Self-Driving Cars Could End Uber

https://www.wsj.com/articles/how-self-driving-cars-could-end-uber-1494154805?emailToken=JRryc/B7aXiSgN08bcw800JtdaQMBaqFXFLJLXbFf0PFrmeQquW8w6lwit275H6lSFw/voxVszdiGW2J3Q%3D%3D

by prostoalex • 9 years ago

33 57 9 years ago

wsj.com

PinguTS2• 9 years ago

Fun, that's what I tell since years.

That is the reason, why I believe its more companies like Car2Go have a better position than Uber. (If that future of self-driving cars and transportation as a service becomes true.)

heisenbit• 9 years ago

Yeah, posted similar arguments a couple times too. The keys are technology to build the car, differentiators for the car, capital to own a fleet and ability to service in the field. The app and customer relationship are not that sticky. Think about it: Do you care whether you order from Uber or Lyft or do you care whether it is a BMW 7 Series, a Ford F-150 or a Cadillac?

The money quote is here:

But even if Uber can keep up in terms of autonomous vehicle technology—or find more willing partners in the established auto industry—there’s a much larger problem looming ahead.
The companies that will profit from the transportation-as-a-service revolution will depend on an incredibly costly infrastructure—one that doesn’t yet exist. Someone has to buy and maintain all the autonomous vehicles, enough to replace all of the cars driven (and usually owned) by Uber and Lyft drivers, not to mention many of the cars driven by you, me and countless others, too.
To date, Uber’s model has been built on it not owning vehicles. Owning an enormous fleet of them, which might be required to make transportation-as-a-service work, is in some ways antithetical to the business model that has given Uber a nearly $70 billion valuation, more than any other startup. That model depends on outsourcing vehicle ownership and maintenance to its drivers.
Uber does own its prototype self-driving vehicles, but declined to comment on the extent to which its future would depend on owning vehicles.
Auto manufacturers have a great deal of experience working with the complex web of dealers, financing companies and fleet managers—even car-rental agencies—that could potentially be repurposed to manage millions of self-driving vehicles.

skdotdan7• 9 years ago

Tesla Network?

usrusr2• 9 years ago

Also, imagine Uber needs to raise additional capital for a physical fleet, and you are a potential investor: would you give your money to Uber, where it would only get you a tiny fraction relative to the massive (and already burnt) existing investment or would you give it to the second mover where your contribution to the fleet would give you a much bigger stake?

sortaThrowaway• 9 years ago

Or Uber will secretly program a few self driving cars that are not Ubers to crash in to people.

This will stall self driving legislation for 5 more years.

you heard it here first.

billynomates• 9 years ago

Don't give them any ideas

Angostura• 9 years ago

Alternatively, surely it could see its business model get a massive boost.

If I'm at work all day and have an autonomous car, why couldn't I "hand the virtual keys to Uber" and become an Uber "driver" despite the fact that I'm sitting behind my desk.

Give me a cut of the fare and I'll bed happy - the thing could be driving around all night too.

Clearly there are nasty issues to solve regarding giving strsngers unfettered access to my car - who clears up the vomit and pays for the knifed seats etc - but they are probably surmountable.

majewsky• 9 years ago

The business model will definitely get a massive boost, but I highly doubt that Uber will be the one eating the cake. Car companies will just start selling cars as a service rather than as a product.

rjsw• 9 years ago

Car companies have plenty of experience of selling cars as a service already, all the big car rental companies have been owned by car manufacturers at some point in their history.

wklauss3• 9 years ago

Because once self-driving cars are cheap enough -and they will be-, this model won't make sense. There would to many cars competing for the few clients that need rides at any given time. The money you'll make will probably amount to nothing and won't cover the hassle.

But I don't think this will be an option. I think we all know cars are extremely inefficient, but we fail to see the magnitude of that inefficiency. They are outrageously, extremely, mind-bogglingly inefficient. To the point that, once they start to become more efficient thanks to self-driving, owning your own car will be extremely rare.

The thing with self-driving cars is that it really alters the whole economic landscape of car transportation. You don't need two cars in your garage because the same car can take your kids to school and you and your spouse to work.

But keep that idea scaling. Your whole neighborhood could probably get around with less that one self driving car per house. So you'll start seeing neighborhood associations or apartment buildings pooling resources to buy 20 or 30 cars for the whole community to use.

Scale even further. The same could be said for a city. You could just have a fleet of 1000 cars, paid and maintained by the local government with taxes, that move people around with maximum efficiency.

It's not that Uber has a tough future ahead. All car companies that rely in selling cars in volume will also face pressure. There will be a lot of concentration, a lot of mergers and a lot of bankruptcies, because we are going to a market that will be 1/10th the size of what it is now.

bryanlarsen• 9 years ago

Every single time that technology has made something massively more efficient, usage has gone significantly up, not down, as the efficiency enabled unexpected use cases.

TheCondor• 9 years ago

Why wouldn't a family have three cars in the garage? One for you, one for you spouse and the one for the kids to get to school or soccer practice or even their friend's house to play after school? Sure it's "inefficient" but the time efficiency of having a car ready to bring them home the instant you call has a premium value to many. if you take the driving out of the equation, I expect the average car becomes dramatically less expensive, performance is purely there for human emotions. Lower the car price and we will simply buy more

there are lots of places where people don't take public transportation now, why is that going to change? So long as work schedules are similar and eating times are similar it seems like there is a queue theory problem with your community pool.

andy_ppp2• 9 years ago

Wow, the neighborhood car pool system would be awesome; you could even crowdfund an Uber competitor in your locality and earn money from your investment!

SilasX• 9 years ago

I can't find it at the moment, but Tesla was planning on offering this as a feature in their SDCs -- to let you turn it loose when you're not using it and have it earn you fares.

(As the top reply notes, it's not quite as lucrative as you might suggest: the fares will drop precipitously once SDCs are out. Once you factor out the inconvenience and overhead, it will probably defray some of TCO but not by much.)

Shivetya• 9 years ago

self driving cars will impact mass transit the most and probably all taxi services so worrying about Uber is silly when the real impact will be taxi services except in very rural areas. I would not doubt that once level 5 actually becomes a thing that regulation would require it for taxi services and such.

of course buses will get automated but the impact of self driving cars on mass transit will be the special needs vehicles will transform.

now I can imagine a world where self driving cars come with a chauffeur to load/unload packages and assist those in need. probably going to be a decent need there

skdotdan7• 9 years ago

Why do Uber investors think that Uber will a) be able to develop all the necessary technology for managing a fleet of self-driving cars before it bankrupts and b) be the only one (or one of the few) that achieves a)?

Uber should have the potential to have a monopoly in self-driving technology in order to justify its current valuation.

stult2• 9 years ago

Assuming the tech is in place and there are many otherwise equal firms entering the market, Uber would have a competitive advantage from their pre-existing customer base. Plus already having the tech in place for arranging the trip. Does that justify their valuation? Maybe, maybe not. Even if some other firm beats them to market with driverless tech, they can always buy driverless cars from that company, or that company may buy Uber just for access to the ready made market. But it's all very theoretical and far off, so I'd say it probably doesn't justify the valuation. Their ability to pivot to actually profiting off their current services is what probably matters most to their near term valuation.

skdotdan7• 9 years ago

But do you think that Uber has a moat?

I don't care if it's Uber, Lyft or whatever. Installing an app and adding your credit card doesn't represent a huge switching cost, only a little friction.

The point of Uber is that they have many drivers. They have economies of scale on the supply side.

But if the self-driving technology becomes a commodity, consumers no longer will care whether it's Uber or Gett.

RodoBobJon• 9 years ago

The prevailing theory is that Uber currently controls the customer relationship for ride-hailing, and that inertia will carry them forward.

I personally don't see it. Uber has already begun being disintermediated. For example, ride-sharing is already an option in Apple Maps on iOS where Uber sits alongside Lyft and any other ride-hailing apps on your phone, price comparison and all. You can also hail a ride with Siri. As a rider, why would I care whether my ride is dispatched by Uber or Lyft? I only care about availability and price. At some point in the future, I probably won't even need to install a competitor's app on my phone; I'll ask Apple Maps or Siri to get me a ride and it will dispatch a car from whichever service is faster and/or cheaper.

Uber has a plausible route to winner-take-all dominance as long as ride-hailing remains a two-sided market, where competitors have a chicken-and-egg problem in recruiting drivers and riders. But self-driving changes the game.

skdotdan7• 9 years ago

Well, they could try to have the monopoly in the self-driving technology, but it seems implausible.

usrusr2• 9 years ago

I only care about availability and price.

If Uber reached the critical mass of creating gridlock almost exclusively consisting of (idling) Ubers, an idling competitor two blocks away would not win the availability metric for your next ride. Unlikely to happen, except maybe in a few particularly overrun city centers, but that's one way they could do it. (Can't think of a different one, I don't believe that they will win their bet)

Fricken2• 9 years ago

Uber has struck a partnership with Daimler to host Daimler's (hypothetical) self driving cars on Uber's ridesharing service, and they could strike similar partnerships with other Autonomous vehicle providers. So should Uber fail to develop their own AVs, that's one alternative model. Alternately, they could license the technology from Intel (which recently acquired Mobileye at a whopping $15 billion). These options may be suboptimal to vertically integrating the hardware, software and services under one company, but it's better than death.

But Uber is in 400-something cities worldwide, it'll be a long time before Robotaxis reach market saturation everywhere, it'll require millions of autonomous fleet vehicles to do that. One advantage that Uber has over a traditional automaker entering the space is that Uber can, at the outset, use autonomous vehicles to augment human driven networks. If a company such as Ford, say, cannot provide enough robotaxis to meet demand in a given locale, then their network won't be reliable and it'll just piss off customers. Uber won't have that problem, their network of human drivers will always be able to fill in gaps in service.

A lot would have to go wrong for Uber to be displaced entirely. We can only guess as to what the demand for autonomous rideshare will ultimately be, but it could easily be 10x, or even 100x what the demand for conventional rideshare ever was.

Although even amongst rideshare companies, both Lyft and Didi are looking more interesting. Didi has secured $5 billion in new capital and will likely be making some high profile AV start-up acquisitions out of their Silicon Valley office soon, and will be partnering with some Chines automaker to bring robotaxis to Asia. Lyft has a secure partnership with GM, the most exciting developer of L4 out there at the moment, given that Cruis automation is making dramatic progress using the Chevy Bolt platform, the first long range mass-market electric vehicle to go into production.

skdotdan7• 9 years ago

That's a fair point.

uptown2• 9 years ago

Owning a car is expensive. But so is operating a fleet of autonomous vehicles, so I expect the cost charged per ride will be non-negligible. Today Uber and others are able to avoid the costs of ownership and maintenance and repairs and cleaning (etc.) because all of those costs fall directly on the owner, but if they own their own fleet, these costs are now their responsibility. So I expect the cost per ride will need to increase.

For urban transport this model may work. Owning a car in a city imposes additional costs not incurred in the suburbs. And taxis have proven pay per ride is sustainable. Where I cannot yet see it working are suburbs. I think of the frequency and range of some of the driving in the suburbs and try to figure what the cost per those rides might be, and I can't see how the economics work for either party. Car service companies will need to charge enough to pay for the vehicles and maintenance, and the family carting kids to three or four places in a day is going to balk at $180 in transport costs on a random Saturday of activities.

stult2• 9 years ago

You're dramatically overestimating the costs. Renting a car only costs $20-40 per day now. Far, far less than $180. It's not going to increase with driverless cars. It may actually decrease because of reduced insurance and wear and tear from better driving.

More generally, the cost of ownership per mile is only around 10 cents. So a driverless car with a utilization of 85% and an average speed of 60mph (high estimates) would need to charge $120 per day to break even. For 1200 miles of driving and 20 hours of travel time, which is far more than a single driver with a rented car would travel. That's $6 per hour. And gas accounts for 95% of that, so if we go electric the costs are even lower.

With taxis, the overwhelming majority of the cost is the driver's wage. Which is way more of an issue in rural areas where they aren't getting paid once they drop the fare off. Without a driver to pay, low density demand is far less of an issue because you may have to bear the cost of getting the car to the next fare, but that's going to be a function of distance traveled rather than time.

caseysoftware• 9 years ago

I think you're 100% right that most people don't consider the much higher % utilization in their analysis.

I think the gap is still the "stations" for the automated cars to pull into for the cleaning, maintenance, etc. But looking at the Tesla maintenance page - https://www.tesla.com/en_GB/support/maintenance-plans - many of the normal checks and changes go away.

Wide scale adoption of electric cars will be one shock to the auto industry (no pun intended) and self-driving will be another. I wonder who will survive?

illumin8• 9 years ago

Your rental rates are accurate, but the cost of ownership is way more than $0.10 per mile. For that to be true, you'd have to pay $20K for the average car (the average is higher), drive it for 200,000 miles, and that doesn't count maintenance, insurance, or gas. Realistic costs are far closer to the $0.55 a mile that the IRS uses to calculate the mileage tax deduction.

IshKebab• 9 years ago

Today Uber and others are able to avoid the costs of ownership and maintenance and repairs and cleaning (etc.) because all of those costs fall directly on the owner, but if they own their own fleet, these costs are now their responsibility. So I expect the cost per ride will need to increase.

That makes no sense. The costs of maintaining the car don't magically disappear because the driver pays them. They're paid from ride fares one way or another.

uptown2• 9 years ago

I believe that there are a lot of drivers not factoring in the maintenance and wear-and-tear on their cars when they look at the income they're earning from being a part-time driver. When Uber owns the fleet, only then will they be

stupidcar2• 9 years ago

The shift to electric vehicles should drastically reduce the cost of car maintenance though, right? The number of moving parts in an internal combustion engine is far greater than that in an electric powertrain. Plus you also have cheaper fuel costs for electric vehicles.

Source: http://www.olino.org/us/articles/2009/02/17/costs-of-the-ele...

andy_ppp2• 9 years ago

I've said this for ages; uber-as-a-service that can be rebranded for people who want to bring a fleet of cars is a fantastic business and Uber won't be able to keep that monopoly with the expected returns investors want.

I also think automated buses will basically be free, you could sell this to government on top.

I do not see how Uber won't die or at the very least struggle once a Tesla/Apple/Google starts to compete on costs.

neonbat• 9 years ago

will

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janesvilleseo3• 9 years ago

OT: if the consensus is that self driving will eliminate ownership then what will people do with their garages? Will there be a market for converting them into more useful space. Will houses be built without garages? Will we need driveways? I know self driving will have a big impact on society. Never thought about how it may impact suburbia.

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JulianMorrison• 9 years ago

Knock them down, dig up the driveway, grow a garden.

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cjrp• 9 years ago

In the UK it's quite common for people to convert their garage into an additional bedroom or office, since most people don't keep their car in there and just use it as storage.

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stupidcar2• 9 years ago

Are garages really used for storing cars much, now that they don't need as much protection from bad weather? I don't know about the US, but in the UK many (most?) people already keep their cars on the driveway, and use their garage for other purposes. E.g. as a storage area, a workshop, or a utility room.

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janesvilleseo3• 9 years ago

Good point. I'd say a good percentage actually use their garage for thei car. Others just fill them up with stuff/junk.

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onion2k• 9 years ago

what will people do with their garages

For existing houses people will use them as storage space, or convert them to an additional room, or just ignore them.

New houses will be built without them. And, maybe more interestingly, without driveways..

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camillomiller• 9 years ago

> Will houses be built without garages?

Welcome to the rest of the World, America. You know, that part of the World that's actually way bigger than America.

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janesvilleseo3• 9 years ago

Yeah. When you think of it in broader historical terms America is a young country. Even given that our early houses never had garages of cousre because there were no cars then. Only when cars became the standard mode of transportation did we start to have garages.

So to put it in American perspective again, maybe garages will be like barns. Eventually less will be built by the masses, some will be torn down, some will be converted, and some will stay up until they crumble.

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b0rsuk• 9 years ago

OT: Has it ever occured to anyone that human-drived cars are the C of human transport ?

Very many people die in communications accidents. Airplane travel may be safer per unit of distance, but NOT for unit of time spent in a vehicle.

Human brains are not effective at 3D navigation. I think this is the real reason we won't see flying cars: because it makes an already dangerous activity an order of magnitude more dangerous. The only way I can imagine flying cars working is with software-assisted flight. Software would need to take over a big fraction or even entirety of the task.

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rco8786• 9 years ago

I don't think it's that humans are bad at 3D navigation. It's likely that they're bad at any navigation without brakes.

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fetbaffe• 9 years ago

Starting to loath all headlines with 'could' in them

  * Flying cars could end Uber
  * Cyborgs could end Uber
  * Nuclear war could end Uber
  * Eating only eel could end Uber
  * Writing too much could end Uber

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mattcantstop• 9 years ago

I think Uber's proposed advantage here, the relationship with the driver, is the easiest part of this equation to replace. After the recent Uber debacles I finally switched to Lyft. The switch took me about 4 minutes and has been absolutely painless.

If Apple, as an example, suddenly had "Get a ride" from Apple's own self-driving cars in my Maps app, and it charged me through my already connected Apple Pay, I would have no problem switching.

I think Apple and Google are best situated to take advantage of this market change as they own the platform that makes the ordering of a ride happen. And they can put their own service front-and-center.

Uber's advantage, existing (tenuous) relationships, is the easiest to replace.

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narrowrail• 9 years ago

This entire discussion is an exercise in premature optimization. It will probably take 20 years from the time we have level 5 autonomous cars before most of this is even relevant. Manufacturers of traffic signals still get sued to this day for liability in accidents. I'd rather see more effort in making traffic signals more intelligent; I hate sitting at a signal with nobody around at 6am.

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Self-Driving Cars Could End Uber

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