So if they're relying on driver subsidies to be competitive but can't make money that route is there a plan for them to make money without relying on autonomous vehicles? Or is that the bet?
That would be a ridiculous bet. Autonomous driving in any wide-spread form is still years if not a decade away. Losing money for a decade while awaiting the glorious future to redeem you is a sure way to go bankrupt, and quickly.
Uber did not start with plans to use autonomous vehicles and so far their plans amount to little more than "well, yeah, we'll shift to autonomous cars when they come." Well, yeah, so will everyone else on the planet. I don't think it's a coincidence that all of this came up around the time Uber started to lose money... when they were in the black all the talk was about the "rise of the freelancer economy."
As crazy as it sounds, they might not actually go bankrupt even if they continue to lose hundreds of millions per year. They've received $11.5B in total funding. They've averaged $1.6B in funding per year of operation and $4.65B in the last 3 months.
It's likely that they're actually building up a war chest at this point, getting ready for extra spending on self-driving cars.
According to the article, their world wide loss for the first HALF of 2016 is $1.2 billion. So $1.6B per year ain't gonna cut it at the current burn rate.
Yes, but it doesn't mean that Uber cannot catch up. As Musk said, it's very easy (relatively) to get to 99% driverless cars, but it's the 1% that is truly difficult (with all edge cases). Furthermore, say driverless car technologies for all companies come around the same time (plus/minus a year) - don't you think Uber would have the distinct network effect advantage that Google would have to build from scratch? Said another way, would you rather bet that Uber can make up the 1 year technology lead (ex. aggressively hiring and more R&D) in driverless car FASTER than Google can make a uber-like driver/rider worldwide car share network?
That being said I don't think Google (who is also an investor in Uber) would - they're mainly looking to license out the software. This is also leading to problems because car companies are realizing how pivotal this is going to be and want to control the entire process rather than be downgraded to a mere OEM.
Truly autonomous vehicles are probably the best and worst thing that will happen to Uber. One of Uber's greatest strength is having all of those drivers, it would be very hard to create a competing service and recruit that kind of fleet. If tomorrow it was legal to put truly autonomous vehicles on the road what is stopping anyone with a few billion dollars (e.g. Apple, Google, etc) to enter the market and compete on price per ride? I don't think many people are loyal to Uber, they are loyal to whatever is easiest, cheapest and quickest.
Autonomous cars don't solve the 'someone puked in the back' problem. So, companies will need a fair amount of local infrastructure near every city. Drivers are probably easier to find. So, I suspect 1-2 years after Ubner runs out of money is going to be the time for a competitor to show up.
Their real risk is a company treating ride hailing as a million dollar company vs. a billion dollar company and running with ultra thin margins.
You only need a parking lot with cleaning staff. As soon as it was detected that the car needs to be cleaned it will automatically drive there. Should be much cheaper than paying drivers full time. And in most cities finding employees shouldn't be that hard.
It takes at least a 1/2 hour to get back to base. Your cleaning staff can't be waiting around all day doing nothing, they need things to do. So the dirty car sits idle until the staff gets to it. Then it takes another 1/2 hour to get back to where the hoity-toity crowd likes to party.
If someone pukes in the car, it's out of service for the rest of the day.
> Your cleaning staff can't be waiting around all day doing nothing, they need things to do.
The service staff may have more to do then cleaning, and even without major events like "someone puked in the back", a large fleet is going to have a continuous, ongoing level of cleaning and care needs (much of which, while needed on an ongoing basis, can easily be deferred when a puking, etc., incident occurs to focus on that.)
So its quite likely that there will, at least in major markets, be work for a 24/7 service staff that also handles puke-like incidents.
Or, I could just drive the cleaning person to the vehicle in question.
I'd still have those 30 minutes of downtime + cleaning time, but no time returning the car to action. So maybe I lose an hour a day per cleaning (and maybe the car should be cleaned once a day regardless, nice way to keep the cleaning team engaged) BUT a self-driving car isn't a person. It can work 24 hours a day, so I'd still get 23 hours out of it.
That reduces the throughput of the cleaning staff and costs you 1+ cars moving them around anyway.
Also, from a capital perspective the utilization from 2-5 AM is going to be terrible. Taking peak demand into consideration you probably average ~6-15 hours per day per car anyway.
> Autonomous cars don't solve the 'someone puked in the back' problem. So, companies will need a fair amount of local infrastructure near every city.
Well, they obviously need someplace to park the cars, and the cars obviously need to get charged periodically (which is likely to require human intervention), and it may be useful to have in-house service capacity. But a combination of internal monitoring systems to detect cabin issues that require a stop for cleaning, and stops for charging and service (that can also be leveraged for in-person cabin and exterior cosmetic inspections) seems to address this, and may require less cost and less risk of forces outside the company's control than relying on individual owners.
You are assuming Uber would want to own the cars. Probably they would want to let the car owner put it to work, while it would otherwise be sitting in the garage or parking lot.
Totally agree - the Otto purchase suggests that they're looking to retrofit existing cars. I'm guessing this means you still need that driver network to at least provide the vehicles (and potentially manpower in the short run to ensure safety).
So let me get this straight. I'm a private citizen early adopter who buys a fancy new expensive self driving car. I'm super fond of it because it's a hot new technology. Then I lend it out to Uber to have the shit beat out of it with city driving, drunk people puking in the back of it, etc. And I'm supposed to cover the costs of maintenance and cleaning. Uber better be offering me a fuck load of money, otherwise that sounds like a pretty bad deal.
Taxis were fine in Arizona, but we only had 'Electronic Dispatch v1.0' [1]. The upstarts upgraded the dispatching system to v1.1. The main advantage of their upgraded system (over v1.0) was providing instantaneous feedback of the to the passenger's mobile computer. v1.1 also gave the passenger the ability to 'rate' their driver, which was also not a feature of v1.0.
>So if they're relying on driver subsidies to be competitive but can't make money that route is there a plan for them to make money without relying on autonomous vehicles?
Wait until others (taxis, Lyft) are out of the market and raise prices?
I don't understand it personally. They sort-of remind me of how the US brought cable TV to the UK. There was huge investment on infrastructure and an amazing service. The funding ended, service declined but that infrastructure, which was decades ahead of anything else still existed.
Uber is similar, but anyone can set up a taxi service. Their own taxi drivers can even do it. Existing competitors can take over when the discounts disappear. It just doesn't make sense, it's like a pyramid with no foundation.
But is Lyft really the competition for Uber in the long run?
This almost feels like the Blu Ray and HD DVD war - yeah, Blu Ray beat HD DVD, but digital beat out both. At what point do self driving cars mean that Uber no longer has a competitive advantage in transportation? Aka if you remove the need to sign up drivers, then you're just competing on cost of a vehicle + overhead as the cost to a customer to switch from Uber to say 'FordNow!' is so low - I just download another app.
Uber is competing with all forms of transportation and to beat everyone there is a long time to try to wait and stay solvent for.
I think this is the key here. Network effects are powerful, but are highly contingent on switching costs. It costs drivers and passengers next to nothing to switch between providers. A relationship between driver and passenger only exists for a single ride.
By contrast, look at Facebook's network effect. The switching cost to obtain a comparable service is talking all your friends and elderly relatives into Something New. Hence G+ making roughly zero gain against the Book.
Ubers treatment of their drivers as "contractors" has hurt their network effect. Because they can't make them exclusive to uber. All the uber drivers in DC also use lyft. And they'd use another service if that popped up.
I bounce around between the two based on whoever gave me a discount.
Uber did not start with plans to use autonomous vehicles and so far their plans amount to little more than "well, yeah, we'll shift to autonomous cars when they come." Well, yeah, so will everyone else on the planet. I don't think it's a coincidence that all of this came up around the time Uber started to lose money... when they were in the black all the talk was about the "rise of the freelancer economy."