Let's say this happens fast forwards to the future.
Now Uber is saddled with a huge inventory of aging vehicles needing maintenance and all the other associated costs that come with that (repaid centers, staff, etc.).
A new company "Hypercar" or something is formed that let's people "ride-share" their own personal self-driving Teslas...making maintenance and upkeep the car owner's responsibility. Hypercar splits fairs with the owners.
In this scenario, Uber should be able to maintain their own cars at a lower cost than individual car owners can, due to their scale. They would also probably be able to buy the cars for less to begin with.
Keeping in mind that Hypercar would have to pay car-loaners at least the amount that the car loan is costing them in maintenance & depreciation (or else who would loan their car), Uber would come out ahead.
Maybe in the short-term, this Hypercar company could rely on car-loaners to underestimate maintenance/depreciation costs but surely that would only last so long.
Isn't your last sentence also entirely true of Uber's current business model?
if "Uber should be able to maintain their own cars at a lower cost than individual car owners can", then Uber should be buying cars today and leasing them out to their contractor drivers. Truck fleets do this, pretty much, so it's not a completely crazy idea. Uber isn't doing that, which suggests that Uber thinks its a better deal for them to have their drivers shoulder the ownership, maintenance and depreciation costs of the capital. Why does self-driving change this?
Only reasons that seems to make sense is because people think that Uber is only compensating their drivers for their labor - but they're not; they are compensating them for their labor as a driver plus the lease and use of their car.
In German Cities Car Sharing is becoming very popular and a lot of Manufacturers have introduced their own car sharing offers or formed Partnerships with existing Companies. Tesla probably would do the same, because otherwise they would risk that Uber buys their cars elsewhere next time.
Your ignoring time value of money. Car depreciation is far from 1:1 with miles driven.
Also, I might need a self-driving car to do a 60 mile trip to work and home every day. But, during work I may be better off letting the car drive others than pay for parking.
One issue with this scenario - once Uber is no longer paying drivers, it should become a lot cheaper, making it viable for a lot more people to get rid of their cars and just rely on Uber. So that'd decrease the pool of people to loan their cars to Hypercar. Effectively everyone would be "ride-sharing", but through Uber.
And then Uber, owning this fleet of cars, would be disrupted by a company that sells/leases self-driving car kits to people who then convert their own vehicles into robo-taxis.
People seem to miss the part when Uber has a lot of mindshare and users with the app already installed. That is part of why they are valued so heavily. There is a giant and obvious market out there and Uber won't be competing on even ground since they already have their app installed in so many places.
All rental companies keep their cars for one or maybr two years and then get rid of them. Nobody wants old cars in their fleet and I suspect uber will be similar.
Isn't the more natural play for uber to position themselves in the market for enabling early purchasers of self-driving cars to offset the cost by having their car go out and be a taxi when they're not driving it?
Uber got where they are - managing a massive fleet of vehicles - not by purchasing cars, but by getting other people to purchase cars on the assumption that uber would help them turn that investment into an income stream. Self driving cars raise the prospect of me being able to turn my car into an income stream without me even having to go out and drive it.
If uber do it right, people will buy fleets of self-driving teslas just so they can rent them out via uber, and uber won't have to invest a penny in depreciating vehicle hardware.
>Uber got where they are - managing a massive fleet of vehicles
Uber does not manage a massive fleet of vehicles. They don't have to service these cars, pay insurance on them, fill them up etc. They are just middle man that links people with cars with people without them.
Read the parent post again. I think you will find that you are actually in agreement with it. You're just using the word "manage" differently. (For the record I think your usage is more correct)
This article is so trolly. I don't mind the headline even, but it's literally a hearsay quote. That's just the tip of the iceberg:
"Tesla Motors now has a huge incentive to get the RoboCar on the road by 2020, but Mr. Musk will need to get the laws rewritten in order to make that happen."
Sorry, I laughed so hard at this line. Before, he was working really hard to get them on the road, but now that Uber is "willing" (again, not even a quote, just a summary of something Jurvetson said that Kalanick said) to buy a decent number that they can't even afford EVERYTHING HAS CHANGED!
likely Uber needed some favorable press and getting into a headline alongside Tesla was a cheap way of doing so, committing to a non existent product is about as cheap as you can get
I've said this before but it strikes me as under appreciated that Uber's main enterprise value is their network of drivers and their logistical expertise in managing and coordinating that network. Once self-driving cars become mainstream, wouldn't that start to erode the value of Uber's critical dominance in this area? A generation from now if I'm choosing between self-driving fleets of cabs from Uber, Lyft, Google, Facebook+Ford, and some Tesla joint venture, wouldn't prices suffer significant downward pressures? The best operators can still make a nice profit but nothing like the monopolistic profits Microsoft, Google, and Facebook extracted from OS, search, and social which seems to be required for a sustained multi hundred billion dollar valuation.
There'd still be a lot to differentiate on if you remove the driver - car quality (nicer/bigger/quieter cars), speed of journey (who has the best routing algorithm that uses the most real world sensors to route around problems), the most cars (so your wait is shorter), the most reliable network (plenty of redundant cars waiting if yours breaks down), the best app features, and so on.
Removing the driver won't be the last innovation these companies do.
Google has an advantage over Uber in all of those respects though - more capital, more experience building highly-available services, better routing algorithms, better contacts with carmakers, owns both the OS that the app will run on and the map data that they use to navigate, etc.
All of that pales in comparison to the fact that google has a direct line to more users. They can auto update their apps and allow people to book a driverless car.
I'm not sure that a financial and operational network of automated transportation would be less defensible, or less of monopolistic opportunity than a social network.
EDIT: now to mention the unavoidable legal issues, which to a certain extent are similar to what Uber is already dealing with and "resolving" quickly according to reports.
Can you dump a ton of money into replicating Facebook and have it succeed? Google+ seems to indicate no. Since the value of a social network derives from my friends being on it also, some critical mass of us have to switch at the same time.
If Google dumped billions into a self driving cab fleet and offered me 30% lower prices than Uber, would I switch? Yes, probably. Do I gain any benefit from my friends being on Uber? No.
I'm not sure what the key characteristics of a great automated car network will be, but I think there will some differentiation in a way where the difference can't be made up by spending, even on the scale of which tech giants are capable. Probably some combination of price, availability, and infrastructure. Maybe a similar customer relationship to what the telcos have right now.
For example, what if Uber "builds" (finances and badges) their own car, and you really like it (no reason it can't still have a steering wheel). What if they are willing to enter a one year agreement where it is cleaned and parked in your driveway at 4AM every Mon-Fri morning to take you to work when you're ready. Or if they have a parking lot near your office with 100 cars where you can just walk up to any car, open the door, and go. Or if they have an automated electric vehicle charging network over the whole country. It will take a while to discover what really matters for a AI-car network.
Self-driving cars may be too expensive for one person to own soon after they are available.. It will take a lot of time and resources to build these machines to be safe and reliable, and companies will need to recuperate the costs in some way. On the other hand, most families will not need as many cars as they do now, so the demand will be lower than most people expect, which will raise the price. We can also expect companies to be the first users of self driving cars, as it will make more financial sense for them, so many suppliers will move to service businesses like Uber. Companies like Uber and Lyft will lobby lawmakers to make it harder for people to own self-driving cars, and effectively make it unaffordable to most. In short time Car-As-A-Service will become reality. In the name of safety and cost reduction, many roads will be closed to regular cars, effectively making it pointless to own a car.
Meh. Apparently retrofit kits will be $2000 two years after self driving cars are on the market (source: that company that drove one from la to ny a few months ago, forgot the name) so cost isn't going to be a biggie.
Ah, the old valuation chestnut. There ought to be a journalism ethics rule prohibiting use of the word "valuation" with respect to previous transactions unless every such transaction was purely for common equity. The only idea sillier than that every (or any!) investor actually values Uber at $50b is that they can get their hands on $20b to buy 500,000 fully autonomous cars in 2020. No part of this assertion is sane, and no part will come to fruition. The cars Uber would need won't exist in 2020, and probably not in 2120 either. To the extent that someone does manage to build one, it won't be available for anything like $40,000, and it won't be built in any quantity. Uber itself may not even exist in 2020, and if it does it will likely be a shell of its former high-flying self, reined in by the same regulations its direct competitors all have to abide by.
I'm curious - do you live in Silicon Valley? Because I see self-driving cars so often here that it's a non-event, and half the time, there's nobody touching the steering wheel. My former boss has ridden in one, and there were signups for an employee beta-test program before I left Google a year ago. I could easily believe that they will be in the hands of consumers by 2020, and I could believe they'll cost $40K once the sensors they need are in volume production. The technology's a lot more advanced than the handful of press articles make you believe.
> Because I see self-driving cars so often here that it's a non-event
No, you don't. You see cars which have a hands-free driving mode. Every single one of them still absolutely requires a driver.
I've been closely involved in automated transport for years, and the current hype cycle is getting exhausting. There are several orders of magnitude of difficulty between a car which allows drivers to take their hands off the wheel some of the time (or even most of the time), and a car which does not require a driver. We are many years, and possibly decades, away from the latter.
We are certainly still in the "Every single one of them still absolutely requires a driver." phase. Given that you've been in the automated transport field for years, and I haven't, I won't make any comments about the many years/decades timeline, except to say that, in general, the pace of technological growth in many areas has surprised me.
This could be solved by hooking the car sensor platform to a remote controlled driver for the times when hands off operation is impossible. Uber could hire their top 5% of drivers to work at at Uber HQ to be drivers on an as-needed basis. and save on 95% of their labor costs.
Google's goals, at least, are for 100% driver-free cars. Not something where you can take your hands off the wheel for 10 minutes, but one where there is no steering wheel at all. I'll let the company speak for how close they are to that, when they choose to.
The reason I believe this problem won't be solved any time soon is that I don't live there, though I have in the past. It's very easy for someone who commutes along hwy 280, for example, to imagine an autonomous vehicle making the same drive instead. It's a bit more of a stretch, but still within reason, to assert that you could do the same on the Central Expressway or Zanker or places like that.
Not all environments are as friendly. Downtown San Francisco will be extremely hard to get right -- note that I say get right, not dump a robot car there and hope for the best. There are going to be a lot of crushed pedestrians and damaged parked cars, and I'm not sure the people who live there will value having autonomous vehicles enough to overlook that series of incidents. Then there are suburban and rural environments with their own challenges: poor mapping, roads that aren't obviously roads, one-lane roads, poor visibility, lack of signage, and so on. Not every location has weather like the Valley, either; suppose an autonomous car gets stuck in snow. A human driver can usually get out, possibly with the aid of a shovel, carpet, sand, etc. The robot can't do those things, and the passengers may not be able to (for example, it's unlikely that a robotic taxicab would have any provision for passengers to control it).
The world is a much bigger place than the Valley, and comes with much bigger challenges. That's why I don't see any real likelihood that fully autonomous vehicles will be developed any time soon. It's easy to get lost in narrow thinking when your entire world consists of a single place and a bunch of people all living in that same place practicing groupthink. This problem is much more difficult than you imagine.
The valley's not the only place I've ever lived. I grew up in Boston, which certainly has its share of inclement weather, one-lane roads, roads without lane markers, one-way streets, 3 left turns that don't make a right, lack of signage, etc. All of these are challenges, but they're not insurmountable challenges.
I'm pretty sure I've seen self-driving cars on Highway 1 in California, for example, which has construction, cattle gratings, one-lane segments, a lot of twists and turns, pull-offs, and places where it gets very narrow and you have to pull off and let opposing traffic pass. They had safety drivers, but I think this means that Google's at least considering these driving conditions in their software.
All I can say is "we'll see". I personally don't believe these challenges will be addressed in 5 years. Perhaps you do (not putting words in your mouth, since you never claimed this), though we agree that no challenge is insurmountable. 50 years is a good marker here. The PCH is tough but it represents but one slice of the challenge; how about hwy 130 to Mt Hamilton? In January? The idea of a car without a steering wheel is far off to me, even in California.
The valuation is rubbish because it comes from multiplying together two numbers that do not mean what people assume they mean. Uber, like substantially all privately-funded corporations, has issued multiple classes of stock and probably convertible debt. The investors were issued securities that do not resemble common stock, so the standard practice of taking the number of dollars invested and multiplying it by the inverse of the ownership share they received is not appropriate. That method works only if all the shares outstanding are of a single class, and are devoid of preference, attached options, warrants, participation rights, etc. Which I can pretty well guarantee you is not the case.
Unless you have Uber's cap table in front of you, you cannot figure its valuation. The journalist certainly did not (and I don't either). The most we can say is that $50b is a ceiling on the company's valuation; in reality it is far less.
Many, many articles have been posted here explaining this in greater detail. Please read them.
But...Uber's core competency is organizing drivers & vehicles without hiring/owning them. I'm leery of companies making dramatic change to their core; owning a fleet of a half-million vehicles is quite different from just telling them where to go.
And they went from having their business depend on having a physical inventory to a (more) purely software model.
The idea that Uber would thrive in going from "Hey, dude, sign up and you'll be on the road," to "First we're going to place an order for a $40,000 capital investment that is all risk to us if it doesn't pay out" is completely insane.
Not to mention that they will have literally no differentiating feature from any competitor who is interested in making the same investment, so they have no way to support any kind of large profit margin.
And all this assumes that people won't just want to own their own driverless car, which is far from certain.
Uber has to say that driverless cars will be wonderful for them, because large amounts of the people who might want to invest in Uber are also convinced that driverless cars will be here in three years.
Uber currently pays its drivers 70-80% of its revenue... A self-driving car makes that 0%. Not to mention marketing costs to get new drivers, all those iPhones, etc. Uber's revenue run rate is expected to hit $10B by the end of this year. That's a lot of cash sitting on the table that could be used to finance driverless vehicles.
Uber also is currently much more expensive than car ownership, and if a relatively low-cost driverless car gets on the market, there is literally no incentive for most people to ever use Uber rather than owning their own driverless car.
So in the event of driverless cars, Uber will have to slash prices -- and, unfortunately for them, a self driving car does not in fact claw back all of their driver's revenue.
Now, there are plausible scenarios (though it's by no means guaranteed) in which driverless cars vastly increase the size of the rides-for-hire market, so even if Uber has to take their current margin on lower-cost rides and pay for inventory, you could imagine that working out overall well for them.
But if it's such a great business to be in, why won't they face competition? There are plenty of companies that are deeper-pocketed than Uber. There are in fact plenty of companies with stronger brands than Uber. And the geographical opportunity to compete locally is pretty brutal.
What's Uber going to compete on?
Size of inventory? That drives up costs (when we're already stipulating that they are paying billions in new costs).
Price? That drives down revenue (when we're already stipulating that they're slashing prices).
Cleanliness, as various people have suggested? That means they have to get into a whole new hyper-local physical business with its own logistical problems, and why should we imagine that Uber can build the best car-cleaning business of its field? What about Uber makes us believe they're the best at that? Is this even a field that can be usefully competed on? Are people willing to pay top dollar for a really really really clean car, or does everyone bring together a basic cleaning service and, whatever, it's all good to the passengers?
> The idea that Uber would thrive in going from "Hey, dude, sign up and you'll be on the road," to "First we're going to place an order for a $40,000 capital investment that is all risk to us if it doesn't pay out" is completely insane.
So the craziest part of a self-driving, autonomous, on-demand taxi service is that someone had to buy a bunch of cars?
Netflix's original goal, AFAIK, was to provide streaming monthly-subscription video service. Mailing DVDs was a means to build that business when that core still wasn't technically possible.
I doubt Uber's original goal was to outright own (with all the hassle & overhead thereof) a half-million vehicles.
Prediction: Uber goes the way of webvan, personal mobility is served by Google vehicles with Fedex/UPS/USPS owning the lion's share of freight self driving vehicles.
If you don't think Fedex and UPS have logistics and fleet management down to a science, I highly recommend you research their capabilities.
1. Google isn't going to be a player in personal mobility. Their technology is no more up to the task than Tesla's or anyone else's. Expect to see a few incremental improvements from all major automobile manufacturers in open-road autonomy, but nothing that's going to enable a driverless taxicab or anything like it.
2. Webvan isn't a good comparison for Uber, except in that it's dead. The actual concept behind Webvan was a good one and is now offered by many, many companies. Had it not been founded when it was, it's likely it could have raised a few more rounds, learned the lessons it needed to, and become profitable. There's nothing about Uber that's novel or interesting; from the end user's perspective, it's no different from Flywheel, which is nothing but the pre-Internet telephone-dispatched taxicab company with a new communication frontend. The only thing Uber has going for it is a structure that tries (and is now failing) to bypass regulation. Without that, it's just another taxi service.
I'm interested in a Tesla (or any electric car). I drive more than 100 miles from home maybe once a decade, so range is not a problem--I can just rent something with more range when I need it, if the electrical infrastructure isn't up to the journey.
But I'm not interested in the high Tesla price. I would be interested perhaps in a used Tesla. I've never bought a used regular car before, because regular cars can require a lot of maintenance when they get old and I don't want to deal with the hassle and the unpredictable expenses. Electrics are simpler, though, so I think a used electric might be OK.
I'm sure there are plenty of people like me.
So here's my suggestion to Tesla (and other car companies that might make self-driving cars). Make a ton of self-driving cars. Run your own Uber-like service with them (but be legal, and feel free to put Uber out of business as a side effect).
Besides providing taxi service, these cars will serve as roving showrooms for your cars. Many people will ride them as taxis, and then consider buying one when they buy a new car.
When a given car has been used for a few years for the taxi service, retire it, tune it up, and offer it for sale used to get people like me as customers.
Heck, put a "buy it now" button in your taxis that lets a passenger buy that particular car. It would then take them to their destination, return to your service center, get its sale tune up, and then the next time the buyer calls for one of your taxis you would send his car to him, and it would stay with him after that.
I think Uber will be disrupted/destroyed by something more driver friendly. They offer nothing that will keep a contractor loyal. All it would take is another 'app' that offers more autonomy and a larger share of the profits. Uber's 25% (is this correct?) take for a software infrastructure and brand is outrageous and probably causes a lot of resentment among drivers.
Of course, we are talking about self-driving cars here so I'll just shut up. :D
A self-driving car would not necessarily be great for Uber. What is the taxi service currently providing? A way to order/pay for/sell a cab ride, and vetting so you don't feel uneasy with the driver.
Take out the driver, and anyone could offer their car as a cab. The app to do so could be Uber, but it the bar is lowered considerably if it's purely a way to book a car.
However it would be a capital intensive business, and Uber has the capital. Uber also the brand, the customers, the data, and a bunch of robotics experts. They also seem to be really good at operations.
The two things that are a knock on Uber today are the politics around taxi licenses and the politics around compensating their drivers. I can see why Uber would be happy to eliminate one of those problems.
If I'm leasing out my car and I'm not going to be in it, I'm going to care a lot more about passenger vetting than the passengers are going to care about vetting me.
Uber has been investing heavily themselves in self-driving cars. They know that Tesla won't have a product available to buy in 2020.
And here's the source quote:
"Jurvetson said Uber CEO Travis Kalanick told him that if Tesla cars are autonomous by 2020, Kalanick wants to buy all 500,000 that are expected to be produced."
He also told him, seemingly apropos of nothing, that "if [his] grandmother had balls, she'd be [his] grandfather." Unfortunately the meaning of this exchange was apparently lost on the journalist.
I think the change from drivers to driver less cars is a large enough one for people to accept and get used to, that it would make sense for uber to have their own small fleets of self driving cars in test cities, so that customers would get used to the self driving car concept in an environment where they could more directly provide feedback to the ones responsible for the car (uber in this case). It would also allow uber to work out issues that may arise from the change. I agree with others who say that this eventually leads to people having their own cars be taxis when not in use, I just consider the idea of uber managing their own small fleet a step towards that.
I don't understand why they'd do this. My understanding is that the Tesla self-driving cars are not end-to-end autonomous like Google's. What benefit would they be to Uber in this case?
The whole article basically says that Travis says that he'll buy half a million Tesla cars in 2020 if Tesla can actually make the cars fully autonomous by then.
Fully driverless cars are still not going to be a good thing for Uber.
1. Uber currently has the ability to grow and move at software speed. Other people buy the cars that it uses and assume the risk. If it needs to pull out of a city because of hostile regulation or whatever, its drivers are left holding the bag. Going from that to being a company with an expensive and gigantic physical inventory would be incredibly painful for it.
2. Driverless cars are the end-point of the commoditization of the rides-for-hire market. If you're buying a Tesla that drives itself, anyone else who provides the same Tesla provides exactly the same level of service to your customer. You can only compete on price or availability -- but availability now means buying expensive physical inventory, so both means of competing are now super, super expensive for Uber.
3. All of this assumes that it even makes sense to have a rides-for-hire business in a driverless car world. It's possible it will, but we don't know that! If the sensor package of driverless cars is relatively cheap and relatively durable in value, then probably driverless cars will actually drive business away from rides-for-hire and towards car ownership.
1. The recent California ruling might minimize this. If drivers are employees, it's not nearly as easy to leave them holding the bag. The physical inventory of cars is also a competitive advantage. If you want ride that's great, because I happen to have 5 cars in your neighborhood right now...
2. That's no different then the current position. I can use Uber, Lyft, a taxi or buy a car myself. And like now, the competition is on who has a car close to me and who has the cleanest car. I could personally compete with Uber by have one well maintained clean car with a mint on the dash, but I could only afford one.
3. Sorry, but I think you're arguing against #1 here. Uber having a large fleet of cars with the logistics to handle them would kill my small business's desire to own cars. The goal with driverless cars is to keep utilization as high as possible; if Uber can keep their cars at 95% utilized they will probably be cheaper than my car which is about 5% utilized.
Your point 1 is "Maybe Uber is going to get a huge kick in the teeth right now, so then the later kick in the teeth will... pale in comparison?" But actually they aren't terribly related. You get why startups exist in the computer sector and not in the traditional manufacturing sector? It's because growth is so much easier in the computer sector. The marginal cost to add a customer in software is tiny. The marginal cost to add a customer in a business with physical inventory is much higher. Going from software to physical business is not to be desired.
Your point 2 is yet more awful for Uber: Great, they get to compete on cleanest car? So now in addition to having to buy these very expensive depreciating assets, they also have to add local employees everywhere to actually clean them? Wasn't the advantage here going to be that they took the cost of "paying people" out of the equation? Uber's growth is going to be based on their ability to build out a really competitive cleaning service? Does that sound like a business you want to invest in?
Point 3 is interesting:
So, look, people who were already of the opinion that there's too much car ownership have gotten excited about the potential of driverless cars to increase car utilization. But "increasing car utilization" isn't a goal of normal people. "Saving money and/or receiving more value" is the goal.
A heavily utilized Uber car is cheaper on some margins than a lightly utilized personal car (that is, it's cheaper based on time-based depreciation and on parking fees). It's more expensive on other margins (it drives more miles per passenger served than the personal car, so its fuel costs, maintenance costs, insurance costs, and milage-based depreciation are higher). And of course Uber has to make a profit, so that's an additional cost as well.
How does that all play out? You can add up the hypothetical costs fifteen different ways based on different assumptions, and come up with whatever numbers suit you. The truth is that nobody knows how the cost of ownership of driverless cars is going to break down yet.
But I will tell you one thing: No car, Uber or otherwise, is going to be 95% utilized.
Because there is no reason for the manufacturer to sell to Uber and Uber has no value proposition if driverless cars become real. If you are the builder of driverless cars why would you want Uber to dominate the market and be in a position to eventually dictate terms to you when you can instead sell at a premium to Uber's desperate competitors or just create your own car agency and laugh all the way to the bank as Uber becomes the next WebVan...
They don't have exclusive access to cars currently and that doesn't seem to be a problem. There are a lot of people who won't buy cars if autonomous cars are available.
I guess I just don't see there's much of a barrier to entry now, so autonomous cars aren't much of a negative.
I think this quote was meant to be taken as a bit sarcastic, in an "I'll eat my hat" kind of way. Uber recently poached a bunch of the top people from CMU's robotics department and has announced plans to lease a 53,000 square foot facility. They have no plans to wait for Tesla.
They would finance the vehicles and pay for them with the revenue they produce. Rental cars are actually a pretty good case of this for conventional vehicles.
However that is pretty typical for industries other than software. Usually you need factories or raw materials or buildings or inventory. All of these things are expensive and depreciate. Software is the outlier.
I don't think so. It will boil down to fleet management. Tesla is bypassing the middle man to sell cars directly. If we combine self driving cars and Uber, then most of us will not be buying cars and instead will be renting by usage. So why shouldn't Tesla bypass the middle man again and reap the profits?
Now Uber is saddled with a huge inventory of aging vehicles needing maintenance and all the other associated costs that come with that (repaid centers, staff, etc.).
A new company "Hypercar" or something is formed that let's people "ride-share" their own personal self-driving Teslas...making maintenance and upkeep the car owner's responsibility. Hypercar splits fairs with the owners.