It turns out, with all apologies to Philip K. Dick, robot cars have no need to dream of electric sheep and can drive all night long. And this sci-fi-to-reality moment that many Uber drivers have feared was coming is now here:
The ride-hailing juggernaut’s customers can now hail a self-driving Uber in Pittsburgh.
But the debut of robot cars should not come as a surprise either, since Uber CEO and co-founder Travis Kalanick predicted in 2014 in an interview at the Code conference that the end of human drivers was eventually nigh.
“And when those bad boys are made, look, the way to think
about it, the magic of self-driving vehicles, is that the reason Uber
[is] expensive is because you’re not just paying for the car, you’re
paying for the other dude in the car,” said Kalanick, in a moment of
bare-knuckles candor. “And so, when there’s no other dude in the car the
cost of taking an Uber anywhere becomes cheaper than owning a vehicle
... And of course that means safer rides, that means more
environmentally friendly, that means a lot of things.”
“Look, this is the way the world is going,” Kalanick in
answer to how he might explain it to Uber drivers who might lose their
jobs down the road. “The world isn’t always great.”
After much negative blowback at the remarks, Kalanick tried to assuage drivers with a tweet:
But, only two years later and not 15, those robot cars are now deployed by Uber on the road in Pennsylvania.
It’s still not as futuristic as all that though. Hailing a
self-driving Uber is still a lot like hailing a regular Uber at the
moment, although it’s only available to Uber’s most “loyal” customers at
first. If a self-driving car is available when one of these customers
hail an UberX, they will be greeted by a car with close to two dozen
cameras and sensors, along with one engineer and one “safety driver” in
the front seats. Customers input their destination, the car drives
itself there, with the safety driver only taking over if the system
needs it to.
While this is the big and potentially scary moment, to be sure, a lot still has to happen before Uber drivers become completely obsolete. Such as: Self-driving cars have to become legal to drive without a safety driver; users will have to want
to get in a self-driving Uber; and, perhaps most importantly, Uber will
have to buy and trick out enough cars with self-driving technology to
make it worth the investment.
What’s most striking about the effort, though, is that it
is probably the first time that Uber will actually own physical assets.
Before beginning to deploy its self-driving cars, Uber
neither employed drivers nor owned any cars, operating in a completely
virtual manner. That doesn’t necessarily mean Uber’s operating costs
were low — they spend money on everything from research and development
to discounting worldwide to hiring lobbyists — but it did mean that Uber
figured out a way to avoid adding drivers’ employee benefits and car
ownership, maintenance and insurance to those costs.
That’s clearly all about to change.
As part of its partnership with Volvo, Uber bought 100
XC90s that it hopes to retrofit with self-driving technology and have
driving down the streets of Pittsburgh by the end of the year. While
it’s probable that Uber bought the Volvos at a discount, the 2017 XC90s
start at $45,750. And that is without all the pricey self-driving
technologies added on.
Presumably, if initial efforts work, Uber will continue
to buy cars and retrofit them with its own self-driving technology as
the company ramps up its fleet of driverless cars. Whether it’s from
Volvo or another automaker, Uber will likely have to buy, maintain and
insure its own cars.
As complex as that will likely be for the company, it still may be more economical than paying drivers.
Today, Uber pays drivers 65 to 80 percent of each fare,
so for every dollar a driver brings in, Uber only takes home 20 to 35
cents. Eventually, when drivers are replaced by robot cars, Uber could
capture close to 100 percent of the fare.
For example, if a driver performs 100 rides at $5 a ride,
Uber will take home $100. With Uber’s new “drivers” — the robot cars —
the company will take home close to $500.
The robot cars will also likely do those 100 rides in a
shorter time, because it only has to stop to recharge or refuel.
Self-driving cars can also be on the road non-stop potentially, racking
up more fares in the same time, unlike human Uber drivers who are
limited to driving 12 consecutive hours.
For startups, one important metric to prove is fast
growth, which is what investors are ultimately betting on. Generating
four times more revenue per fare would certainly help that, even if the
costs to growing the top line are also higher initially.
These cars, however, will also rack up more miles and
consequently wear and tear much faster than today’s cars, which in turn
might mean Uber will have to replace them faster.
Still, the economics in favor of the robot cars could be compelling.
On June 25, 2016 in New York City,
for example, Uber had nearly 30,000 drivers and performed close to
180,000 rides that day. It doesn’t necessarily mean that all its drivers
were active, but if one self-driving Uber does 100 rides a day — a very
doable four rides an hour — then Uber would only need 1,800 cars.
The company is also not under much pressure to completely
make up the cost of buying each car immediately, because it can spread
out that cost over several years. But it will have to reallocate much of
the capital it once spent on things like competing in China and
attracting and retaining drivers to buying actual cars.
While this is just a small, single-city test for Uber —
experiments that will be happening more and more across the world by a
range of players — it creates a host of controversial but inevitable
issues from the prospects of computers increasingly replacing humans to
questions about liability and safety to declines in car ownership to the
cascade of industries (insurance, gas stations, car makers and more)
that are impacted by the changes.
And while were not in the Blade Runner future yet, it’s just one more step toward it.
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