
Uber CEO Says He’d Buy 500k Self-Driving Cars From Tesla Motors - butwhy
http://learnbonds.com/rise-of-the-robocar-uber-ceo-says-hell-take-500k-tesla-motors-self-driving-cars/119632/
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bane
Let's say this happens _fast forwards to the future_.

Now Uber is saddled with a huge inventory of aging vehicles needing
maintenance and all the other associated costs that come with that (repaid
centers, staff, etc.).

A new company "Hypercar" or something is formed that let's people "ride-share"
their own personal self-driving Teslas...making maintenance and upkeep the car
owner's responsibility. Hypercar splits fairs with the owners.

~~~
ryanmonroe
In this scenario, Uber should be able to maintain their own cars at a lower
cost than individual car owners can, due to their scale. They would also
probably be able to buy the cars for less to begin with.

Keeping in mind that Hypercar would have to pay car-loaners at least the
amount that the car loan is costing them in maintenance & depreciation (or
else who would loan their car), Uber would come out ahead.

Maybe in the short-term, this Hypercar company could rely on car-loaners to
underestimate maintenance/depreciation costs but surely that would only last
so long.

~~~
jameshart
Isn't your last sentence also entirely true of Uber's current business model?

if "Uber should be able to maintain their own cars at a lower cost than
individual car owners can", then Uber should be buying cars _today_ and
leasing them out to their contractor drivers. Truck fleets do this, pretty
much, so it's not a completely crazy idea. Uber isn't doing that, which
suggests that Uber thinks its a better deal for them to have their drivers
shoulder the ownership, maintenance and depreciation costs of the capital. Why
does self-driving change this?

Only reasons that seems to make sense is because people think that Uber is
only compensating their drivers for their labor - but they're not; they are
compensating them for their labor as a driver _plus the lease and use of their
car_.

~~~
ryanmonroe
Without self-driving cars, there's not a good way to have contract drivers who
can just work whenever.

------
jameshart
Isn't the more natural play for uber to position themselves in the market for
enabling early purchasers of self-driving cars to offset the cost by having
their car go out and be a taxi when they're not driving it?

Uber got where they are - managing a massive fleet of vehicles - not by
purchasing cars, but by getting other people to purchase cars on the
assumption that uber would help them turn that investment into an income
stream. Self driving cars raise the prospect of me being able to turn my car
into an income stream without me even having to go out and drive it.

If uber do it right, people will buy fleets of self-driving teslas just so
they can rent them out via uber, and uber won't have to invest a penny in
depreciating vehicle hardware.

~~~
6d6b73
>Uber got where they are - managing a massive fleet of vehicles

Uber does not manage a massive fleet of vehicles. They don't have to service
these cars, pay insurance on them, fill them up etc. They are just middle man
that links people with cars with people without them.

~~~
jameshart
They 'manage' a massive fleet of vehicles in that I can ask uber to send me a
vehicle, to my specifications, and they will do so.

The clever part is that, yes, they don't own them. That was my point. Like, my
entire point.

------
jegutman
This article is so trolly. I don't mind the headline even, but it's literally
a hearsay quote. That's just the tip of the iceberg:

"Tesla Motors now has a huge incentive to get the RoboCar on the road by 2020,
but Mr. Musk will need to get the laws rewritten in order to make that
happen."

Sorry, I laughed so hard at this line. Before, he was working really hard to
get them on the road, but now that Uber is "willing" (again, not even a quote,
just a summary of something Jurvetson said that Kalanick said) to buy a decent
number that they can't even afford EVERYTHING HAS CHANGED!

~~~
Shivetya
likely Uber needed some favorable press and getting into a headline alongside
Tesla was a cheap way of doing so, committing to a non existent product is
about as cheap as you can get

------
nugget
I've said this before but it strikes me as under appreciated that Uber's main
enterprise value is their network of drivers and their logistical expertise in
managing and coordinating that network. Once self-driving cars become
mainstream, wouldn't that start to erode the value of Uber's critical
dominance in this area? A generation from now if I'm choosing between self-
driving fleets of cabs from Uber, Lyft, Google, Facebook+Ford, and some Tesla
joint venture, wouldn't prices suffer significant downward pressures? The best
operators can still make a nice profit but nothing like the monopolistic
profits Microsoft, Google, and Facebook extracted from OS, search, and social
which seems to be required for a sustained multi hundred billion dollar
valuation.

~~~
onion2k
There'd still be a lot to differentiate on if you remove the driver - car
quality (nicer/bigger/quieter cars), speed of journey (who has the best
routing algorithm that uses the most real world sensors to route around
problems), the most cars (so your wait is shorter), the most reliable network
(plenty of redundant cars waiting if yours breaks down), the best app
features, and so on.

Removing the driver won't be the last innovation these companies do.

~~~
nostrademons
Google has an advantage over Uber in all of those respects though - more
capital, more experience building highly-available services, better routing
algorithms, better contacts with carmakers, owns both the OS that the app will
run on and the map data that they use to navigate, etc.

~~~
CyberDildonics
All of that pales in comparison to the fact that google has a direct line to
more users. They can auto update their apps and allow people to book a
driverless car.

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mariusz79
Self-driving cars may be too expensive for one person to own soon after they
are available.. It will take a lot of time and resources to build these
machines to be safe and reliable, and companies will need to recuperate the
costs in some way. On the other hand, most families will not need as many cars
as they do now, so the demand will be lower than most people expect, which
will raise the price. We can also expect companies to be the first users of
self driving cars, as it will make more financial sense for them, so many
suppliers will move to service businesses like Uber. Companies like Uber and
Lyft will lobby lawmakers to make it harder for people to own self-driving
cars, and effectively make it unaffordable to most. In short time Car-As-A-
Service will become reality. In the name of safety and cost reduction, many
roads will be closed to regular cars, effectively making it pointless to own a
car.

Source: Crystal Ball

~~~
roel_v
Meh. Apparently retrofit kits will be $2000 two years after self driving cars
are on the market (source: that company that drove one from la to ny a few
months ago, forgot the name) so cost isn't going to be a biggie.

------
fredkbloggs
Ah, the old valuation chestnut. There ought to be a journalism ethics rule
prohibiting use of the word "valuation" with respect to previous transactions
unless every such transaction was purely for common equity. The only idea
sillier than that every (or any!) investor actually values Uber at $50b is
that they can get their hands on $20b to buy 500,000 fully autonomous cars in
2020. No part of this assertion is sane, and no part will come to fruition.
The cars Uber would need won't exist in 2020, and probably not in 2120 either.
To the extent that someone does manage to build one, it won't be available for
anything like $40,000, and it won't be built in any quantity. Uber itself may
not even exist in 2020, and if it does it will likely be a shell of its former
high-flying self, reined in by the same regulations its direct competitors all
have to abide by.

Utter rubbish.

~~~
nostrademons
I'm curious - do you live in Silicon Valley? Because I see self-driving cars
so often here that it's a non-event, and half the time, there's nobody
touching the steering wheel. My former boss has ridden in one, and there were
signups for an employee beta-test program before I left Google a year ago. I
could easily believe that they will be in the hands of consumers by 2020, and
I could believe they'll cost $40K once the sensors they need are in volume
production. The technology's a lot more advanced than the handful of press
articles make you believe.

~~~
nkoren
> Because I see self-driving cars so often here that it's a non-event

No, you don't. You see cars which have a hands-free driving mode. Every single
one of them still _absolutely_ requires a driver.

I've been closely involved in automated transport for years, and the current
hype cycle is getting exhausting. There are several orders of magnitude of
difficulty between a car which allows drivers to take their hands off the
wheel some of the time (or even most of the time), and a car which does not
require a driver. We are _many_ years, and possibly decades, away from the
latter.

~~~
Diederich
Removable steering wheel..that's kind of funny:

[http://techcrunch.com/2015/06/25/googles-latest-self-
driving...](http://techcrunch.com/2015/06/25/googles-latest-self-driving-car-
prototypes-are-now-on-mountain-view-streets/#.bvfsiu:d5xf)

We are certainly still in the "Every single one of them still absolutely
requires a driver." phase. Given that you've been in the automated transport
field for years, and I haven't, I won't make any comments about the many
years/decades timeline, except to say that, in general, the pace of
technological growth in many areas has surprised me.

------
ctdonath
But...Uber's core competency is _organizing_ drivers & vehicles _without_
hiring/owning them. I'm leery of companies making dramatic change to their
core; owning a fleet of a half-million vehicles is quite different from just
telling them where to go.

~~~
yincrash
Netflix's core competency was mailing DVDs.

~~~
aetherson
And they went _from_ having their business depend on having a physical
inventory _to_ a (more) purely software model.

The idea that Uber would thrive in going from "Hey, dude, sign up and you'll
be on the road," to "First we're going to place an order for a $40,000 capital
investment that is all risk to us if it doesn't pay out" is _completely
insane_.

Not to mention that they will have literally no differentiating feature from
any competitor who is interested in making the same investment, so they have
no way to support any kind of large profit margin.

And all this assumes that people won't just want to own their own driverless
car, which is far from certain.

Uber _has_ to say that driverless cars will be wonderful for them, because
large amounts of the people who might want to invest in Uber are also
convinced that driverless cars will be here in three years.

~~~
jonknee
Uber currently pays its drivers 70-80% of its revenue... A self-driving car
makes that 0%. Not to mention marketing costs to get new drivers, all those
iPhones, etc. Uber's revenue run rate is expected to hit $10B by the end of
this year. That's a lot of cash sitting on the table that could be used to
finance driverless vehicles.

~~~
aetherson
Uber also is currently much more expensive than car ownership, and if a
relatively low-cost driverless car gets on the market, there is literally no
incentive for most people to ever use Uber rather than owning their own
driverless car.

So in the event of driverless cars, Uber will have to slash prices -- and,
unfortunately for them, a self driving car does not in fact claw back all of
their driver's revenue.

Now, there are plausible scenarios (though it's by no means guaranteed) in
which driverless cars vastly increase the size of the rides-for-hire market,
so even if Uber has to take their current margin on lower-cost rides and pay
for inventory, you could imagine that working out overall well for them.

But if it's such a great business to be in, why won't they face competition?
There are plenty of companies that are deeper-pocketed than Uber. There are in
fact plenty of companies with stronger brands than Uber. And the geographical
opportunity to compete locally is pretty brutal.

What's Uber going to compete on?

Size of inventory? That drives up costs (when we're already stipulating that
they are paying billions in new costs).

Price? That drives down revenue (when we're already stipulating that they're
slashing prices).

Cleanliness, as various people have suggested? That means they have to get
into a whole new hyper-local physical business with its own logistical
problems, and why should we imagine that Uber can build the best car-cleaning
business of its field? What about Uber makes us believe they're the best at
that? Is this even a field that can be usefully competed on? Are people
willing to pay top dollar for a really really really clean car, or does
everyone bring together a basic cleaning service and, whatever, it's all good
to the passengers?

------
tzs
I'm interested in a Tesla (or any electric car). I drive more than 100 miles
from home maybe once a decade, so range is not a problem--I can just rent
something with more range when I need it, if the electrical infrastructure
isn't up to the journey.

But I'm not interested in the high Tesla price. I would be interested perhaps
in a used Tesla. I've never bought a used regular car before, because regular
cars can require a lot of maintenance when they get old and I don't want to
deal with the hassle and the unpredictable expenses. Electrics are simpler,
though, so I think a used electric might be OK.

I'm sure there are plenty of people like me.

So here's my suggestion to Tesla (and other car companies that might make
self-driving cars). Make a ton of self-driving cars. Run your _own_ Uber-like
service with them (but be legal, and feel free to put Uber out of business as
a side effect).

Besides providing taxi service, these cars will serve as roving showrooms for
your cars. Many people will ride them as taxis, and then consider buying one
when they buy a new car.

When a given car has been used for a few years for the taxi service, retire
it, tune it up, and offer it for sale used to get people like me as customers.

Heck, put a "buy it now" button _in_ your taxis that lets a passenger buy that
particular car. It would then take them to their destination, return to your
service center, get its sale tune up, and then the next time the buyer calls
for one of your taxis you would send his car to him, and it would stay with
him after that.

------
shenanigoat
I think Uber will be disrupted/destroyed by something more driver friendly.
They offer nothing that will keep a contractor loyal. All it would take is
another 'app' that offers more autonomy and a larger share of the profits.
Uber's 25% (is this correct?) take for a software infrastructure and brand is
outrageous and probably causes a lot of resentment among drivers.

Of course, we are talking about self-driving cars here so I'll just shut up.
:D

------
lordnacho
A self-driving car would not necessarily be great for Uber. What is the taxi
service currently providing? A way to order/pay for/sell a cab ride, and
vetting so you don't feel uneasy with the driver.

Take out the driver, and anyone could offer their car as a cab. The app to do
so could be Uber, but it the bar is lowered considerably if it's purely a way
to book a car.

~~~
sciguy77
I see what you mean. If I own a self-driving car I can pimp it out while I'm
at work, cutting out Uber.

And I thought Uber was pretty weak compared to YellowCab on driver vetting?

~~~
fweespeech
Yes but _how_ would you pimp it out? ;)

You'd put it in a marketplace with an app for people to order the rides...:P

------
smackfu
Uber has been investing heavily themselves in self-driving cars. They know
that Tesla won't have a product available to buy in 2020.

And here's the source quote:

"Jurvetson said Uber CEO Travis Kalanick told him that if Tesla cars are
autonomous by 2020, Kalanick wants to buy all 500,000 that are expected to be
produced."

~~~
fredkbloggs
He also told him, seemingly apropos of nothing, that "if [his] grandmother had
balls, she'd be [his] grandfather." Unfortunately the meaning of this exchange
was apparently lost on the journalist.

------
genericuser
I think the change from drivers to driver less cars is a large enough one for
people to accept and get used to, that it would make sense for uber to have
their own small fleets of self driving cars in test cities, so that customers
would get used to the self driving car concept in an environment where they
could more directly provide feedback to the ones responsible for the car (uber
in this case). It would also allow uber to work out issues that may arise from
the change. I agree with others who say that this eventually leads to people
having their own cars be taxis when not in use, I just consider the idea of
uber managing their own small fleet a step towards that.

------
hooo
I don't understand why they'd do this. My understanding is that the Tesla
self-driving cars are not end-to-end autonomous like Google's. What benefit
would they be to Uber in this case?

~~~
aetherson
The whole article basically says that Travis says that he'll buy half a
million Tesla cars in 2020 if Tesla can actually make the cars fully
autonomous by then.

Fully driverless cars are still not going to be a good thing for Uber.

~~~
anthony_d
Why do you say fully driverless cars are not a good thing for Uber? Most of
what I've read on the topic says otherwise.

~~~
aetherson
There are a ton of reasons:

1\. Uber currently has the ability to grow and move at software speed. Other
people buy the cars that it uses and assume the risk. If it needs to pull out
of a city because of hostile regulation or whatever, its drivers are left
holding the bag. Going from that to being a company with an expensive and
gigantic physical inventory would be incredibly painful for it.

2\. Driverless cars are the end-point of the commoditization of the rides-for-
hire market. If you're buying a Tesla that drives itself, anyone else who
provides the same Tesla provides exactly the same level of service to your
customer. You can only compete on price or availability -- but availability
now means buying expensive physical inventory, so both means of competing are
now super, super expensive for Uber.

3\. All of this assumes that it _even makes sense_ to have a rides-for-hire
business in a driverless car world. It's possible it will, but we don't know
that! If the sensor package of driverless cars is relatively cheap and
relatively durable in value, then probably driverless cars will actually drive
business away from rides-for-hire and towards car ownership.

~~~
anthony_d
That's just not convincing.

1\. The recent California ruling might minimize this. If drivers are
employees, it's not nearly as easy to leave them holding the bag. The physical
inventory of cars is also a competitive advantage. If you want ride that's
great, because I happen to have 5 cars in your neighborhood right now...

2\. That's no different then the current position. I can use Uber, Lyft, a
taxi or buy a car myself. And like now, the competition is on who has a car
close to me and who has the _cleanest_ car. I could personally compete with
Uber by have one well maintained clean car with a mint on the dash, but I
could only afford one.

3\. Sorry, but I think you're arguing against #1 here. Uber having a large
fleet of cars with the logistics to handle them would kill my small business's
desire to own cars. The goal with driverless cars is to keep utilization as
high as possible; if Uber can keep their cars at 95% utilized they will
probably be cheaper than my car which is about 5% utilized.

~~~
aetherson
Dude, I don't know what to say.

Your point 1 is "Maybe Uber is going to get a huge kick in the teeth right
now, so then the later kick in the teeth will... pale in comparison?" But
actually they aren't terribly related. You get why startups exist in the
computer sector and not in the traditional manufacturing sector? It's because
growth is so much easier in the computer sector. The marginal cost to add a
customer in software is tiny. The marginal cost to add a customer in a
business with physical inventory is much higher. Going from software to
physical business is not to be desired.

Your point 2 is yet more awful for Uber: Great, they get to compete on
cleanest car? So now in addition to having to buy these very expensive
depreciating assets, they also have to add local employees everywhere to
actually clean them? Wasn't the advantage here going to be that they took the
cost of "paying people" out of the equation? Uber's growth is going to be
based on their ability to build out a really competitive cleaning service?
Does that sound like a business you want to invest in?

Point 3 is interesting:

So, look, people who were already of the opinion that there's too much car
ownership have gotten excited about the potential of driverless cars to
increase car utilization. But "increasing car utilization" isn't a goal of
normal people. "Saving money and/or receiving more value" is the goal.

A heavily utilized Uber car is cheaper on some margins than a lightly utilized
personal car (that is, it's cheaper based on time-based depreciation and on
parking fees). It's more expensive on other margins (it drives more miles per
passenger served than the personal car, so its fuel costs, maintenance costs,
insurance costs, and milage-based depreciation are higher). And of course Uber
has to make a profit, so that's an additional cost as well.

How does that all play out? You can add up the hypothetical costs fifteen
different ways based on different assumptions, and come up with whatever
numbers suit you. The truth is that nobody knows how the cost of ownership of
driverless cars is going to break down yet.

But I will tell you one thing: No car, Uber or otherwise, is going to be 95%
utilized.

------
butwhy
Fun fact: if Tesla remained at the same manufacturing speed they're at today,
it would take them 10 years to fill this order.

------
onewaystreet
I think this quote was meant to be taken as a bit sarcastic, in an "I'll eat
my hat" kind of way. Uber recently poached a bunch of the top people from
CMU's robotics department and has announced plans to lease a 53,000 square
foot facility. They have no plans to wait for Tesla.

------
sidcool
Isn't Google ahead of Tesla in self-driving cars?

~~~
jonknee
By a wide margin, but Tesla actually makes cars.

------
jleyank
Litigation risk. Uber now hides behind "just a contractor". Unless they don't
actually own the cars, they're liable...

------
falsestprophet
There is some real news here: Uber (probably) does not believe its autonomous
vehicle program will be successful before 2020.

~~~
kkhire
I've heard directly from an Uber's exec himself that he does not feel safe
getting into a driver-less car.

------
bagels
At $30,000 each, that's 15 billion in cost. That's a lot of money to raise for
depreciating assets.

~~~
jonknee
They would finance the vehicles and pay for them with the revenue they
produce. Rental cars are actually a pretty good case of this for conventional
vehicles.

------
segmondy
Why shouldn't Tesla take their self-driving cars, make an app and "Uberify"
it.

~~~
austenallred
In a word, specialization. Worrying about self driving cars is probably enough
of a challenge, but that's my best guess.

~~~
segmondy
I don't think so. It will boil down to fleet management. Tesla is bypassing
the middle man to sell cars directly. If we combine self driving cars and
Uber, then most of us will not be buying cars and instead will be renting by
usage. So why shouldn't Tesla bypass the middle man again and reap the
profits?

------
antidaily
More proof that CEOs are grossly overpaid. Who needs that many cars? Just
disgusting.

~~~
jegutman
trolololo

