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Comment by skdotdan | Hacker News Reader

Why do Uber investors think that Uber will a) be able to develop all the necessary technology for managing a fleet of self-driving cars before it bankrupts and b) be the only one (or one of the few) that achieves a)?

Uber should have the potential to have a monopoly in self-driving technology in order to justify its current valuation.

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The prevailing theory is that Uber currently controls the customer relationship for ride-hailing, and that inertia will carry them forward.

I personally don't see it. Uber has already begun being disintermediated. For example, ride-sharing is already an option in Apple Maps on iOS where Uber sits alongside Lyft and any other ride-hailing apps on your phone, price comparison and all. You can also hail a ride with Siri. As a rider, why would I care whether my ride is dispatched by Uber or Lyft? I only care about availability and price. At some point in the future, I probably won't even need to install a competitor's app on my phone; I'll ask Apple Maps or Siri to get me a ride and it will dispatch a car from whichever service is faster and/or cheaper.

Uber has a plausible route to winner-take-all dominance as long as ride-hailing remains a two-sided market, where competitors have a chicken-and-egg problem in recruiting drivers and riders. But self-driving changes the game.

> I only care about availability and price.

If Uber reached the critical mass of creating gridlock almost exclusively consisting of (idling) Ubers, an idling competitor two blocks away would not win the availability metric for your next ride. Unlikely to happen, except maybe in a few particularly overrun city centers, but that's one way they could do it. (Can't think of a different one, I don't believe that they will win their bet)

Well, they could try to have the monopoly in the self-driving technology, but it seems implausible.

Uber has struck a partnership with Daimler to host Daimler's (hypothetical) self driving cars on Uber's ridesharing service, and they could strike similar partnerships with other Autonomous vehicle providers. So should Uber fail to develop their own AVs, that's one alternative model. Alternately, they could license the technology from Intel (which recently acquired Mobileye at a whopping $15 billion). These options may be suboptimal to vertically integrating the hardware, software and services under one company, but it's better than death.

But Uber is in 400-something cities worldwide, it'll be a long time before Robotaxis reach market saturation everywhere, it'll require millions of autonomous fleet vehicles to do that. One advantage that Uber has over a traditional automaker entering the space is that Uber can, at the outset, use autonomous vehicles to augment human driven networks. If a company such as Ford, say, cannot provide enough robotaxis to meet demand in a given locale, then their network won't be reliable and it'll just piss off customers. Uber won't have that problem, their network of human drivers will always be able to fill in gaps in service.

A lot would have to go wrong for Uber to be displaced entirely. We can only guess as to what the demand for autonomous rideshare will ultimately be, but it could easily be 10x, or even 100x what the demand for conventional rideshare ever was.

Although even amongst rideshare companies, both Lyft and Didi are looking more interesting. Didi has secured $5 billion in new capital and will likely be making some high profile AV start-up acquisitions out of their Silicon Valley office soon, and will be partnering with some Chines automaker to bring robotaxis to Asia. Lyft has a secure partnership with GM, the most exciting developer of L4 out there at the moment, given that Cruis automation is making dramatic progress using the Chevy Bolt platform, the first long range mass-market electric vehicle to go into production.

That's a fair point.

Assuming the tech is in place and there are many otherwise equal firms entering the market, Uber would have a competitive advantage from their pre-existing customer base. Plus already having the tech in place for arranging the trip. Does that justify their valuation? Maybe, maybe not. Even if some other firm beats them to market with driverless tech, they can always buy driverless cars from that company, or that company may buy Uber just for access to the ready made market. But it's all very theoretical and far off, so I'd say it probably doesn't justify the valuation. Their ability to pivot to actually profiting off their current services is what probably matters most to their near term valuation.

But do you think that Uber has a moat?

I don't care if it's Uber, Lyft or whatever. Installing an app and adding your credit card doesn't represent a huge switching cost, only a little friction.

The point of Uber is that they have many drivers. They have economies of scale on the supply side.

But if the self-driving technology becomes a commodity, consumers no longer will care whether it's Uber or Gett.

Exactly. I could see them keeping a large userbase, since users have inertia (speaking for myself - I'm yet to try their competitor, despite having the app installed). But like the King in the Little Prince, they only have that position as long as they don't actually take advantage of it. They'll have to keep slim margins to avoid losing users, which doesn't bode well for the investors.

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