Presumably all of those costs would disappear once someone wins the market or a "truce" is called. Right now both teams are spending like crazy in those areas because they need to have best numbers at IPO time. But once they both go public and the stock prices stabilize I suspect the spending will go down and they will be more profitable.
I'm not sure any single company ever truly wins this market because, as others have mentioned, the barriers to entry are pretty low. Raise VC money to subsidize the most lucrative rides/markets and Lyft & Uber will never be able to stop their spending (either through advertising or through acquiring new entrants).
The ride-share market may wind up like the airlines: heavy utilization but not amazing businesses.
I think that's more or less what I was trying to get at. Once you build your place in the market, competition can and will come along, but you'll be so entrenched, just like the airlines, you can just cruise along (no pun intended) with very little spent on ads or customer acquisition.
It's not like Uber and Lyft aren't still a useful service at 1.5x to 2x current pricing (or whatever is needed to achieve profitability). Traditional taxi services suck in a lot of places. And, OK, at that point the users who only take Uber because of the VC subsidies end up going back to taking the bus. But who cares.
>destroy all local taxi services
Except they haven't. There are still taxis where they make sense as well as private car services. It's hard to see giving it a few more years is going to make much of a difference.
I.e. while someone earning $200K might decode they can afford $20 rides rather than $10 ones, someone making $50K might think differently. The "who cares" when people go back to riding the bus is Uber.
None of this is to argue against the sustainability of the model, just to point out that no one has any idea what would happen. Network effects matter.
I'll let someone chime in who understands the taxi business financials better. But in my observations, Uber and Lyft are only slightly cheaper than taxis. If prices go up, taxi companies will cut into their profits.
I'll also say we (as a society) are very lucky that Lyft emerged as a real competitor to Uber. If one of Lyft or Uber had failed a few years ago, we'd be in a total monopoly situation by now, and "Uber" would have similar meaning as "Kleenex" or "Scotch tape" -- that is, there's only one kind of smartphone ride hailing service and everyone uses it. Maybe that was the play of both Uber and Lyft all along -- stay alive long enough to force the other out and get to monopoly well before autonomous vehicles enter. And they failed. Both are still alive. There is no one firm with a monopoly.
I'm sure it varies. I don't use them much when I travel but my perception is that they're maybe 70% or so of the price of a taxi. So not a huge difference but enough that I usually default to Lyft if there's no reason not to.
I agree about the competition. Though that's US-specific. Uber may operate under more regulation generally in Europe but I don't have a lot of personal experience.
A taxi from my home to/from the airport is $50-$55 with tip. Uber is $20-$25 non surge (which is most of the time). Before Uber, on an outbound I would always have a friend take me or drop me at BART. On the return, since the taxi is right there, I would take it about half the time.
Now I take Uber/Lyft almost all the time. I'm not sure what I'll do when/if Uber goes up to $50.
Taxis can't undercut them. Even if Uber were 2x as expensive, that would be ok because Taxis are 4x worse.
It really depends. One city I travel to fairly regularly, I tend to take Lyft because it's cheaper but I'm really indifferent to taking a cab vs. taking a Lyft for any other reason. In fact, I sometimes take a cab from the airport if there's no line and cabs just sitting there because it saves a few minutes.
Yes, taxis are generally bad in quite a few cities but it's not universal.
Drivers could have something similar where they see all the opportunities and potential fares across platforms in one app. What do they need? A list box to select the fare, then a map with reasonable routing, and a pay processor.
I think the endgame is to dump the stock on the public market so investors and execs can cash out and mission accomplished. I don't think there is any viable long term plan.
If you subsidize driving and subsidize riding significantly, people will sign up. A $40 bonus covers several rides for a customer so they'll hold onto the app at least until they've used their initial free offering.
There's probably some critical mass for these services to work well and that's going to have at least some effect on whether it makes sense for a new entrant.
Lots of people are still going to own cars, especially as you get to less dense areas where parking isn't difficult or expensive and cars are needed on a daily basis to go places, store things, etc.
What possible advantage, other than fleeting brand recognition, does Lyft or Uber have in a world where self-driving is a standard car feature? Why wouldn't Avis, Hertz, National, <insert new or existing fleet management company here> operate those short-term rentals? Or even the car manufacturers--although based on past behavior--they probably are primarily interested in building cars.
i understand people in dense cities may drive less and some not have a car at all, but a car is people important to anyone outside a city in ways ride share will not replace easily. this has nothing to do with lack of public infrastructure, it’s the benefits of being in control of your time
If you live somewhere that parking's easy, there are a lot of reasons to own your own vehicle which mostly depreciates based on how many miles it's driven anyway. In addition to always having the vehicle available, you can customize it for your needs (sports, kids), use it as a sort of mobile storage locker, install a nice sound system if you're so inclined. If you don't need to drive, I'd expect more people to want a customized work/media entertainment space in their vehicle, not fewer.
Massive fleets of autonomous vehicles transporting people.
People often fall into the trap of seeing Uber and Lyft as a taxi service, they are absolutely autonomous vehicle companies. The human drivers are simply there to collect massive amounts of data, and build brand recognition, while the autonomous vehicle technology comes to maturity.
A self-driving taxi company is going to look a lot like a car dealership that doesn't sell cars, or a lot like a taxi company that doesn't have any drivers. They're going to have a huge number of cars, parking lots to store cars that aren't in use, and technicians to service, clean and fuel vehicles periodically.
Uber has none of these.
Meanwhile, they're blowing through most of their venture capital selling rides below cost.
This does nothing for their self-driving goals, because they aren't acquiring a "market", because there is no stickiness in taxi customers. It just wastes capital they will one day need to buy a huge number of self-driving vehicles and their maintenance facilities throughout the world.
They would be better off sitting on that giant pile of money, or operate as a cash-losing taxi company so they can build out their maintenance facilities with venture capital while having regular drivers drive regular cars (which could also be serving as platforms for data gathering and training machine learning models).
The only theoretical differentiator is price. At the moment VC subsides are removing that as well
People seem to implicitly assume that autonomous driving will make getting driven around really cheap. But all you're really doing is taking a ~minimum wage driver out of the loop. A good starting point for costs is the $0.50ish/mile IRS mileage deduction which is maybe about half Lyft/Uber pricing today. That's a significant difference but I'm not sure it's a radically alter everyone's behavior difference.
No? You'll need charging stations to charge vehicles and will have enough to meet typical demand, when a large event is expected you have vehicles come in from other areas (Indy 500, Superbowl, etc). If vehicles aren't driving people or charging you use them as courier vehicles.
Yes you'll still maintain some in parking structures at some hours but with no driver needed you can pack considerably more into the same space as a vehicle that would require a human being to enter and exit the vehicle to move it.
Kids in their teens and early 20's are losing their desire to drive, individuals are getting their licenses much later. This is already a sign that a carless society is a very real possibility. These companies know that, they're working on taking the human driver out of the equation, they're building brand recognition, they're getting people comfortable with using a driving service (a large portion of the population has never used a taxi or even public transportation, yet within a few years hopping in a car with a stranger became normal) and they're collecting more data on driving and human movement via vehicle than ever before.
>Meanwhile, they're blowing through most of their venture capital selling rides below cost.
They are investing money in collecting data. The data alone they are collecting is worth the money they are burning through. You can't go buy that data from someone because it has never been collected and there's many ways to exploit that data to generate revenue both now and in the future as technologies become available like autonomous vehicles.
Re: venture capital use, there are currently 65,000 Uber-affiliated cars in NYC alone, according to a random search. If you were to replace all of those with self-driving cars at $50,000 a pop, that would be $3 billion right there. You can argue they'll only need a tenth that number because of self-driving efficiencies and because most Uber drivers aren't constantly driving (for comparison, NYC allows ~13k taxies) and claim they'll be able to manufacture a self-driving car for half that, but you're still talking hundreds of millions of dollars for a single market.
To replace their current fleet of sub-contracted drivers with self-driving cars is going to cost billions and billions of dollars. Uber currently has something like $7B on hand and is burning through nearly a billion a quarter.
So 2021 comes around, and self-driving technology has been perfected by Uber, Google, Tesla and Ford.
You are a VC -- or a regular investor if Uber is public -- looking to invest in a self-driving taxi company.
Two companies are seeking $10B to build out their world-wide fleet of self-driving taxis. Would you rather invest in Uber, which has a successful ride-hailing App and an internally built self-driving car and is $20B in the hole on VC investment already, or would you rather invest in a newly formed corporation, Bob's Friendly Taxi Company, which has nothing, and is going to use its VC funds to buy a bunch of self-driving vehicles and develop a new ride-hailing app from scratch?
I said nothing about just having cars that aren't in use driving around... I said offer them for courier/cargo service as well (prepared food, groceries, office supplies, flower delivery, etc). This is just one option for helping to use up unoccupied vehicles.
> there are currently 65,000 Uber-affiliated cars in NYC alone, according to a random search. If you were to replace all of those with self-driving cars at $50,000 a pop, that would be $3 billion right there
All 65,000 cars aren't on the road 24/7/365, NYC is also one market (and one that already has a robust public transportation system, unlike most of the country) and is far from the typical uber market.
> If you were to replace all of those with self-driving cars at $50,000 a pop
Yeahhhhhh, self driving cars aren't going to be 50k when these companies start deploying them. They'll be considerably cheaper.
You're going to have a largely spartan cabin, no wood grain on the dash, no leather, no need for Bose surround with a full-featured infotainment system, just some utilitarian seats, airbags and climate control. They'll be just enough horsepower for adequate city driving and enough battery to operate a few hours between charges.
> but you're still talking hundreds of millions of dollars for a single market.
Uber and Lyft now have to pay a minimum of $17 an hour to drivers in NYC. If they have an average 1000 drivers on the road at any time, that's $408,000 a day. Almost 150 million a year...
Even if a self-driving car only saves half of that, and we go with your random figure of 50k, if they deployed 2000 cars to have 1000 drivers replaced every minute of every day, it takes them about 16 months to recover their investment purely from savings. Likely much faster.
They'll also be able to service vehicles much cheaper than private individuals because all the vehicles are identical, everything will be bought in bulk. Tires for example are a hell of a lot cheaper when you're buying trainloads straight from a factory, fixing mechanical failures are a lot quicker when every vehicle is identical and your internal mechanics have made the same repair tens or hundreds of times and don't have to waste time digging around through Chilton or Haynes manuals to figure out where the manufacture hid this or that on a random year make and model ohhhh wait this was manufactured at the Canadian factory so it's different than the US factory slightly (like my Impala grumble) and not actually pictured in the manual.
>To replace their current fleet of sub-contracted drivers with self-driving cars is going to cost billions and billions of dollars. Uber currently has something like $7B on hand and is burning through nearly a billion a quarter.
Yup, and they're not going to abruptly stop allowing human drivers. They'll enter one market, then two markets, then three markets and as above, they'll be saving money in some that have minimum pay rates required by law for drivers which will allow them to relatively quickly recover their costs without changing pricing at all and many customers will save money because they won't feel they need to tip.
>and is burning through nearly a billion a quarter.
Yeah, radical change often costs a good deal of money before it becomes profitable. Just like exploration, sailing to the new world was a rather dangerous and expensive endeavor until trade routes were finally established for example.
One or both companies may very well fail before they achieve success as autonomous transportation companies, but that's absolutely what they are trying to be.
The main difference between Uber and Lyft is that Uber is already in a lot more cities than Lyft, so if Lyft wants out of the subsidizing game, they either have to settle for being in less cities or somehow significantly outdo Uber in terms of growth cost efficiency when penetrating new cities where Uber/others already operate.