Driverless cars? Don’t count on it
That’s a problem for the Uber, Lyft IPOs
In the battle to go public, Lyft might be winning. The company’s initial public offering — with a target of more than $20 billion — is expected shortly, ahead of rival Uber. Key to wooing public investors, however, is showing potential for strong returns. That’s a problem because both ride-hailing giants spend more than they earn.
Their biggest expense? Driver salaries. In the first quarter of 2018, Uber raked in $11.3 billion in revenue, more than $8 billion of which was spent on paying drivers.
Driverless technology is expected to change this. Sensors and software, after all, don’t demand salaries, which ultimately means wider margins. This explains why Uber and Lyft are investing heavily in self-driving technology. So is Waymo — a Google spinoff — which recently launched its own ‘robocab’ service. That service comes with caveats, however. It’s only available in four Arizona suburbs for now, not everyone living in those suburbs can freely use the service (Waymo has to preapprove you), and riders who can are greeted by human drivers in the front seat (Waymo added them owing to safety concerns).
Uber and Lyft’s efforts with selfdriving technology have fared no better. Some say this isn’t the let-the-robot-drive, anyone-can-ride experience that companies have long promised us. It’s hardly surprising.
Algorithm vs. human intuition
For one thing, driverless does not mean humanless. Machines are after all, imperfect. They stumble just like humans do. The impact of these blunders is trivial when fruit-picking, drink-pouring and burger-flipping robots break down. But when algorithms charged with our safety and security follow suit, the results can be deadly.
Regulators know that for its virtues, a machine can’t be trusted to get it right all the time, every time (manufacturers know this, too, by the way).
Self-driving technology is no different. Unless these systems are proven faultless, ceding control of public safety to algorithmic rather than human intuitions is an unlikely prospect at best. There goes the let-the-robot-drive future we were promised.
As for the anyone-can-ride experience, fulfilling that pledge is even less likely. The reason? Cost.
Enthusiasts assume that consumers will forgo personal vehicle ownership in favor of using robocabs. Why shouldn’t they? Owning a car is pricey. Robocabs, on the other hand, will be cheaper because driverless technology cuts out a taxi operator’s single largest expense — the driver.
Such reasoning — while intuitively sound — is flawed. For one thing, human involvement in driving can’t (and won’t) be entirely axed. Even if it were, personal car ownership would still be a better bargain than hailing a robocab. The reason? Driver salaries, although significant, affect fares less than the cab’s utilization rate — the percent of miles it travels with a fare paying passenger. And that’s a problem because in some cities, drivers spend as little as 40 percent of their time earning fares; the rest is spent finding them.
Fares heavily subsidized
Whether the likes of Waymo are tuned into this reality is unclear. The company seems more focused on offering robocab fares comparable with Uber and Lyft. That’s ironic given that Uber and Lyft fares are heavily subsidized and costlier than owning a car.
Waymo’s strategy of “beginning to test pricing models” is probably wise. Were consumers to see the true price of hailing a robocab, they’d flee en masse. Why buy a slice of (robo) transportation for $6 when you can pay significantly less in a regular car?
Don’t expect proponents to accept this reality. They’re busy championing the virtues of a technology that never seems to quite arrive. “Fully self-driving cars are here,” proclaimed Waymo CEO John Krafcik in 2017.
The technology might be here, but its promises are on life support.