Uber seeking to buy self-driving cars: source
reuters.com
reuters.com
I know a little bit about this. It's not "self-driving" car per se. You know with current technology we can't have completely driver-less cars. But to get there we need a lot of data. Uber and Lyft saw all the rides on their systems and thought if we had a lot of sensors in cars and recored all of that we could have the winning factor for self driving cars which is data.
In order to record that data they need customized cars. They also need to own the car to own the data associated with it (this is my assumption).
First, there's this widespread handwaving around getting the very detailed map data that is at least useful for even limited autonomy. At one level, it's a solved problem that that doesn't mean it won't take a huge investment to collect all this data.
The second is the idea that this mapping data may be a source of competitive advantage for individual firms working on improved assistive driving systems followed by autonomy--initially under limited circumstances. On the one hand this makes a lot of sense. On the other hand, it means that a lot of work probably ends up getting duplicated.
It would make more sense if they were ordering their own fleet of standardized, sensor-laden, optimized UI cars. But that's not what this (dubious) news report is about.
Why not? Doesn't the Google car have a near-spotless record with minimal human intervention?
The car simply cannot figure out where it is when there's a significant layer of snow on the ground because the reference maps stop looking like what the car is seeing.
[0] https://backchannel.com/how-elon-musk-and-y-combinator-plan-... "Probably Tesla will have more real world data than any other company in the world."
That is, if the report is even true.
Sci-fi days ahead methinks.
"The driver can fully cede control of all safety-critical functions in certain conditions. The car senses when conditions require the driver to retake control and provides a "sufficiently comfortable transition time" for the driver to do so."
https://en.wikipedia.org/wiki/Autonomous_car#Classification
Its expected their Model 3 mass market vehicle will contain the same, if not a greater level, of driving automation.
Disclaimer: I've traveled down the interstate in a friend's Model S for ~2-3 hours at a time at ~85mph in autopilot mode with no intervention required.
If you can't beat them, join them.
I wouldn't be surprised if the wholesale (with profit) cost on a S-Class Benz is somewhere around 65-70k. I'd imagine that the cost of building an S-Class (100k retail) over a C-Class (~40k) is nominal.
Perhaps the long-term order is a commitment from Uber to motivate Mercedes to invest more heavily in autonomous vehicles? If the long-term strategy of Uber is to have a fully autonomous fleet then a long-term commitment of $5bn with one manufacturer seems plausible.
It's like if airbnb bought $5B of Manhattan real estate. Yes, it's "the heart of their business" but also - wow.
With Airbnb, I don't think anyone expects them to pivot into owning their own property. There's no real benefit.
If these are self-driving cars, it makes sense to me, otherwise it doesnt.
Also, a risk here is that other large parties will make the same calculation, flood the market (anybody with money will be able to start a cab company with a lot less hassle from labor laws because you don't need that much personnel) and drive margins down.
To win in this space you probably will need both a lean model of operations and a good image in the customer's eye. Uber currently seems to have both, but committing _now_ to a provider of cars is risky (what if other manufacturers turn out to have better or cheaper self-driving cars?). On the other hand, it also may be necessary to commit now in order to stay lean (committing now probably gets them a nice price cut)
So it'd be the best of both worlds for Uber: being able to put the self-driving vehicles to use around the clock and not having to make a capital investment to handle spikes in demand, which would just continue to be handled by existing drivers (for now). Just call in the human backup to help out when required.
I'm also wondering if they made the huge order so that they'd be able to influence and guide the requirements for the vehicles to Uber's specs. It seems that the requirements for a self-driving car for an individual's use differs from that for commercial taxiing.
You're assuming that each ride is independent, but that's already not the case with their Smart Routes - the driver picks up a customer, then picks up another one on the way, then drops off the first and picks up a third, etc.
The goal stated by their CEO is "perpetual rides", in which the car is never without a passenger.
That applies to a lesser extent to such things as theaters and cinemas, and even suburbs (who wants to get picked up there at 1 AM to fill the car that that theater goer took home?)
They will get below 50:50 for "at least one passenger on board", but it would surprise me if they managed to beat a 25:75 ratio.
Cheaper, certainly. Everyone will have cheaper SD cars than Benz, just as everyone has cheaper cabs than an S-class today. But better? If history is any guide, German luxury will be the gold standard of automotive UX for our lifetimes and beyond.
An order like this is probably:
* For a delivery spread over 10+ years
* The vehicles will almost certainly be leased/finance
* Each vehicle will probably assume a 5+ year working life and have a residual of about perhaps 25% of list after 5 years given the likely mileage
* There will be a big initial discount given the size of the order
So assume each car, is $100k new, but given an order that size is perhaps a 40% discount. So that's a $60k sale. After 5 years, the car is perhaps worth 20k.
So the unit economics are that each car costs (before financing costs) 40k over 5 years, or $8k a year. This is a relatively low cost given the number of rides it can take and the cost of the driver who will be driving it.
On that basis is doesn't sound that expensive.
[1] http://corporate.ryanair.com/news/news/14908-ryanair-places-...
No way. Absolutely no way. Looking online I'm seeing estimates of 300,000 to 500,000 miles per year in a taxi. If Uber is even NEAR that max, this car is going to have 300,000 miles on it. Hell even 150,000 is a ton of miles on a used vehicle.
Looking at KBB with a base S-Class that's 5 years old with 300,000 miles you're looking at roughly $12k in "good" condition (because, let's face it, people are going to be in this thing constantly and "good" is the rating the majority of used cars are in when they're sold).
Then factor in that Uber is not going to become a used car company (at least I would imagine they wouldn't) they're going to have to sell even lower than KBB to a third party so that third party can make any money. So I'd bet one of these cars would end up selling for $6k to $8k depending on mileage and condition after 5 years.
Individual drivers may not be able to take very good care of their cars, but large companies that use fleets of cars can take them regularly (perhaps even every night, as their default storage) to maintenance garages and have them restored.
Uber placed an order for 10,000 vehicles with the option to purchase 90,000 more.
Haha, I just checked. A recent valuation is $68B. (Dec '15)
It's just that they sold all this stuff to ISPs who didn't have any good credit lines, so Lucent extended them credit (bing! interest payments!) using the MAXen as collateral.
When the ISP dialup market collapsed, the ISPs returned the equipment in lieu of payment. That equipment had no value whatsoever, because anybody who wanted one and could afford one already had two.
Presumably there's some sort of secondary market for cars -- but a hundred thousand black S-Class is about what they've sold in the US over the last 7 years combined.
You are correct, of course, but I think the majority of that would go away if you hired the mechanic yourself and bought parts direct. My theory is that most of the German luxury vehicle surcharge is the "hey, it looks like you've got money, how about you give me some of that" surcharge.
I mean, I've owned a BMW 325is and a Toyota Sienna. Similar vehicles in that the vehicles had similarly sized engines/transmissions and brakes to match.
Sure, my experience agrees with your assertion in that rolling into the mechanic in the 325is is going to cost me north of twice what rolling into the mechanic in my Toyota Sienna will cost me.
But if you are doing the work yourself? the German car isn't any harder to work on. If anything, I think the german mechanical aesthetics agree with me in ways that make working on it easier than working on a Japanese car. Sure, they need a little bit more love in that they're just not as advanced as a Japanese car, or at least not as much effort is put into maintenance free operation, so you need to do more to keep them running, but that difference isn't huge. Parts are also not hugely more expensive than similarly specc'd parts on the toyota (e.g. brake rotors cost about the same on my 325is as they did on my toyota sienna; they were similarly sized, too; it's just the 325is was a much smaller car, so stopped dramatically better.)
I mean, I'm generalizing about German luxury vehicles from my experience with another brand, but yeah, if you hire your own mechanic, I bet most of the maintenance cost differences become much smaller.
I haven't dealt with anything really more complex than the early 'aughts toyota... at least up until that point, the electronics made it way easier for a shadetree mechanic like me to solve problems. There's all sorts of ways to get diagnostic codes out of the thing; on the bmw, you did this dance where you turned it on, then floored the gas a certain number of times, and then the 'check engine' light would tap out a code you could look up in the manual, just like beep codes on a motherboard. On my Toyota, I hook up the OBD thing and it gives me a code I can plug into google and get youtube videos of how to fix it. I've never dealt with an electrical problem more complex than one of the the (what do you call them? the short wire things that go from the coils to the spark plugs on the bmw) going out of spec in terms of resistance, but that was pretty easy to diagnose with the manual and multimeter.
But if it really is the complexity that creates the cost, why was it so expensive to pay someone else to service my simple 325is?
I currently still turn wrenches as a hobby and work on higher end Euro cars (Ferrari, Porsche, etc.) and it only gets worse. :)
Most cars require special, often model specific, tools to service them. A specific adapter to take off an oil filter on your Honda Civic, or a set of special ramps that get your super low Ferrari on to the car hoist. The shop then has to amortize the cost of tools over the number of vehicles they service with it. So the special wrench used for the Civic can probably be used for 500 oil changes in a year, but the Ferrari ramps are used on maybe 10 a year. Not to mention the specific training required to do the actual service.
In a computer related example, imagine a receptionist that just needs Microsoft Paint to put text on signs around the office. Now compare that to an industrial designer that needs a $10,000 licence for a CAD application and specific training to do material stress analysis on your new iPhone accessory. Each sign has little to no incremental cost, whereas each iPhone accessory needs to pay for part of that licence and class.
If Uber were to buy thousands of the exact same vehicle, they would have a predictable amortization of a spark plug tension wrench, while a dealer might hope to get enough cars in a year to justify the cost.
Unlike the days of dial up where bandwidth improvements made it obsolete it's hard to see a day where we don't need reliable transportation on roads. Cars play an integral part of modern life.
First: they're a domestic car manufacturer, lower cost to deliver to local drivers. Second: they're able to offer specific taxi options, such as manual front seat adjustment (vs automagic). Third: they offer a substantial discount to taxi drivers (they justify the discount through the marketing value of having large number of individuals ride in their cars).
Such discounts for marketing purposes is quite common in the industry. I've also heard dealerships sell cars to rental car companies at a loss, just to make sure customers have access to their cars (and will possibly consider buying that type of car for the next purchase).
The tax a private person has to pay to buy a car was 180% in 2015 so essentially a luxury car is nearly triple of what it might be in US, with a new S350 being $250k.
Thos taxi rules have changed recently however, so Mercedes may lose their 90% taxi market share.
Thanks for your clarification!
Driverless rental vehicles will very quickly look like the back of public buses. "Dave {hearts} Christina" inscribed on every surface.
Uber gets it's fleet, Mercedes gets the tech. It's getting competitive. Mercedes will get the tech perfected, but this kind of deal could get them there much faster. Access to Uber's team, and more importantly mountains of data that Uber is taking the risk for will probably speed up refinement of the tech.
All auto companies need to get into the self driving space. Uber wants to get into this space for transporting people. If Uber and a car company work together Uber could get a discount, help develop the tech and share with the car company; it's a huge win for both sides.
At least that's how I'd try structuring the deal. You know, from my billion-dollar-company-CEO-arm-chair.
Uber operates in a grey-area legal environment in the cities it operates in. Uber's defense / view on this is that they generate such a societal positive in terms of jobs that it outweighs the legal constraints.
But, when your goal is to eventually use a fleet of self-driving cars and eliminate the job possibilities for drivers, isn't that a moot point?
http://www.slate.com/articles/business/moneybox/2015/04/uber...
"Back in September of last year, Kalanick said at a conference that Uber was creating 50,000 new jobs for drivers around the world every month—more than doubling the 20,000 new monthly jobs Uber estimated it was generating in May.
...
Usually when we talk about job creation, we’re thinking in terms of the Bureau of Labor Statistics’ monthly payrolls report. So the economy added 126,000 jobs in March and 264,000 in February, while the unemployment rate was basically unchanged. That’s the language of the labor market. Because the drivers who use Uber’s app to accept your request for a ride and pick you up are independent contractors, they fall under the BLS’s umbrella of “alternative employment arrangements.” "
I doubt they care a bit about the amount of jobs they are creating, I would say their view is "they generate such a positive amount of cash that it outweighs the legal constrains" and if they see a possibility of removing their highest expense of getting that cash - they won't bat an eye on doing so because they already have a history of doing stuff that is on the edge of legality/morality.
1) They fall under the traditional pre-arranged/limo exemption since they aren't doing street hails.
2) They massively increase the convenience and affordability of getting a ride, which cuts down on drunk/bad driving and saves money.
Neither of those points is affected by the move to SDCs.
The fetishism of "job-creation" is misguided and unsustainable. The purpose of life is not 'work'.
High-availability self-driving Ubers are undoubtedly better for the majority of urban consumers than taxis or individual car ownership.
Edit: to be clear, these are regular taxis, not high-end/limousine/whatnot-service
EDIT We are being pedantic apparently. Are there any cash or cash like payments or is the subsidy purely in the form of a tax reduction?
"A subsidy is a benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction."
If I sell you a donut for $3 and then give you $1 back, or I sell you a donut for $2, is there any meaningful difference?
"markets where regulations are enforced"
http://m.manager-magazin.de/unternehmen/autoindustrie/a-1082...
It says they plan to buy "a six digit number of cars", and they're only interested in self driving cars.
Having a deal in stock rather than cash also makes sense: it is unlikely that many people would buy cars from Daimler or anyone if Uber charges at cost (gas + maintenance).
Imagine Daimler can produce 100,000 self-driving cars. They would continue to produce and sell self-driving cars to other people as well. They could sell self-driving cars to Lyft. Individuals could operate their own self-driving car services. They could organize in to cartels and have a single app that competes with Uber or Lyft.
Uber is destined to be a commodity in an open marketplace of taxi services as soon as they adopt self-driving cars. Their primary roll right now is as a labor organization. They currently create the economic incentives needed to attract a fleet of drivers. Self-driving cars are not motivated by economic incentives. Uber can't control the sale, distribution and organization of self-driving cars.
All that riders care about is being able to reliably get from one side of town to another. They'll know that they can trust Daimler self-driving cars, regardless of the dispatcher.
We're going to end up right back to where we started, with a commodity system of private taxi dispatchers and a productive industry of automobile manufacturers, with an emphasis on the automatic nature of this new form of transportation.
Daimler is the big winner here if they can bring a self-driving car to market.
While not quite as insurmountable an obstacle as, say, making a new smartphone platform (sorry Palm/Nokia/BlackBerry/Microsoft), it is enough of one to make this far from a perfect, liquid market.
In a hypothetical world in which we have fully autonomous vehicles and someone wants to compete with Uber, anyone who can afford capital investment in a fleet is not going to have much difficulty generating a customer base (and then they can have a mutually destructive price war with Uber).
I think you misunderstand Uber. Most of its perceived value is in arbitrage between drivers' perceived and actual costs of car ownership: drivers mostly think in terms of wages minus cost of gas, ignoring all of the other costs. Given that business model, I doubt Uber is actually looking at buying these cars. They will presumably force drivers to buy or lease the cars themselves.
Currently both Uber and Lyft handle the task of vetting drivers and making sure there is a good experience for their customers. They organize and control the labor required for a good experience for the riders.
Think about a rider in a world where Lyft and Uber are both dispatching self-driving cars. What's the difference between the services if they're all using Mercedes S-Class SelfDrivers? The rider knows that all Mercedes S-Class SelfDrivers are the same experience. There's no question of if the driver is trustworthy or competent. Uber and Lyft would be providing the exact same commodity experience of sending a self-driving car to your location to then do your bidding in exchange for money.
In Uber's perfect world, yes. And Uber will do its best to hide the true costs of insurance, depreciation, regular maintenance, etc. from owners and lessors, just like they do today. It's worth understanding that Uber only works as long as it doesn't own any cars, or employ any drivers. If they switch over to owning some self-driving cars, they'll have to maintain and insure them.
Other entrants (Tesla or Mercedes) will have to reinvent this wheel and have to market themselves and get users to download/use yet another app that does the same thing.
Personally, I think the right move for Tesla/Mercedes is to just rent out SDCs and focus on their core business rather than expand out into a different one they're new to.
(That's not an advantage against Lyft, of course.)
I found this list of sizes for existing commercial fleets. They would be besting UPS for total fleet size if all 100k were on the road at once. http://www.fleet-central.com/content/pdf/AUTOF_top300commerc...
This is a large scale capital investment in a safe luxury service that Uber can sell in certain markets. I'm betting the s-class needs very little hardware to wire into what UATC is developing.
Or were you comparing that to total volume? Market leaders sell a bit over a thousand per month.
Why do I bring up rental cars, a market usually considered distinct from taxi and limo services? Because without a driver, there's no difference.
Uber is trying to crush the taxi market, but in an age of self-driving cars it needs to watch out for the rental car giants who will happily extend their daily-weekly rental cycles down to per-trip rentals, with pickup and drop-off anywhere in the country. The giants already have purchasing arrangements with the major auto manufacturers, supply chains, maintenance facilities, and parking lots to use as buffers.
They only made about 50,000 cars last year and have capacity for around 90000 this year. Even if Uber's order was spread on a number of years, Tesla will have trouble filling the order.
The S-Class is a great car, but I'm sure there are Uber-specific improvements that can be made. Why would you order some many of something 'off-the-shelf'?
Uber is capital chasing a potential treasure chest. Google, Tesla, GM/Lyft/Cruise are the real players it appears.
That's one way a precommit makes sense to me; a contract could be structured such that Uber gets a certain price as long as they keep up with their commitments, if they don't keep up, they pay a penalty.
Bye Uber.
As it turns out, going from sensors to working self-driving car is a pretty difficult task, and Uber has some of the best self-driving researchers in the world working for them.
Its an uphill climb for Uber. They will need to fund their vehicles; Tesla funds their battery manufacturing, vehicle manufacturing, and autopilot telemetry corpus buildouts using the vehicles owners have paid for.
2. Interstate driving autonomy and city driving autonomy are different beasts. Gathering a ton of data about task X isn't necessarily helpful for task Y; ML isn't magical. If anyone, Google is ahead of the pack in the market Uber is vying for (automated taxis).
http://www.valmet-automotive.com/automotive/cms.nsf/pages/in...
As a mobile drug/prostitution marketplace.
If that was the case, the volume makes sense. Makes zero sense to buy 100,000 of today's model and watch it depreciate in value while providing none back 'cause you still need a driver.
Not really seeing the value-add of Uber at that point beyond the brand and historical data about customer rides as transportation is so fungible.
It's not entirely impossible that Uber/Lyft will engage in a race to the bottom while a bold automaker (such as Tesla) offers to buy out Lyft for it's trip data... to then stand on the sidelines as Uber goes bankrupt... to then purchase their data during liquidation.
I could be wrong, but it will be interesting to see where Uber executives take the company.
Look at what Uber has done:
* Uber buys Nokia Here Maps for their map part and for their street imagery part.
* Uber hires robotics department.
* Uber knows today's business is supposed to be the transition phase to going into a zipcar like car-on-demand service.
There aren't too many data points here, but the only thing I can glean from this is Uber wants to have robotic cars to pick you up and drop you off and will plan that future by storing street imagery, instead of that LiDAR based method the others are doing.
It is also clearly stated there that Daimler is not expecting to be able to deliver such a car before 2020.
Basically, Uber said: "Once you're able to build a self-driving S class, we will buy 100.000 of them". And Daimler said: "We will come back to it."
[1]http://m.manager-magazin.de/unternehmen/autoindustrie/a-1082...
Why would they even sell the cars, when they can rent them out and make much bigger margins ?
Uber's current strength is it's database of drivers, but since we're talking self-driving cars here, that become irrelevant.
It's not like Mercedes or BMW lack brand recognition in the transportation space...
http://qz.com/642648/the-fbi-is-warning-drivers-your-car-may...
Umm, don't they get the cars for free now? How many rides will the cars need drive to break even compared to cheap drivers and no capital cost now?
Though I'll admit the self driving vehicle delivery is probably another level of difficulty than Uber's current capability. But I suspect Uber and the car manufacturer may work on the self driving together.
...
There comes a point at which the helpfulness of technology becomes a form of oppression: walled gardens, predictive services making the wrong predictions, and every social platform forcing us to use our real names. It's cute when it's small, but what happens when self-driving cars can collude with the cops?
https://motherboard.vice.com/read/one-star ( previously: https://news.ycombinator.com/item?id=11149653 )
Self driving cars in our current world, in our current system will not go well. We need changes in the heads first.