[redbrickroad]

At the current cost of a self-driving car (~$250K), it would be ridiculously expensive to build a fully self-driving ride-sharing fleet [1]. So expensive that I doubt it's possible to make real money that way right now.

Self-driving cars are a long game until companies can bring down the costs. It might be years before that happens. Uber has the advantage of being able to ramp up self-driving cars as part of their existing fleet until then.

Edit: Math mistake

[1] https://qz.com/924212/what-it-really-costs-to-turn-a-car-int... [2] https://www.uber.com/newsroom/company-info/

[mdasen]

I believe that the cost to produce a self-driving car will be coming down, but let’s look at the $250k price tag.

Over 6 years, that comes to $114/day. 1 ride per hour at $5 per ride would hit $120/day.

Assuming a 2 mile ride, that would be 105k miles which is well within the car’s usable life. At 3 miles, it would be 160k miles which is still within a car’s lifespan. It looks like Uber is $1.35/mile with a $2.10 base fare and $1.85 fee. A 3 mile ride should be able to get $5.

Plus, it’s really about the long run. Operating margin might be negative for a bit, but the cost of the technology and manufacturing will come down significantly. Still, even today, I think $250k just isn’t that bad. I think most drivers will do a lot more than $5/hour in gross revenue.

It would be really expensive to make a fleet, but the economics are so compelling, even at high prices. I mean, Americans are often spending $35,000 on a car. If a self-driving vehicle can service the needs of 7 people, it can be cheaper than car ownership.

While the price of driverless tech might be high now, the prices of car ownership and human labor are both very high as well and only one of those three prices is likely to decrease over time.

[taysic]

Isn't 6 years quite long for a high tech car? I wonder what maintenance would cost.

[redbrickroad]

Factor in the cost of gas and you're in the negative already.

[edshiro]

I suppose most of these vehicles will be electric, and cost of charging is lower than cost of refuelling...

[ant6n]

Your operating cost appears to be 100% capital costs. What about, you know, operating costs?

[bduerst]

This is trivial.

Driverless cars are "always on" so it's not an apt comparison because you're going to always get more from less. Besides, ridesharing is already subsidized right now, so bottom line isn't an issue in the market.

Likewise, ride-sharing with self driving cars is even easier since if you own a self driving car it can work on it's own while you are not using it, which is most of the time. There's no reason a similar asset sharing model won't spring up after economies of scale.

You could also argue that it's cheaper to pay workers with their own textile equipment, rather than spend the CapEx on a weaving loom, yet here we are.

[asdff]

It's not trivial when we don't even know what sort of regulation will be required to maintain these vehicles' road legal status, let alone banking on future economies of scale. Would it be a simple license fee? Perhaps an inspection? An age requirement on the vehicle? Or perhaps the worst (and very possible) outcome, mandating that an undistracted driver be sitting behind the wheel at all times, ready to take control.

It would take one trivial piece of legislation to turn this technology into a souped up cruise control rather than the world changing technology that its backers insist that it is. How could you even fight that sort of regulation without your argument boiling down to 'we promise we don't need human oversight.' One lazy 'think of the children!' retort later, and it's banned faster than mango juul pods.

I don't understand the investor confidence here. To me this seems like basic research, critical for future technological developments, but a cash sink with no guarantee for profitability. Is this just a rat race between the giants throwing cash at this?

[swagasaurus-rex]

The likelihood of such a legislation on a national level is unlikely. Instead, you will have cities that refuse to adopt self-driving, maybe because they were burned with a tragedy (with no regard to statistics), maybe to protect human jobs.

Large companies can adopt in other cities, or if need be, other countries eager to change their quality of lives.

[bduerst]

Precisely. Regulatory adoption won't be much different than how government has responded to ridesharing today. Highly fragmented but typically open.

[throwawaymath]

If this is trivial to you, what do you consider moderately difficult? What's sufficiently difficult that you have to spend a single day thinking about it? How about an open problem requiring careful planning and months of effort?

It's like the word "trivial" has no meaning anymore. All I can tell from people using it these days is that they're very confident in what they're about to say.

[bduerst]

What I consider non-trivial is tangental to comparing the cost/benefits between autonomous driving and ride share services. The non-trivial part of this is [nearly] solved, as is evident by this Waymo soft launch.

[lkbm]

The self-driving cars may be available to give rides 24/7, but if 90% of the demand is 0800-0900 and 1600-0200, they may end up sitting idle for twelve hours each day anyway.

You probably need over 100x the vehicles at 5pm as you do at 4am. You have to find a balance of how much CapEx is worthwhile -- probably more than you need to cover the 4am shift, but far less than needed for the 5pm shift.

[calvinbhai]

Factor in the cost of a driver, and the $250K price tag will look super cheap if not sensible.

Right now, rideshare companies keep ~40% of the ride revenue (not including vehicle payments). Which means, 60% goes to the driver. Now if you consider operating costs (fuel/gas/insurance/tolls/oil change/maintenance) at 30% (of the total revenue), there's still the remaining 30% that the driver takes home. Even if you think the driver is working 80 hrs a week, that's not even 50% of the total number of hours an autonomous car can work (24x7 = 168 hrs a week).

With a fully autonomous car, that remaining 30% and lower maintenance costs combined with lower insurance costs will mean probably close to 40% of the current ride revenue will be saved. If you operate the car for 160 hrs a week (8 hrs for fuel/maintenance) then it'll probably be ~60% of ride revenue (at current rideshare rates) that'll be pure profit.

As cost to produce these cars (basically it's the separate technology package added to regular cars) goes down, they can continue to keep the service super affordable while recovering the upfront investment in the $250K car in a few years. Instead of having 10 Chrysler vans on car dealer lots/storage, have one $250K car in service a day after it is manufactured. After that maintenance costs may increase slightly, but the rest is pure profit, which creates a positive feedback loop to

reduce vehicle price --> reduce final fare paid by passenger --> attract more users --> more vehicles needed --> Leads to larger scale production and reduction in price--> repeat.

At some point it'll be cheaper than public transit and then owning and driving a car becomes a need only in regions / places / conditions where autonomous cars wont work. Until then, non-autonomous cars ensure good margin for autonomous cars to thrive.

FWIW, I believe Uber has zero advantage with it's existing fleet. All they have is a large number of indentured drivers (due to subprime loans given to them for their cars). In fact it is a disadvantage for Uber, because as fares for ride share goes down, it starts making lesser sense to operate those cars. they'll just stop making payments and return / trash the vehicle.

[lsh123]

I don’t think you need same number of self driving cars as drivers and the ratio might be way higher than 1:3. Plus I think you have a math error and the total cost in your example is $250B which is doable for Google.

[koboll]

>So expensive that I doubt it's possible to make real money that way right now.

I don't think anyone is interested in "mak[ing] real money that way right now", they want to get a foothold in, or capture a swath of, a market which definitely will make them money in the future. A tremendous amount if they play it right, even if it means operating at a loss for the next few years.