As Uber Technologies Inc prepares for its mammoth initial public offering later this week, no one has more on the line in the ride-hailing business than Masayoshi Son. The Japanese entrepreneur has bet $18 billion on the sector by taking stakes in the United States (US) pioneer and three similar startups.

So what are his potential returns? Many of Sons own investors at SoftBank Group Corp are skeptical. But one analyst crunched the numbers to find plenty of promise: He figures Son has already made close to $9 billion on paper, with a lot more upside if his portfolio companies can realize their vision for robot taxis and artificial intelligence.

SoftBanks stakes in Uber, China’s Didi Chuxing, south-east Asia’s Grab and India’s Ola are worth between $22.1 billion and $26.5 billion, according to Chris Lane, an analyst at Sanford C Bernstein & Co. The calculation is part of a 27-page report issued Wednesday and is based on the price-to-sales valuations of Uber and rival Lyft Inc.

Son sees the combination of hitching rides via an app and robot taxis as a transportation revolution comparable to that which replaced horse-drawn carriages with cars a century ago. He has said SoftBank and its Vision Fund control 90 per cent of the ride-hailing market worldwide through their investment portfolio, including a $2.25 billion stake in General Motor Co.’ self-driving unit Cruise. Uber is also said to be in talks to sell a $1 billion stake in its autonomous driving division to a consortium of investors led by SoftBank.

Read: Why Ola's founder turned down a $1.1 billion deal with SoftBank

“People are starting to feel more comfortable with the investments Son has made in this space. They are attacking the problem from many angles,” Lane said in an interview.

A shift from the current driver-for-hire model to fully-autonomous vehicles could quadruple the industry’s revenues, while cutting costs in half and pushing up the value of the ride-hailing portfolio to between $240 billion and $430 billion by 2030, Lane projects. That implies an annualized return between 24 percent and 30 percent over the next 12 years. The estimates do not include SoftBank’s stake in Cruise and the reported investment in Uber’s own autonomous unit.

To get there, ride-hailing companies would have to reduce their operating expense ratios to about 30 per cent of revenue, from 88 per cent for Lyft and 77 per cent for Uber now. Robot taxis would also have to cost about $50,000 apiece and be used more than 60 per cent of the time, or about 40 trips a day, Lane wrote.

For these companies to achieve their long-term potential, they need to be autonomous, he said. Ultimately, that is what they are designed to do.

Related Topics
comment COMMENT NOW