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Why wouldn't Toyota just launch Toyotas On Demand? If the cost of the car and fuel are the only significant costs, Toyota could probably do it more cheaply than

Why wouldn't Toyota just launch Toyotas On Demand? If the cost of the car and fuel are the only significant costs, Toyota could probably do it more cheaply than Uber. Uber's network effect is its driver network. It will find it a lot harder to compete if you no longer need drivers, when it has to compete with real car companies that could be able to undercut them on cost.

kbenson 10y ago
> Toyota could probably do it more cheaply than Uber. I agree. The fact that autonomous cars will likely reduce ownership will put a squeeze on car companies, and it might make sense for them to branch into service areas, as they can get the cars at cost. I guarantee that for 10,000 Camrys purchased by Uber and 10,000 Camrys built and shuffled to a ride service division by Toyota, Toyota's ride-sharing division will get the sweeter deal on price. Put another way, it's much easier for Toyota to start a ride service company than it is for Uber to start manufacturing cars to get them at cost.
- linkregister 10y ago
  I think that is suboptimal vertical integration. Hertz is a fleet buyer for a good reason; it doesn't want to be reliant on its Hertz Automotive subsidiary to meet a production quota. It doesn't want that capital expenditure. It wants to buy cars at volume and sell them as they depreciate.
  - readams 10y ago
    Hertz lives in an equilibrium where lots of people buy and operator their own cars. Autonomous cars may well move us to an equilibrium where most people do not own cars and instead rely on services. That totally changes the economics of the situation.
    - linkregister 10y ago
      How does it change the economics of the situation? More volume or shorter rentals? Would having more frequent rentals mean that rental companies would want to produce their own cars?
  - kbenson 10y ago
    > It doesn't want that capital expenditure. Ah, but the car companies have already expended that capital. The problem here is they will have a lot of building capacity from all the factories they own, and possibly less to build with that capacity. There's nothing stopping them from buying extra needed capacity from another company, but in the meantime it may help them fill the lack of utilization they may see. At some point, some factories will need modernization as normal, and they can choose at that point to reduce factory capacity. The point is that it's a possible strategy to get them from point A to point B when they've already banked heavily on certain future production trends if they've overestimated.
- EdHominem 10y ago
  It isn't efficient for Toyota to fully stock every city in the world for peak demand, and yet that's what they'd have to do to compete with the surging multi-manufacturer fleet of Uber.
  - MagnumOpus 10y ago
    They don't need to stock for peak demand. They don't need a monopoly (nor will they be permitted to get one). To succeed worldwide, they simply need to be as good as Uber, but cheaper. And if the capital cost of the car becomes half of the cost base of taxis, a 10% saving matters.
    - EdHominem 10y ago
      To get as big as Uber means they need to be as convenient which means that there's always a car available. Uber handles that by being multi-brand, and by incentivizing their fleet with surge pricing. Toyota would have to prepare for worst-case load and let those cars sit idle to keep them available. And they'd have to do that in almost every city in the world or their app would just be another local annoyance. Also, if you order a Toyota and a Ford shows up you're going to laugh and tweet it. On the other hand, it does give them a stable production target which would level out manufacturing spikes...
      - kbenson 10y ago
        > On the other hand, it does give them a stable production target which would level out manufacturing spikes... That's the underlying assumption I was working with. If they've invested heavily in production yet they see a downturn in individual ownership, it's a way to capitalize on that resource (factories) to stabilize production until some factories reach end-of-life and have theoretically paid for themselves. Factories which require large capital expenditure are not something you want to see sitting idle. Every year is another year where the tooling is becoming more obsolete.
btian 10y ago
Demand for new cars will fall off a cliff. People will still buy Rolls-Royce or Mercedes S-class for the comfort, but most Toyota customers don't care if they're car pooling with 3 other people or sitting in a car that's not their own.
Roybot 10y ago
I take it that Uber is betting on being thee brand for ride sharing. Maintaining market leadership is critically important for when autonomous cars take off. Even if any car manufacturer were able to undermine Uber on cost, Uber will already have a significant upper hand with people already seeing it as the company you call to get somewhere. The only question I ask myself when looking to go somewhere is, Uber or Lyft? If car manufacturers tried to clone what Uber has built they'll probably flop on making the technology usable, and the experience may just be overall frustrating.

kbenson 10y ago

> Toyota could probably do it more cheaply than Uber. I agree. The fact that autonomous cars will likely reduce ownership will put a squeeze on car companies, and it might make sense for them to branch into service areas, as they can get the cars at cost. I guarantee that for 10,000 Camrys purchased by Uber and 10,000 Camrys built and shuffled to a ride service division by Toyota, Toyota's ride-sharing division will get the sweeter deal on price. Put another way, it's much easier for Toyota to start a ride service company than it is for Uber to start manufacturing cars to get them at cost.

linkregister 10y ago
I think that is suboptimal vertical integration. Hertz is a fleet buyer for a good reason; it doesn't want to be reliant on its Hertz Automotive subsidiary to meet a production quota. It doesn't want that capital expenditure. It wants to buy cars at volume and sell them as they depreciate.
- readams 10y ago
  Hertz lives in an equilibrium where lots of people buy and operator their own cars. Autonomous cars may well move us to an equilibrium where most people do not own cars and instead rely on services. That totally changes the economics of the situation.
  - linkregister 10y ago
    How does it change the economics of the situation? More volume or shorter rentals? Would having more frequent rentals mean that rental companies would want to produce their own cars?
- kbenson 10y ago
  > It doesn't want that capital expenditure. Ah, but the car companies have already expended that capital. The problem here is they will have a lot of building capacity from all the factories they own, and possibly less to build with that capacity. There's nothing stopping them from buying extra needed capacity from another company, but in the meantime it may help them fill the lack of utilization they may see. At some point, some factories will need modernization as normal, and they can choose at that point to reduce factory capacity. The point is that it's a possible strategy to get them from point A to point B when they've already banked heavily on certain future production trends if they've overestimated.
EdHominem 10y ago
It isn't efficient for Toyota to fully stock every city in the world for peak demand, and yet that's what they'd have to do to compete with the surging multi-manufacturer fleet of Uber.
- MagnumOpus 10y ago
  They don't need to stock for peak demand. They don't need a monopoly (nor will they be permitted to get one). To succeed worldwide, they simply need to be as good as Uber, but cheaper. And if the capital cost of the car becomes half of the cost base of taxis, a 10% saving matters.
  - EdHominem 10y ago
    To get as big as Uber means they need to be as convenient which means that there's always a car available. Uber handles that by being multi-brand, and by incentivizing their fleet with surge pricing. Toyota would have to prepare for worst-case load and let those cars sit idle to keep them available. And they'd have to do that in almost every city in the world or their app would just be another local annoyance. Also, if you order a Toyota and a Ford shows up you're going to laugh and tweet it. On the other hand, it does give them a stable production target which would level out manufacturing spikes...
    - kbenson 10y ago
      > On the other hand, it does give them a stable production target which would level out manufacturing spikes... That's the underlying assumption I was working with. If they've invested heavily in production yet they see a downturn in individual ownership, it's a way to capitalize on that resource (factories) to stabilize production until some factories reach end-of-life and have theoretically paid for themselves. Factories which require large capital expenditure are not something you want to see sitting idle. Every year is another year where the tooling is becoming more obsolete.

btian 10y ago

Demand for new cars will fall off a cliff. People will still buy Rolls-Royce or Mercedes S-class for the comfort, but most Toyota customers don't care if they're car pooling with 3 other people or sitting in a car that's not their own.

Roybot 10y ago

I take it that Uber is betting on being thee brand for ride sharing. Maintaining market leadership is critically important for when autonomous cars take off. Even if any car manufacturer were able to undermine Uber on cost, Uber will already have a significant upper hand with people already seeing it as the company you call to get somewhere. The only question I ask myself when looking to go somewhere is, Uber or Lyft? If car manufacturers tried to clone what Uber has built they'll probably flop on making the technology usable, and the experience may just be overall frustrating.