10 ms·
Basic question here, but what happens when the war's over and the subsidies end? Prices jump by several dollars a ride? Or is there some kind of economy of scal
by abalone 10y ago
Basic question here, but what happens when the war's over and the subsidies end? Prices jump by several dollars a ride? Or is there some kind of economy of scale or lower overhead that the winner enjoys?
- hkmurakami 10y agoIf they own their own fleet, they can negotiate all sorts of things. Think of the prices Walmart gets for the exact same good they sell, vs say, Safeway. One analogue is rental car companies getting steep discounts: https://www.bostonglobe.com/business/2016/05/18/sees-sales-tumbling-automaker-shuns-rental-car-market/p4Nt4qBhMH5OpCwzdAzopL/story.html https://www.bostonglobe.com/business/2016/05/18/sees-sales-t... Operational efficiency is another. Southwest Airlines iirc was (one of) the first discount airline by virtue of their superior aircraft turnaround times. If a rideshare company can dramatically increase the ratio of time carrying a passenger (or multiple) vs carrying none, they can spread their fixed costs (or even the variable ones, if carrying multiple passengers) over a larger denominator.
- toomuchtodo 10y agoIf Uber or Lyft have to own their own fleet, they are (pardon me) screwed. It blows their cost model away with how much capital is required, as they currently hoist the extensive depreciation on drivers who own their own vehicles. Not a lot of VCs jumping into Fedex or UPS type businesses when you actually have to invest in a transportation network. Tesla Network might pull it off with their customers footing the capital costs (instead of Tesla needing to go into the markets to scoop up another few billion dollars in credit lines).
- eaurouge 10y agoThat's not true. Driver's share of a car's annual revenue is necessarily greater, actually significantly greater than annual depreciation on the car. With autonomous cars, the driver's share goes to Uber, as does cost of depreciation. But that cost is only a small fraction of the additional revenue coming to Uber. In fact, I'd go as far as to say that, at current ride rates, Uber/Lyft would be able to replace/refurbish autonomous cars on an annual basis. Of course, rates will fall with autonomous cars, but not below the cost of depreciation.
- AlexandrB 10y agoThis doesn't address the problem at all. Fleets of physical cars do not scale like Uber's business does right now. A fleet would represent a huge capital investment in the cars themselves and in infrastructure like parking and service garages for all these vehicles. This is a vast sum of money that would now be tied up in illiquid, depreciating assets. Not to mention that it would take many years to build out such a fleet. Expanding the fleet to a new city now means buying land, building facilities, hiring mechanics and admin staff, and buying the cars. At this point Uber would look more like UPS - with UPS-like growth - than a tech company. All the while, unless they raise prices significantly, they're still losing money.
- justincormack 10y agoThe car companies may finance them, in order to get their models sold. Car companies have always been huge financing operations, and cars are reasonably good in terms of debt finance, as they are relatively easy to repossess and resell.
- eaurouge 10y agoThe one valid cost you've mentioned would be the cost of parking all those cars. A couple of points. Cars in service don't need parking, obviously. They're either ferrying passengers or on their way to the next fare. And, as demand for transportation drops on a given day, parking availability increases and parking costs drop. Finally , a car being removed from service, on a given day, may be sent to low-cost parking, far from expensive urban centers. Many Uber/Lyft drivers do this currently and still make a profit. The cost of infrastructure and automechanics, etc, is spread across the fleet. That's the benefit of operating at scale - economies of scale. You don't lose money merely because you're operating at scale, that's not how it works. What would it cost you to maintain a Prius? How about 100 identical Priuses? It's not 100x. Finally, the comparison to FedEx/UPS is flawed. Those guys don't just have a fleet of trucks to maintain, they have to deal with shipping centers, hubs, air transportation, multi-day package tracking, and the logistics nightmare that's involved in doing all that and still getting packages delivered. They'd rightfully tell you managing their fleet is the least of their concerns.
- FanaHOVA 10y agoLyft lends cars to their drivers in LA already; drivers can use them for free while working and then pay per mile when they drive it on their own time.
- FanaHOVA 10y agoLyft lends cars to their drivers in LA already; drivers can use them for free while working and then pay per mile when they drive it on their own time.
- ebiester 10y agoNot as much as you might think. Car rental companies buy in sufficient bulk to get discounts deep enough that they sell at a profit in good markets. Fleet maintenance and self-insurance is an issue, to be sure, but it's not the same as Fedex or UPS.
- jasonlingx 10y ago> If Uber or Lyft have to own their own fleet Uber already owns thousands of cars in Singapore.
- toomuchtodo 10y agoNow extrapolate to a large market Uber needs. They're going to need at least a million cars. That's real money.
- elchief 10y agoUber's plan is monopoly
- pslam 10y ago"The directors of Lyft and Uber are legally required to maximize profit for the respective shareholders." This is utterly not true, and even companies like Google have (had?) it specifically written into their shareholder prospectus that this wouldn't be the case. Companies which maximize profit at any cost are doing it because they want to not because they have to. http://www.nytimes.com/roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/corporations-dont-have-to-maximize-profits?nytmobile=0 http://www.nytimes.com/roomfordebate/2015/04/16/what-are-cor...
- eva1984 10y agoUber already bumped its price in South Bay by somewhere as much as 50%(my daily ride from $14 to $17 then to $20) from my experience. Now I only use Uber Pool since Uber X in comparison is like 2-3 times more expensive.
- foobarbecue 10y agoMy ride to work was usually $2 on pool in Nov 2016. It's usually $7 or $8 now.
- preetish 10y agoIn Bangalore they were running a campaign last week; UberPool used to cost about a dollar for daily commute (to and fro).
- astrange 10y agoThe Uber Pool prices are still obviously fake - it's half the price of UberX for the same long trip even at 4am when nobody else gets in the car. Lyft Line is a discount but a much smaller one.
- BinaryIdiot 10y ago> The Uber Pool prices are still obviously fake - it's half the price of UberX for the same long trip even at 4am when nobody else gets in the car. I wish this were the case. Well, at least for me. I'm in the East Bay and Uber X versus Uber Pool is no question because Pool is $2 cheaper AT THE MOST, typically closer to a $1.50 cheaper. That's for a trip that typically costs roughly $15. I'm curious how they determine their Pool prices.
- th3rooki3 10y agoUber and Lyft don't make money until they're able to replace their drivers with autonomous cars. 80% of an Uber fair goes to the driver, so once they are able to replace the driver with an autonomous car, there's no reason why competition between the two companies would not drive fare prices down.
- foobarbecue 10y agoDon't confuse the fare with what's fair...
- yabatopia 10y agoAt the current burn rate, they will be bankrupt long before the widespread deployment of autonomous cars is a reality. Even if that takes only a decade, good luck finding the funding to keep covering the losses.
- zepn 10y agoProbably true, but these companies will be among the first to deploy; no need to measure against general "widespread deployment". There are autonomous taxis already, albeit not quite yet in the wild.
- beagle3 10y agoThere is no autonomous car that has been certified to be without someone who can drive it inside - and it's likely that such certification is still a few years away. I would guess it will take 2-3 years of cars driving on their own with hardly ever any need for a person to intervene before such certification is given. In my city there are many small streets with bad traffic and environment, that at least once a week I need to verbally negotiate with other drivers who goes first and who goes back. If all cars are autonomous, they may negotiate that; But if only half are, I don't see how this will work. Most US cities have the benefit of being built for cars; But most European cities do not; and even in the NYC, there are weird small streets that often require negotiation among drivers.
- imh 10y agoThe prices will go up and then, at least in the bay area, some time will pass, then some other ride share company with a slightly different take on things will start with their own VC subsidized business model. We'll all switch to it, bemoaning how Uber/Lyft used to be so much better before they got greedy and raised the prices.
- SerLava 10y agoReminds me of image hosting services and social sites. Oh I'm sure we can make money with all these users. I mean there are so many of them. We just have to wait until the incumbent starts collapsing, and burn money until we start collapsing, and someone else figures all those users must be worth something, so they start burning money, and...
- oblio 10y agoThe problem with this comparison is that image hosting services have a really low social and political impact. Ride sharing on the other hand... can't really be a giant Ponzi scheme.
- weego 10y agoCost will rise, their marketing budgets will balloon as costs to acquire customers spirals out of control. Then as a two horse race they will realise that if they merge their marketing budgets can be slashed and then they become the monster they dreamed of killing.
- disordinary 10y agoAnd then we will be regretting the fact that they killed off the taxi companies who, in some cities at least, were in a very competitive but sustainable market before uber came along.
- dnautics 10y agoCompetitive and sustainable? Tell that to the non-owners taxi driver suffering under exploitative commission structures and has to rent their car from an intermediary to even begin to make money.
- cel1ne 10y agoCan both of you, give an example where classic taxi-drivers are in a particulary bad position and being helped by lyft & uber and an example where it's the other way round?
- disordinary 10y agoThat's why I said in many cities. In quite a few cities the Taxi industry is the only opportunity for immigrants and they're forced to work long hours in rented vehicles for very low wages. That's not good. In other cities the taxi industry requires quite a lot of education and is harder to get into. Where I live Uber drivers are often taxi drivers, they pull the taxi signs off their cars when they get an Uber pickup, despite the fact that we have a fairly exploitative taxi system they say that they get paid less by Uber. Ultimately there are dozens of taxi companies and one Uber, those taxi companies range from very large to tiny but none of them can afford to run sustained losses to knock out competitors like Uber.
- 10y ago
- boto3 10y agoThere is still quite a bit of money in local service advertising. Uber/Lyft can start pushing ads on the riders.