Clean­ing up messes adds to cost of robo-taxi fleets

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - DAVID WELCH AND GABRIELLE COP­POLA

It didn’t take long for Pri­tam Singh to learn a key les­son about work­ing for Lyft. Peo­ple are dis­gust­ing. They have a nasty habit of throw­ing up in mov­ing ve­hi­cles.

Ride-hail driv­ers are acutely aware that cus­tomers tend to do that, along with slightly less an­noy­ing things like wip­ing ham­burger-greasy fin­gers on arm­rests and turn­ing floor mats into swamps of slush. Singh, who fer­ries pas­sen­gers for Lyft Inc. in Man­hat­tan sev­eral evenings a week, spends about $200 a month on clean­ing his Toy­ota Camry.

For Gen­eral Mo­tors Co., Uber Tech­nolo­gies Inc. and oth­ers think­ing about rob­o­taxis, the bill could be in the tens of mil­lions of dol­lars an­nu­ally. When in­sur­ance, in­ven­tory stor­age and the steadily shrink­ing value of beat-up cars are added in, the cost could be bil­lions.

That casts a pall on the idea, held dear by the likes of Uber co-founder Travis Kalan­ick, that the ad­vent of self-driv­ing will swiftly make ride-hail­ing so cheap that most Amer­i­cans won’t bother to own their own ve­hi­cles.

How to deal with messes rep­re­sents one of many great unan­swered ques­tions about the busi­ness model that Kalan­ick once summed up as get­ting rid of “the other dude in the car.” In the fu­ture he and Lyft co-founder John Zim­mer have de­scribed, apps and bots do the work, con­sumers save big time and in­vestors just rake it in. But num­ber-crunch­ers at GM and com­pa­nies in­clud­ing Ap­ple Inc. and Al­pha­bet Inc.’s Waymo are adding up a lot of costs that will get in the way of robo-taxis be­ing cash cows.

Ap­ple and Waymo have turned to Avis Bud­get Group Inc. and Hertz Global Hold­ings Inc. for help in man­ag­ing driver­less fleets. Even big rental com­pa­nies, though, have strug­gled to con­tain their own costs in tak­ing care of cars and trucks used by the great un­washed public.

“It is a re­ally big is­sue and no one has fig­ured it out,” said Mark Wake­field, co-head of the global au­to­mo­tive prac­tice at the con­sult­ing firm AlixPart­ners. “No one is even bet­ting on the out­come.”

That’s not to say the no-driver prize won’t even­tu­ally be worth a lot, which is why so many are jock­ey­ing for po­si­tion and do­ing their home­work.

GM’s Maven unit, which com­petes with Avis’ Zip­car in the hourly rental busi­ness and leases ve­hi­cles to Uber and Lyft driv­ers, has stud­ied how much abuse ride-share ve­hi­cles take. In ad­di­tion to the dam­age in­flicted and filth de­posited by cus­tomers, the costs for in­sur­ance and park­ing — pricey in New York and San Fran­cisco, where ride hail­ing is pop­u­lar — will be sub­stan­tial, said Peter Kosak, GM’s ex­ec­u­tive di­rec­tor of ur­ban mo­bil­ity.

Ready or not, robo-taxis are be­ing pre­pared for the roads. GM Chief Ex­ec­u­tive Of­fi­cer Mary Barra said last month that the au­tomaker is ex­pand­ing its fleet of self­driv­ing, all-elec­tric Chevro­let Bolts from 50 to 180. Lyft plans to test the Bolt as a robo-taxi in San Fran­cisco, with a hu­man baby-sit­ting the steer­ing wheel. GM also will run tri­als in Detroit and Scotts­dale, Ariz.

The robo-taxi, with­out any hu­man to com­pen­sate for nav­i­gat­ing traf­fic, might in­deed be a gold mine. Its ar­rival could be one of those big econ­omy-al­ter­ing events, free­ing up acres of park­ing space in cities, elim­i­nat­ing the need for garages in homes and hand­ing peo­ple thou­sands of dol­lars a year in new dis­pos­able in­come. AlixPart­ners’ Wake­field said it could fun­da­men­tally change how many peo­ple view and buy trans­porta­tion.

Lyft’s Zim­mer re­cently de­scribed a per­sonal ve­hi­cle as “a ball and chain that gets dragged through our daily life” and pre­dicted that by 2025, pri­vate car own­er­ship will “all but end” in ma­jor U.S. cities.

That will hap­pen only if com­pa­nies like GM can fig­ure out how to make all the costs makes sense. “Lyft and Uber don’t care about man­ag­ing the fleet,” said GM’s Kosak. “Down the road, you’ll need to dic­tate who does all of that.”

It prob­a­bly won’t be Lyft, ac­cord­ing to Brian Hsu, the com­pany’s vice president of sup­ply. “We stay as­set light,” Hsu said. “We re­al­ized very early on that fleet man­age­ment is like real es­tate man­age­ment. That’s a ca­pa­bil­ity that is very dif­fer­ent from what we do.”

Hsu said rental-car com­pa­nies could be an an­swer be­cause they have ex­per­tise, along with vast lots in cities all over the U.S.

Hertz has a deal to man­age a small fleet of self-driv­ing Lexus RX 450h sport util­ity ve­hi­cles for Ap­ple, and Avis has inked a sim­i­lar ar­range­ment with 600 self-driv­ing Chrysler mini­vans for Al­pha­bet Inc.’s Waymo au­ton­o­mous tech­nol­ogy divi­sion.

What might the rental com­pa­nies charge? They typ­i­cally deal with de­pre­ci­a­tion of more than $300 per car ev­ery month; Hertz has $10 bil­lion in ve­hi­cles on its books and de­pre­ci­ates them to the tune of $2 bil­lion a year.

Add in clean­ing and main­te­nance, and the to­tal may be $400 to $600 per ve­hi­cle a month, Wake­field said.

AP/CAR­LOS OS­O­RIO

Two driver­less shut­tles, one shown here in June, will be­gin op­er­at­ing at the Univer­sity of Michi­gan in Ann Ar­bor this fall, and like all fu­ture au­ton­o­mous ve­hi­cles, will re­quire reg­u­lar clean­ing.

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