could be the most desirable ride.

- This is a Breakingviews prediction for 2019. To see more of our predictions, click reut.rs/2R6H5pG

Breakingviews

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