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If 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 a

If 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 ago
If 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 ago
  That'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 ago
    This 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 ago
      The 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 ago
      The 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 ago
  Lyft 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 ago
  Lyft 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 ago
  Not 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 ago
    Now extrapolate to a large market Uber needs. They're going to need at least a million cars. That's real money.

toomuchtodo 10y ago

If 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 ago
That'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 ago
  This 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 ago
    The 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 ago
    The 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 ago
Lyft 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 ago
Lyft 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 ago
Not 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 ago
  Now extrapolate to a large market Uber needs. They're going to need at least a million cars. That's real money.