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But you're replacing low-paid drivers that supply their own cheap cars with very high marginal-cost cars and sensors (and low marginal cost software). Its hard

But you're replacing low-paid drivers that supply their own cheap cars with very high marginal-cost cars and sensors (and low marginal cost software). Its hard to imagine them turning a profit from owning and operating a fleet of cars - it seems like a business model closer to Hertz than Uber, and neither are terribly profitable.

danielmarkbruce 4y ago
On a per mile basis they might not be expensive per car. Hertz and Uber struggle because of competition, not business model. If Waymo is the only self driving player and hence lowest cost mode of transportation, they'll make a fortune. If there are several players, they won't.
- mechagodzilla 4y ago
  They have plenty of competition though - if Waymo is operating a taxi service, they are explicitly competing with Uber/Lyft/traditional taxis/bikes/buses/all the other ways to move around - generally pretty low-margin businesses where their competitors set a pretty strict ceiling on the price you can charge (who would pay a lot more for a waymo ride vs a competitor? maybe some, but not many). Waymo would have high capital costs for the cars, plus still need centralized service infrastructure (re-fueling, re-charging, who cleans a waymo when a drunk person throws up in it?). It would also still have the same problem other companies have - lots of people might want to travel to/from work, and on weekend evenings (or to big events), but not much the rest of the time. An uber vehicle might serve double duty as a personal vehicle during off-peak times (where the driver might even have a different job), but a waymo car needs to pay for itself, so it needs to be driving a lot. I could see them licensing their software to other companies like android auto or something, but that also doesn't seem like a way to print money (how much does android auto earn for google?). It just seems like a very hard business to transition from 'fun software project' to 'clearly profitable independent business.'
  - danielmarkbruce 4y ago
    Agree with most of what you are saying, except that the driver is a big enough component of the cost structure that they should be able to price something like 20% below services that require a car. I just took a $65 uber yesterday which took I think 42 mins. Assuming the driver cost $15/hr and is running at 75%(??) capacity, the labor cost baked into my ride was around $15. If Waymo offered the same ride at $55 (ie leave $5 on the table for some of the issues you highlight), Uber etc are in a lot of trouble.
crazygringo 4y ago
Huh? Seems like the current Waymo cars run a little under $200K with all the sensors. Obviously that's going to come down at scale to something closer to $100K let's say. And yes you can contrast that with a $25K Uber vehicle, but the average US Uber driver makes $42K a year, and since taxis are traditionally split into 3 shifts, we can assume the cost of a 24-hour driver is closer to $100K. In NYC, Uber drivers make something like $30/hr, which means $263K/yr for a 24/7 driver. So a "low-paid driver" costs as much in a year as one or two single autonomous vehicles. In which case, it's hard to imagine Waymo not turning a profit. The reason Hertz and Uber aren't particularly profitable is because they have tons of competition, there's no real competitive moat. While Waymo is going to undercut driver-based rideshare drastically. It's going to make tons of money once the R&D is recouped.
- fragmede 4y ago
  You're probably right, but given just how much money has been poured into R&D, it seems like it might be a little bit of while before they get there.
  - crazygringo 4y ago
    The $5.5B they've raised is only $15 per American. If this is a service people spend $500/yr on then they'll recoup it pretty quickly I think.
jpalomaki 4y ago
If you can make a predictable profit per car on scale, you can likely find somebody to finance the cars.

danielmarkbruce 4y ago

On a per mile basis they might not be expensive per car. Hertz and Uber struggle because of competition, not business model. If Waymo is the only self driving player and hence lowest cost mode of transportation, they'll make a fortune. If there are several players, they won't.

mechagodzilla 4y ago
They have plenty of competition though - if Waymo is operating a taxi service, they are explicitly competing with Uber/Lyft/traditional taxis/bikes/buses/all the other ways to move around - generally pretty low-margin businesses where their competitors set a pretty strict ceiling on the price you can charge (who would pay a lot more for a waymo ride vs a competitor? maybe some, but not many). Waymo would have high capital costs for the cars, plus still need centralized service infrastructure (re-fueling, re-charging, who cleans a waymo when a drunk person throws up in it?). It would also still have the same problem other companies have - lots of people might want to travel to/from work, and on weekend evenings (or to big events), but not much the rest of the time. An uber vehicle might serve double duty as a personal vehicle during off-peak times (where the driver might even have a different job), but a waymo car needs to pay for itself, so it needs to be driving a lot. I could see them licensing their software to other companies like android auto or something, but that also doesn't seem like a way to print money (how much does android auto earn for google?). It just seems like a very hard business to transition from 'fun software project' to 'clearly profitable independent business.'
- danielmarkbruce 4y ago
  Agree with most of what you are saying, except that the driver is a big enough component of the cost structure that they should be able to price something like 20% below services that require a car. I just took a $65 uber yesterday which took I think 42 mins. Assuming the driver cost $15/hr and is running at 75%(??) capacity, the labor cost baked into my ride was around $15. If Waymo offered the same ride at $55 (ie leave $5 on the table for some of the issues you highlight), Uber etc are in a lot of trouble.

crazygringo 4y ago

Huh? Seems like the current Waymo cars run a little under $200K with all the sensors. Obviously that's going to come down at scale to something closer to $100K let's say. And yes you can contrast that with a $25K Uber vehicle, but the average US Uber driver makes $42K a year, and since taxis are traditionally split into 3 shifts, we can assume the cost of a 24-hour driver is closer to $100K. In NYC, Uber drivers make something like $30/hr, which means $263K/yr for a 24/7 driver. So a "low-paid driver" costs as much in a year as one or two single autonomous vehicles. In which case, it's hard to imagine Waymo not turning a profit. The reason Hertz and Uber aren't particularly profitable is because they have tons of competition, there's no real competitive moat. While Waymo is going to undercut driver-based rideshare drastically. It's going to make tons of money once the R&D is recouped.

fragmede 4y ago
You're probably right, but given just how much money has been poured into R&D, it seems like it might be a little bit of while before they get there.
- crazygringo 4y ago
  The $5.5B they've raised is only $15 per American. If this is a service people spend $500/yr on then they'll recoup it pretty quickly I think.

jpalomaki 4y ago

If you can make a predictable profit per car on scale, you can likely find somebody to finance the cars.