Uber/Lyft have defective business model?

[Cigarbutt]

"I would guess scheduling and routing algorithms are not trivial. Is that enough of a moat, I don't really know."

"Also, people will order through some portal, so you'll have to pay for your car to be included in one. So perhaps portal with no car fleet will win. Who knows."

 

Reflecting on the airline industry, over time, profitability (cyclical) has often been linked to superior "scheduling and routing algorithms". As road transportation becomes more commoditized, it is hard to imagine that the coordination activity will be separated from the fleets of vehicles.

 

Who knows who will win long term, but I wonder if the moat won't be passed on to the end-consumer in correlation to what I imagine to be continued deregulation and free markets.

 

Then again, the airline industry has been referred to before as a death trap, in terms of investment returns, only now to be considered a reasonable investment since it is felt that the industry will show more than ususal capital and operational discipline (?).

 

 

[Jurgis]

Then again, the airline industry has been referred to before as a death trap, in terms of investment returns

 

I would not invest in Uber/Lyft even though I posited that they might have some kind of moatiness. There's definitely a number of outcomes some of which are pretty disastrous for Uber/Lyft.

[StevieV]

I think that’s a fallacy. Having a huge fleet of cars is going to be expensive to set and expensive to mantain - It’s today and it will always be. Having a real and huge network of cars/drivers on demand an the digital ecosystem supporting that network is the most valuable thing here.

 

As mentioned in my post, I think car companies themselves and rental car companies are natural competitors.  Car manufacturers should have some advantage by making the cars and rental car companies do maintain a large fleet of cars.

Uber/Lyft don't maintain any fleet of cars today.

 

 

Just as anybody can replicate the ITunes’ model (but in reality is not just that easy!), anybody would be able to replicate Uber’s model but it’s not going to be that easy!

 

I don't think Uber's current model is easy to replicate, but I think the AV one will be easier.  At least because the two-sided network mentioned above, will become one sided.

 

-------------------------------

In any event, I don't think the margins will be there.  As I understand it, right now, Uber loses a ton of money, and that is without a very good deal for drivers.

 

I think the question/proposition above was that the company or investors or someone says that they can make money with a shift to AV.  So, AV has to be not be better than the human driver model.  It may be better from a customer standpoint, but I think it will be easier to replicate and, so, a tougher business for Uber.

 

Could be wrong for a lot of reasons.  Uber could be under-earning during its growth phase and it could be profitable today.  Perhaps they will have a subscription model that will reach such scale that it will be difficult to compete.  Perhaps other competitors won't enter the market.  Lots of other things I could be missing.

 

But, if I had to guess, I'll stick with my original answer.

[rkbabang]

 

I am also going to guess that a fully autonomous car is going to cost at a MINIMUM $50k.  What if these cars cost $75k or $100k?  They are going to buy a very expensive piece of machinery to capture $8/hour in profit (maybe?).

 

 

Autonomous cars will kill Uber/Lyft.

 

Why wouldn't I take out a loan, have the car drive itself for the 22 hrs/day when I don't use it myself, and capture that $ myself?

 

And how are people going to find and call your personal car to them if not through the Uber or Lyft app?

 

That's Uber v3.0 after they figure out owning and maintaining a massive fleet of AVs is an expensive, low margin proposition. Uber 3.0 will connect your car with customers where their platform just acts as a middleman. Like the current version but without the drivers demanding better wages. WSJ headline circa 2032 - "MIT Study Reveals Autonomous Vehicles are Working Well Below Minimum Wage"

 

All fine and good until the robots unionize, then we’re screwed.

[LC]

 

Also, people will order through some portal, so you'll have to pay for your car to be included in one. So perhaps portal with no car fleet will win. Who knows.

 

Open source network traffic algorithms exist. Google hosts the platform a la google maps. Cheap and easy.

[DanielGMask]

I think that’s a fallacy. Having a huge fleet of cars is going to be expensive to set and expensive to mantain - It’s today and it will always be. Having a real and huge network of cars/drivers on demand an the digital ecosystem supporting that network is the most valuable thing here.

 

As mentioned in my post, I think car companies themselves and rental car companies are natural competitors.  Car manufacturers should have some advantage by making the cars and rental car companies do maintain a large fleet of cars.

Uber/Lyft don't maintain any fleet of cars today.

 

 

Just as anybody can replicate the ITunes’ model (but in reality is not just that easy!), anybody would be able to replicate Uber’s model but it’s not going to be that easy!

 

I don't think Uber's current model is easy to replicate, but I think the AV one will be easier.  At least because the two-sided network mentioned above, will become one sided.

 

-------------------------------

In any event, I don't think the margins will be there.  As I understand it, right now, Uber loses a ton of money, and that is without a very good deal for drivers.

 

I think the question/proposition above was that the company or investors or someone says that they can make money with a shift to AV.  So, AV has to be not be better than the human driver model.  It may be better from a customer standpoint, but I think it will be easier to replicate and, so, a tougher business for Uber.

 

Could be wrong for a lot of reasons.  Uber could be under-earning during its growth phase and it could be profitable today.  Perhaps they will have a subscription model that will reach such scale that it will be difficult to compete.  Perhaps other competitors won't enter the market.  Lots of other things I could be missing.

 

But, if I had to guess, I'll stick with my original answer.

 

Rental car companies may be competitors, that’s certainly a possibility. My way of looking at this is that even though there are companies owning the rights to some music or movie, there are others having the distribution channel necessary to market that. The same way that some company owning the technology to make the best cellphone is not necessarily the same selling the most phones.

 

Just because there are companies manufacturing cars that doesn’t mean they will be good marketing or providing a service with those cars, not that they will be able to compete with the leader. History proves that manufacturers are good doing that, manufacturing (and not even that!).

 

About the business sense and margins I don’t know. I haven’t studied the model and I would not bet on any company, I’m just stating that I think there will be money to make in moving people within cities and towns and Uber looks like the leader.

[Pelagic]

Anyone else follow the bike sharing/rental space? Broadly speaking I feel the various competitors in the bike rental sector are where Uber/Lyft will be if/when autonomous vehicles become common place. Each has to maintain a massive inventory of bicycles and concentrate them in locations that best match demand. It's a race for each company to move into new cities and areas where demand is underserved and be the first in the market establishing what passes for a moat in the sector because people in that area have your app on their phone and are used to using your bikes. I think a lot of parallels exist between the current state of competition in this space and where Uber/Lyft and other ride sharing companies could end up, racing to establish themselves as the sole player in numerous smaller markets while pouring capital into more competitive markets.

 

https://news.crunchbase.com/news/alibaba-bets-866-million-can-win-chinas-bike-race/

 

[DTEJD1997]

Hey all:

 

I am listening to a news segment on WJR about Uber in Tempe AZ.  Turns out one of their self driving vehicles struck and killed a pedestrian about 10PM Sunday night.

 

I can't even imagine how a big a lawsuit this is going to be.

 

Uber has shut down all of their self driving vehicle testing programs at this point.

 

This is going to be HUGE setback for Uber's self driving vehicles.  It is going to damage the company.

 

Will the public tolerate more than a couple/few fatalities in the testing of these vehicles?

 

I think this is just another piece of evidence that Uber has a defective business model.

[Cigarbutt]

"Will the public tolerate more than a couple/few fatalities in the testing of these vehicles?"

 

Delicate topic. Pedestrian death due to a car impact is a tragedy.

 

I agree with a lot of what you say but here are some nuances.

 

“Roadkill” has been an American term used for millions of animals that are victims to automobiles every year.

 

When « road engines » hit the road in the late 1800’s, they got the label of an evil machine as the car became the innovation, among others, that would prevail as the unavoidable substitute to horse-drawn carriages. From the perspective of the late 1800’s, motorized vehicles met a very strong demand for better and more efficient mobility. However, before it became a basic necessity, as it slowly became mainstream, it gave rise to significant popular discontent as accidents were common and many fatalities occurred. Especially outside urban centers, cars (and their owners) were met with fear and even hatred. Stones were thrown. Guns were seen. Cars came with dust, smell, noise and eventually pollution but, at the beginning, sadly, it became clear that cars were also the cause of auto accident victims. But various attempts to stop the widespread use of cars failed. In 1906, President-to-be Woodrow Wilson said: "nothing has spread socialistic feeling in this country more than the use of automobiles. To the countryman they are a picture of arrogance of wealth with all its independence and carelessness." Ford then came around and made the cars affordable for the masses. Cars (and the drivers) continued to kill but became mainstream America.

 

In the American ideology, “roadkill” has also become a label for anything and anyone standing in the way of the relentless march of destiny.

 

The above is my summary of a very interesting book with an excerpt following below.

 

www.press.uchicago.edu/Misc/Chicago/467412.html

 

Motorized cars conquered public opinion because its utility became larger than the consequences and measures were taken to maximize utility and minimize consequences.

 

Will it always be this way? I don’t know.

 

Will autonomous cars become standard practice? I don’t know.

 

Last time I checked (2015 numbers), a US pedestrian is killed in a traffic-related crash every 1,6 hours and a pedestrian is treated in an emergency department for non-fatal crash-related injuries every 4 minutes. In another life, I was intimately involved in the management of the after-effects from these accidents.

 

These are tough issues. Hope that helps for a serene discussion.

 

 

[Gamecock-YT]

it looks like the bike in the WSJ picture is here on google maps:

 

 

https://www.google.com/maps/@33.4369934,-111.9429875,3a,37.5y,102.55h,81.01t/data=!3m6!1e1!3m4!1scUyILaxFs5z63AL2SupCJw!2e0!7i13312!8i6656

 

what is interesting is the bike lane and the turning lane practically 'switch'. A car heading northbound on Mill Ave and turning right on Curry Rd would cross into a bike rider going from the 'shoulder' bike lane when crossing the previous bridge to a bike lane at the intersection which is towards the middle of the road. Impact to the car is to the front right quarter panel, which would lead to that scenario making sense.

 

EDIT: Reports say she might have been trying to reach the island in the middle of the road instead?

[Cigarbutt]

Thought this was relevant.

https://www.usatoday.com/story/opinion/2018/04/18/self-driving-cars-uber-tesla-column/522623002/

It's about difficult transitions.