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?
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."
It's likely that they're actually building up a war chest at this point, getting ready for extra spending on self-driving cars.
But at some point there's got to be a limit to the tolerance of investors.
They are waiting for self driving cars to arrive. Not building it themselves.
Once someone does all the hardwork, they just want to buy and use them.
Not going to happen any time soon.
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.
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.
If someone pukes in the car, it's out of service for the rest of the day.
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.
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.
By the time full scale driving AI arrives. I'm sure we will have decently capable robots who can clean this kind of thing.
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.
Wait until others (taxis, Lyft) are out of the market and raise prices?
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.
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.
I bounce around between the two based on whoever gave me a discount.