Tesla's taking a very long view. They are thinking about what the world will look like when autonomous cars are ubiquitous, and then working backwards from some of the pretty gnarly realizations that sink in when you do that sort of thinking.

You realize that nobody will care as much about most of the things they currently care about when buying a car. Performance? Mileage? Handling? Horsepower? Fucking irrelevant if I'm chilling in the back seat and my car is just getting me to where I need to go.

So what still matters? Price. Comfort. Amenities. The upsell becomes the main sell. At a certain point, Tesla isn't even selling "cars" so much as it's selling mobile offices to one segment, and mobile living rooms to another segment. I could also see Tesla finding a way to place the burden of price elsewhere and offer effectively "free" cars to consumers. For instance, leasing or selling fleets to employers. Or to cities. Or to Uber. Or to Amazon.

Uber, on the other hand, sees a world in which nobody owns a car, nobody drives a car, and everyone hails an automated car whenever and wherever. Like that scene in Minority Report.

Both of their strategies are banking on the idea that cars, as we currently understand and experience them, will eventually become pure commodities. The difference is that Tesla is seeking margin and Uber is seeking volume. The cliche that Tesla is Apple and Uber is Amazon is sort of true in that respect.

I think Tesla also understands that once autonomous cars are ubiquitous, you won't own one: you'll just rent one for whatever needs you have in that moment. I think the best analog for the market dynamics that this will create is the airline industry -- a fleet of vehicles will be a massive investment, and ongoing maintenance, government oversight, etc. will be similarly cumbersome. But the job of the airline (actually operating the plane) is being done by the company creating the algorithms. That's a market control point that can be leveraged.

That's why ultimately, I feel Uber will end up being the Expedia/Priceline of the self-driving car industry. If you don't control the means of value production, you become a middleman. There's a reason they were working on their own self-driving tech rather than licensing from someone else -- everyone who is actually building this tech likely told them "go shove it, we can recreate what you do far easier than you can recreate what we do".

I keep hearing this, but why wouldn't you own one? Part of the reason to own a car is the immediacy of use. I don't want to have to do the equivalent of waiting for a lyft/uber every time I want to run to the grocery store.

Sure in large walkable cities with constantly circulating fleets car ownership might go away. For those of us in the suburbs who HAVE to drive everywhere, not so much. Even waiting 5 extra minutes for every errand (optimistic, given that my most recent lyft took 10-15 minutes to arrive) adds up fast. Let alone going out into the rural areas where Uber/Lyft scarcely exist and the nearest human structure can be miles away.

I could, however easily see a model where people rent their self-driving car out to Uber/Lyft when they're not using it. Driver fees would be gone, and they could take a greater cut that might even put them towards profitability.

1) Cost

2) Configurability

Anyone who is price sensitive won't want to pay the hourly rate to have a car sit in their garage all day/night doing nothing. Nor will they want to pay the up front cost and/or interest to hold a controlling share in the vehicle.

And configurability means you can take a 2-seater when you are going to work, take a 4-seater to lunch with you coworkers, take a hatchback to the farmers market to pick up your groceries, and then an SUV to the mountains, preconfigured with a roof rack with your ski rentals already on it, sharpened and waxed, and then take a mobile office for the drive home so you can get some work done, and a mobile bedroom for your trip down to LA so you can catch up to sleep.

But yes, the wealthy will still own private cars because they can have it waiting, just like private planes. Also, cooties.

Plane travel isn't a day-to-day event, even for those wealthy enough to afford private jets. You still have to pack, travel to an airport, get on the plane, crew has to be made ready, flight plan has to be filed, etc. It's a high-impact event that occurs at most every few days, even for frequent flyers.

Driving is a day-to-day task. My time's already short, if I have to add an extra 5 minutes waiting for pickup every time I want to go anywhere (once again an optimistic estimate, it would likely be closer to 10), on a busy day that's a minimum extra hour a day of time I've lost just standing on the sidewalk. Margin matters, even an extra 15 minutes a day adds up to over 90 hours a year.

Also these rental services/configurations will hardly be free. So the cost of the car/maintenance isn't eliminated entirely. For my situation, given that I've been driving the same car for the last 11 years, and it was ~16k when I bought it, plus maybe an average $1200 a year in insurance, and maybe an average of $300 a year in maintenance that means I've spent an average of $2,954.54/year over the last 11 years on car ownership. And that number is only going to get smaller unless I buy another car.

But in this scenario I'm losing a minimum 90 hours per year on the margin. If those were work hours, then at my current take-home rate I can decrease that number down to around $1065/year going forward. Given that I'm likely going to make more money as the years go by, these continuous rental services are going to have to be awfully cheap to be worth it for my situation, and I don't think I'm too far from the average.

Now sure, if you're buying a new car every 4 years like some people do then it might be worth it. Or if the cost of insurance is prohibitively high in your given location. Or if your job sucks and you just can't afford a car. Or if you actually need a broad variety of vehicles on a regular basis. There are lots of factors that go into it, but for anyone who's middle class or better I don't think it'll supplant ownership entirely. Or maybe it will and I'll just be with the sour-grapes number-crunchers in the corner ranting about margin to anyone who'll listen. :)

> Also these rental services/configurations will hardly be free. So the cost of the car/maintenance isn't eliminated entirely. For my situation, given that I've been driving the same car for the last 11 years, and it was ~16k when I bought it, plus maybe an average $1200 a year in insurance, and maybe an average of $300 a year in maintenance that means I've spent an average of $2,954.54/year over the last 11 years on car ownership. And that number is only going to get smaller unless I buy another car.

Nope, but they will be commoditized. If you have a car that all you have to do is pass it an API key and a location, there's not much value a ride sharing service can add to that -- which means there will probably be a bunch of them. Which means that the price to the consumer should be something close to [ (marginal cost of ride) + (depreciation cost of ride) ] * 1.03. And the cost side of that will benefit from scale for the business, but not the consumer.

Basically, once it's commoditized, it will cost you more to do it yourself than to pay someone to do it for you. Just like with currently commoditized services like AWS, there can still be good reasons to do it yourself -- but those tend to be special cases rather than the norm.

> But in this scenario I'm losing a minimum 90 hours per year on the margin.

Err, I'll play along. If you were in an autonomous car (or even a current ride-share), you could just work while en route rather than drive. I'm willing to bet you spend more hours sitting in traffic today than you ever would waiting on a car to arrive.

Well hey if it somehow costs less than then I spend on car ownership in a year, then sure! All just depends on how much my time's worth/how much these services charge if/when they come around. But right now the sum total of rides per year, whatever the cost model, would basically have to be sub $1000 per year to make sense for me. Cheaper if I end up making more money as time goes on. If scale and commoditization can accomplish that then I'll happily embrace a new golden age of transportation.

As for the rest, keep in mind we're comparing renting an autonomous car vs owning an autonomous car, not renting an autonomous car vs driving. So the actual rides are equivalent. The time difference is me getting in my car and telling it where to go vs me hailing a car, waiting 5-10 minutes for it to arrive (where my capacity to do any meaningful work is basically nil) and then tell it where to go, a minimum of 3 times a day. Maybe up to 12 times a day on a busy day. That's not an insignificant time loss over the medium/long term.

Granted it's all hypothetical and the actual value of the time lost would be highly situational, but it would be one of those small daily time-sucking inefficiencies, like walking into the other room to get paper towels as opposed to just putting a roll in the kitchen. When you do them every day, those add up.

I suspect Tesla will be the next major story of burn rate fueled firms confronting reality...

Tesla is a different story entirely. Uber is burning cash by subsidizing operations (aka buying customers); Tesla is spending it on capital assets and R&D. Money spent on operations generally won't benefit you beyond the current quarter; but capital assets (including intellectual property as the result of R&D) retain value over time and often pay for themselves in a relatively short period of time.

You'll notice a common thread throughout Elon Musk's "big bets" (Tesla, SpaceX, etc.) He is extremely conservative with operational spending, and all of these companies are very capital-intensive. Just look at the difference between a "Tesla Store" (small, maybe 3 or 4 employees, cars can be stored offsite wherever is cheap) and a normal auto dealership (huge, dozens of employees, majority of expensive real estate is used for parking cars). The Tesla store is very efficient compared to the auto dealer.

When you have high capex, it makes it easier to fund your company through debt rather than equity since those loans/bonds are backed by capital assets with a non-zero liquidation value.

That's what many said about Facebook when they had their crazy valuation. The same was said of Google before they figured out ads.

Tesla has a brand value higher than any other car. It's not an app that can be easily replicated. The dynamics are not the same as Uber.

Owning a car and the freedom to travel whenever wherever for whatever reason is a fundamental American value that won't go away.

Sure it will, when cars are available on demand anytime you want one for however long you want it at the press of a button. Convenience changes values, and ownership sucks when that kind of convenience exists.

I don't think so. I'd much rather pay the cost of ownership than rental every time I wanted to move about.

By definition rental is going to be more expensive than ownership.

I don't doubt that companies will have fleets of cars for their employees, etc, but personal vehicles are not going to go away.

That's short sighted and incorrect. Rental is only going to cost more than ownership if multiple people aren't sharing the cost, but the whole point of autonomous cars defeats that idea, renting will be vastly cheaper than buying.

> but personal vehicles are not going to go away.

For the vast majority of the population, yes, they will go away.

If that was true everyone would live in hotels. Renting rides only makes sense in cities where the cost and inconvenience of parking are high.

Look at the quality of the interior of the average cab and you will see why a lot of people would prefer to own.

That's not good analogy (living in hotels), better would be to compare how many people own their flat/house and how many rent it. Which would imply that a lot of people will still own their car ...

Why should rental be more expensive by definition? A fleet of autonomous vehicles can operate 24/7. Your own personal car gets a trip to work and a trip back home every day and maybe another round trip to an activity or chore.

That depends on how much do you need to use a car. If you dont need it that frequently, renting is cheaper.

who in the world doesn't need a car that frequently?

young people, old people, and homeless people.

Everyone else needs a car frequently.

Those who live in Europe. Or anywhere with decent infrastructure.

> You realize that nobody will care as much about most of the things they currently care about when buying a car. Performance? Mileage? Handling? Horsepower? Fucking irrelevant if I'm chilling in the back seat and my car is just getting me to where I need to go.

Mileage is a critical component of cost of operation, and of range without stopping, which are pretty much (along with capacity and comfort) the things that matter most if you aren't driving and the car is just taking you from A to B.

That's even true if you don't own it (even the cost factor, since that—assuming an efficient market—still controls what you'll pay to use it.)

Maybe something like Will Smith's car in I,Robot movie is what I imagined while reading this. Faster than a bullet train and automated.

I don't think Uber's valuation is based on autonomous cars. That would be a really stupid bet for investors.

Autonomous cars are a side bet. A few hundred millions in R&D that would also attract good talent and nice PR for Uber.

But I don't think investors were stupid enough to invest billions into Uber based on that bet. Specially considering the fact that anyone who gets that technology first can make it big and Google had a few years of head start.

Uber's valuation has to be based on an anticipation of autonomous vehicles. Otherwise, whether self-driving cars arrive in 5 years or 10, investors are putting money into a horse-and-buggy company.

Not necessarily. If your projection is that widespread autonomous vehicles don't arrive for 30 years, there is a lot of money in the meantime to be made being a horse-and-buggy company.