Oh I'm sure we can make money with all these users. I mean there are so many of them. We just have to wait until the incumbent starts collapsing, and burn money until we start collapsing, and someone else figures all those users must be worth something, so they start burning money, and...
They all look like Ponzi schemes at the moment.
Public transport exist, and for people that actually need a car on a daily basis, cars exist.
Taxis are luxury service and not subsidized ( as that word is defined in the dictionary) by money offsets. We can derail this into whether medallions/insurance regulation should be there, but the hard cold argument here is : Money. Lots and lots of money.
Uber/luft are subsidized by hard cash just to exist.
I drive, so from the outside, this looks as if somebody was subsidizing Android watches, because they'll overtake real watches.
It's a business gamble, but many are mistakenly taking it as a fact.
So, correspondingly, expect either prices to keep rising on Uber/luft/etc, or them to go out of business.
Is there a particular reason you are restricting scope to only the US? Taxis and "ride sharing" organizations are an international phenomenon: I'd say the majority of jurisdictions do not have medallions. And the upstream point remains - most taxis can now be hailed via mobile apps.
Whether Uber's billions in losses can be amortized over that time so those losses aren't on the books so they can be competitive with a new entrant solely using self-driving cars, remains to be seen.
In any case, the door-to-door 100% driverless tech that Uber/Lyft/etc. require to eliminate drivers is almost certainly many decades away. It seems unlikely they can sustain massive losses for a fraction of that time even if they did have some sort of competitive advantage once that future arrives.
If you don't like a company that you're invested in through an index fund, you can always offset that part of your portfolio with a call/put option or a short (depending on your horizon).
In my city there are many small streets with bad traffic and environment, that at least once a week I need to verbally negotiate with other drivers who goes first and who goes back. If all cars are autonomous, they may negotiate that; But if only half are, I don't see how this will work.
Most US cities have the benefit of being built for cars; But most European cities do not; and even in the NYC, there are weird small streets that often require negotiation among drivers.
[0] http://www.mass.gov/courts/selfhelp/tickets/jaywalking.html
People are underestimating how game changing "mostly working" self driving cars are.
So they only need to wait 3 years, not 10.
The legal problems that everyone talks about will be (comparatively) minor.
A bunch of pro-innovation, anti gov regulation red states like Arizona will fully legalize it (why do you think Ubers CEO has been meeting with Trump?) , and the rest will follow once these states test drive the cars at scale, and they start to save thousands of lives.
However, quickly there will be many new local competitors. Who wouldn't start such a business in their own local town anywhere? Buy a few cheaper autonomous cars (10 Model III+upgrades) and have them drive around your neighborhood. Call it 'EcoGreenCar LLC'. There will certainly even be an open source software platform to manage autonomous micro fleets.
Truck and car manufacturers will have to disrupt their business models, as their customers will be fewer, but larger - known as Service Providers.
This is exactly what is happening in the IT Hardware business, where small companies can't motivate the cost of having their own internal datacenter (having to pay for staff, infrastructure, real estate, electricity etc). Rather, they outsource to "Local Service Provider LLC" (Managed Private Cloud), or AWS (Public Cloud)...
Both IT Hardware providers and truck manufacturere are experiencing "commoditization". The HW itself becomes less important. Why do I care if my truck has the latest V8 with Bosch 2.34 injection? I just want my fleet to operate smoothly. Many companies can no longer sell "just products", they must evolve and sell the services to create outcomes that a) reduces costs or b) generates extra revenue or c) reduces risk for their end-customers.
It's a major change for any large corp, which I believe many will not be able to achieve in time.
Good article on this topic: https://www.nytimes.com/2016/07/27/business/dealbook/1-billi...
”with an autonomous car, there's no reason why competition between the two companies would not drive fare prices down.”
So, what is it, will they become profitable because they will be able to decrease their costs, or will they have to cut prices because their competitors are able to do so because they will be able to decrease their* costs? Or do you think they will be able to split that between the two?
I think the only benefits that burning money at tremendous rate buys these companies are scale and mindshare. I doubt either will be worth enough in the long term to warrant the current expenses; for scale, I even doubt whether having scale at the level they aim for is worth having at all. If it were advantageous, I think we already would have had international taxi companies.
I see two possible cop-outs, but don’t think they are worth their current expenses.
The first is if either of them managed to effectively become a monopoly. I don’t see that happen, and if it does, I expect quite a few governments across the globe to take action to correct that.
The second is that lower prices that autonomous cars will afford them would grow the market (if their margin per ride halves, but the number of rides quadruples, their revenue will double). That might be possible, but I fear they need unrealistically high market growth to have that make them a winner.
Why? Because they don't need to attract drivers.
Car rental entities are huge and have the capex to invest in something like this - and they have 'feet on the ground' everywhere.
'Call Avis to get to work'.
If 'self driving cars' actually become a thing it will change many things.
Assume that in year 20XX, when autonomous cars finally become a thing, there are two companies. Uber, which has accumulated $X billion in debt while growing it's driver network, and brand new company NewAutonomousCompany, with no debt.
What possible advantages does Uber have in that situation that makes that debt worthwhile? It will have some software and the fact that users already downloaded an app - but will that really be worth the subsidies?
Uber has one more thing that they're funneling piles of money into - a self-driving vehicles department. They'll have a significant advantage if they're the first to "market" with fully autonomous self-driving vehicles. Right now it's a huge money sink, but research often is.
Is this a math equation? Can I solve for X?
X=2.
2022 for self driving car release is around what all self driving car companies are saying for release.
Whatever map data Uber/Lyft started with (and have perhaps since augmented with proprietary GPS data supplied by their apps), is it enough of a competitive advantage?
1) Fares were lower when the 'x' versions came out. Original Uber was limo/SUVs to/from LAX and out of my price range. Then UberX came out. I don't use Lyft Line or whatever Uber's version of that is. I only 'share' rides with friends.
2) Convenience. The apps made it convenient to call and get an accurate assessment of when a car will show up. It sucked getting a taxi company to send a car reliably and know when they'll be around.
3) Crap drivers. In LA, every taxi I took I had to direct them step-by-step (unless it was an airport pickup as those folks seemed to know what they were doing) and they weren't that great to interact with, if it was necessary.
For the most part, Lyft drivers have been great (if sometimes weird). Uber drivers the past few years have seemed to basically be former taxi drivers.
Even after years of using the apps (and I mainly use Lyft now) I still think of it like the gypsy cabs I used to get in Russia, only much safer (for me as a guy) and more formalized (no haggling over payment).
It will be really interesting to see how Uber/Lyft and whoever else come along do when autonomous cars come along. I hope it's not a race to the bottom in terms of safety and reliability.
I also wonder what will happen to the drivers. I think right now people mainly use it to make some extra cash. I'm assuming there are some full-time Uber/Lyft drivers? But it will be another victim in this 'gig' economy where low/no-skills are replaced by automation.
My only other concern is who is going to clean up the trash from the cars after each ride? Will there be a vomit alert or tax if you someone gets sick in the back after a wild night out? It would seem you would almost need a car to come in for service after most every ride unless it's somehow being monitored.
Public infrastructure experiences a lot of vandalism and abuse. Prepare for your car to be treated like public infrastructure.
Totally. I've even allocated investment capital for the sole purpose of putting a few Teslas into service as full time taxis on the Tesla Network.
I let people into my rental properties, why not other investment assets?
Because monthly rent is big, and leases are usually longer than a month. A Tesla Taxi is more like a motel room with hourly rates.
So, more like AirBNB than a leased rental agreement?
Different people have different boundaries and I respect that. I have no problem with renting my room/house out while I'm away, and I'd have no problem with renting my car out without me in it.
Prepare for your car to have interior cameras and a load of other sensors (e.g. smoke detector) constantly streaming to "the cloud." Of course, there will be no way to turn them off, because then passengers would do that. Then you just bill the passenger for the damages, and send him a link to the incriminating footage.
Then again, I would hate to use my personal car as a taxi, or my spare bedroom as a hotel, so I'm clearly not a good candidate for the "sharing" economy. Maybe I'm not desperate enough.
"and the ability to lock it's doors and drive someone to a police station"
I imagine that being able to identify the person renting the car, and cameras to show their actions, would be deterrence for most. For the rest, there's insurance.
One analogue is rental car companies getting steep discounts: https://www.bostonglobe.com/business/2016/05/18/sees-sales-t...
Operational efficiency is another. Southwest Airlines iirc was (one of) the first discount airline by virtue of their superior aircraft turnaround times. If a rideshare company can dramatically increase the ratio of time carrying a passenger (or multiple) vs carrying none, they can spread their fixed costs (or even the variable ones, if carrying multiple passengers) over a larger denominator.
Not a lot of VCs jumping into Fedex or UPS type businesses when you actually have to invest in a transportation network. Tesla Network might pull it off with their customers footing the capital costs (instead of Tesla needing to go into the markets to scoop up another few billion dollars in credit lines).
In fact, I'd go as far as to say that, at current ride rates, Uber/Lyft would be able to replace/refurbish autonomous cars on an annual basis. Of course, rates will fall with autonomous cars, but not below the cost of depreciation.
Expanding the fleet to a new city now means buying land, building facilities, hiring mechanics and admin staff, and buying the cars. At this point Uber would look more like UPS - with UPS-like growth - than a tech company. All the while, unless they raise prices significantly, they're still losing money.
The cost of infrastructure and automechanics, etc, is spread across the fleet. That's the benefit of operating at scale - economies of scale. You don't lose money merely because you're operating at scale, that's not how it works. What would it cost you to maintain a Prius? How about 100 identical Priuses? It's not 100x.
Finally, the comparison to FedEx/UPS is flawed. Those guys don't just have a fleet of trucks to maintain, they have to deal with shipping centers, hubs, air transportation, multi-day package tracking, and the logistics nightmare that's involved in doing all that and still getting packages delivered. They'd rightfully tell you managing their fleet is the least of their concerns.
Car rental companies buy in sufficient bulk to get discounts deep enough that they sell at a profit in good markets.
Fleet maintenance and self-insurance is an issue, to be sure, but it's not the same as Fedex or UPS.
Uber already owns thousands of cars in Singapore.
I wish this were the case. Well, at least for me. I'm in the East Bay and Uber X versus Uber Pool is no question because Pool is $2 cheaper AT THE MOST, typically closer to a $1.50 cheaper. That's for a trip that typically costs roughly $15.
I'm curious how they determine their Pool prices.
For what it's worth I saw a pitch-add for Uber two days ago during the French League 1 match between Lille and Saint-Etienne. I've never seen an add for an Silicon Valley company during an European football match before, and I've been watching this sport for 30+ years.
In quite a few cities the Taxi industry is the only opportunity for immigrants and they're forced to work long hours in rented vehicles for very low wages. That's not good. In other cities the taxi industry requires quite a lot of education and is harder to get into.
Where I live Uber drivers are often taxi drivers, they pull the taxi signs off their cars when they get an Uber pickup, despite the fact that we have a fairly exploitative taxi system they say that they get paid less by Uber.
Ultimately there are dozens of taxi companies and one Uber, those taxi companies range from very large to tiny but none of them can afford to run sustained losses to knock out competitors like Uber.
This is utterly not true, and even companies like Google have (had?) it specifically written into their shareholder prospectus that this wouldn't be the case. Companies which maximize profit at any cost are doing it because they want to not because they have to.
http://www.nytimes.com/roomfordebate/2015/04/16/what-are-cor...