I've seen it claimed that due to the lower fuel costs, and the lower maintenance, that taxis are a fast growth market for electric cars so that may be a factor as well.
Most of the subsidy is in the form of tax reductions, a little is in cash like payments (e.g. increased car allowance). But what does it matter? The distinction is purely arbitrary. If the government said "there will be no tax reductions, you get an equivalent cash payment instead", the end financial situation for both you and for the government is exactly the same.
If I sell you a donut for $3 and then give you $1 back, or I sell you a donut for $2, is there any meaningful difference?
My thoughts exactly. Uber are struggling to get a foothold in Europe because of regulation. I suspect the plan is to become a traditional taxi or limousine operator in these hostile markets, leasing cars to licensed taxi drivers. Using S class rather than the more common C class cars would fit with their existing Uber Black service.
You can get an S Class or similar via Uber today, but you have to order an Uber Lux, which is quite a bit more expensive than a regular Black (though I have gotten a BMW 7 Series as a Black before). Of course, none of these cars are owned by Uber.
Wow, I wonder what a contract like that looks like, and how many years the payments and deliveries are spread out over. Assuming a massively-discounted price of $25,000 per car, that comes to $2.5 billion!
Maybe I'm missing something but that number sounds hard to believe. An S-Class in the US is $100K. Even if a stripped down "utility" version was available at $50K that's $5B worth of cars. Yes, it's a "long term" order (i.e., not paid for and delivered at once), but that seems way beyond anything even Uber would do.
I'm sure there's a volume discount when you order 100,000 of anything, even an S-Class. There's also the possibility of this not entirely being a cash sale.
Uber is what you need to make an auto-driving automobile acceptable to the general public. With Uber spin, Daimler can push on the driver-less car in many markets..
Both the Tesla Model S and X are Autonomous Level 3 capable:
"The driver can fully cede control of all safety-critical functions in certain conditions. The car senses when conditions require the driver to retake control and provides a "sufficiently comfortable transition time" for the driver to do so."
Its expected their Model 3 mass market vehicle will contain the same, if not a greater level, of driving automation.
Disclaimer: I've traveled down the interstate in a friend's Model S for ~2-3 hours at a time at ~85mph in autopilot mode with no intervention required.
Yeah but how much of a discount? The example in question was already assuming $50k per car which is already a tremendous discount. Even if you cut it in half again to $25k (which there's no way the price per car is that low) that's still $2.5B in cars. That's insanity.
Depends on how this is structured, if it's say 33k cars on a five year lease, renewable twice that's ~2.5B over 15 years. Also, Uber has a huge and arguably inflated market cap, so if they get this deal in exchange for stock it could be very valuable to them in the short and long term.
Especially if there is no middle-man dealer to pay. On a $100k S-Class, Invoice comes in around $93k. Some people are able to pull off sub ~88k sale prices at dealers.
I wouldn't be surprised if the wholesale (with profit) cost on a S-Class Benz is somewhere around 65-70k. I'd imagine that the cost of building an S-Class (100k retail) over a C-Class (~40k) is nominal.
Respectfully, your inference is entirely off base. Trivial research gives you the wholesale value. A slightly deeper dive gives you the manufacturer margin. Franchise laws prohibit direct sales.
"Uber had placed a long-term order" [...] "Uber is particularly interested in autonomous driving vehicles, the magazine reported, adding that such cars are expected to be available after 2020."
Perhaps the long-term order is a commitment from Uber to motivate Mercedes to invest more heavily in autonomous vehicles? If the long-term strategy of Uber is to have a fully autonomous fleet then a long-term commitment of $5bn with one manufacturer seems plausible.
"it's the heart of their business" but the fact that it's a fundamentally alternative business model from anything they've taken a cent of revenue on is important to note.
It's like if airbnb bought $5B of Manhattan real estate. Yes, it's "the heart of their business" but also - wow.
Sure - but I think it's always been the expectation that Uber/Lyft/Sidecar before it went bellyup were participating in the sharing economy only as a stopgap until autonomous cars are available.
With Airbnb, I don't think anyone expects them to pivot into owning their own property. There's no real benefit.
Well, if they expect to use them as self driving cars (which the article mentions), the investment can pay out pretty quickly. Say they can make on average 5$ per ride. To make $60k they need 12k rides. A self driving car should be able to easily make 12k rides in one year (only 32 rides per day).
That seems way harder unless they plan on buying a very small number of car models. Every different car model (even the same model between years) has different performance characteristics (do you issue the same orders for "hit the brakes" to a car that needs 100ft to go from 40-0 as a car that needs 50ft?) and physical dimensions which would necessitate different software optimizations and sensor calibrations. Development plus rigorous testing of every configuration means this quickly gets out of hand unless you standardize on 1 or a very small number of models.
It's hard to come up with a huge number of cars on the spot once self-driving cars are available. It's much easier to retrofit your already existing cars.
Only 32 rides per day? I would think that's pushing the limit. You will have to buy cars for peak times, so most of them will see only a few hours of use each day. At a guessed 6 hours of busy service a day, that's 5 trips an hour, or 6 minutes to drive to a customer and 6 to drive him where he wants to be.
Also, a risk here is that other large parties will make the same calculation, flood the market (anybody with money will be able to start a cab company with a lot less hassle from labor laws because you don't need that much personnel) and drive margins down.
To win in this space you probably will need both a lean model of operations and a good image in the customer's eye. Uber currently seems to have both, but committing _now_ to a provider of cars is risky (what if other manufacturers turn out to have better or cheaper self-driving cars?). On the other hand, it also may be necessary to commit now in order to stay lean (committing now probably gets them a nice price cut)
Perhaps they're purchasing these to handle the constant/baseline load of riders throughout the day, and then will continue to use human drivers & contractors to supplement demand beyond that, eg. the peaks times you mention.
So it'd be the best of both worlds for Uber: being able to put the self-driving vehicles to use around the clock and not having to make a capital investment to handle spikes in demand, which would just continue to be handled by existing drivers (for now). Just call in the human backup to help out when required.
I'm also wondering if they made the huge order so that they'd be able to influence and guide the requirements for the vehicles to Uber's specs. It seems that the requirements for a self-driving car for an individual's use differs from that for commercial taxiing.
I don't think they need to tackle peak driving time at the start. They still have all of those regular drivers. Surge pricing should still draw out humans.
6 minutes to drive to a customer and 6 to drive him where he wants to be.
You're assuming that each ride is independent, but that's already not the case with their Smart Routes - the driver picks up a customer, then picks up another one on the way, then drops off the first and picks up a third, etc.
The goal stated by their CEO is "perpetual rides", in which the car is never without a passenger.
Perpetual rides may be their goal, but I don't see how they will not get there. For example, there's no way they are going to find as many people wanting to go to sport stadiums as are wanting to get away from them, just after the end of the game, and stadiums typically are so far out of about every other destination that they cannot make a detour there with a paying passenger on board to pick up a second passenger.
That applies to a lesser extent to such things as theaters and cinemas, and even suburbs (who wants to get picked up there at 1 AM to fill the car that that theater goer took home?)
They will get below 50:50 for "at least one passenger on board", but it would surprise me if they managed to beat a 25:75 ratio.
>> "...what if other manufacturers turn out to have better or cheaper self-driving cars?"
Cheaper, certainly. Everyone will have cheaper SD cars than Benz, just as everyone has cheaper cabs than an S-class today. But better? If history is any guide, German luxury will be the gold standard of automotive UX for our lifetimes and beyond.
The deal is probably similar to the way an airline buys planes. E.g consider when Ryanair bought 200 737s for $22Bn [1] which is about the same in it's entire market cap.
An order like this is probably:
* For a delivery spread over 10+ years
* The vehicles will almost certainly be leased/finance
* Each vehicle will probably assume a 5+ year working life and have a residual of about perhaps 25% of list after 5 years given the likely mileage
* There will be a big initial discount given the size of the order
So assume each car, is $100k new, but given an order that size is perhaps a 40% discount. So that's a $60k sale. After 5 years, the car is perhaps worth 20k.
So the unit economics are that each car costs (before financing costs) 40k over 5 years, or $8k a year. This is a relatively low cost given the number of rides it can take and the cost of the driver who will be driving it.
In the states the franchise laws do not allow Uber to buy directly from the manufacturer. Also, the margin on an S class sold in the US is approximately 15%, not 60%.
Great analysis but this makes it sound even less likely. Going from zero marginal costs to something like this seems totally against their current model.
No way. Absolutely no way. Looking online I'm seeing estimates of 300,000 to 500,000 miles per year in a taxi. If Uber is even NEAR that max, this car is going to have 300,000 miles on it. Hell even 150,000 is a ton of miles on a used vehicle.
Looking at KBB with a base S-Class that's 5 years old with 300,000 miles you're looking at roughly $12k in "good" condition (because, let's face it, people are going to be in this thing constantly and "good" is the rating the majority of used cars are in when they're sold).
Then factor in that Uber is not going to become a used car company (at least I would imagine they wouldn't) they're going to have to sell even lower than KBB to a third party so that third party can make any money. So I'd bet one of these cars would end up selling for $6k to $8k depending on mileage and condition after 5 years.
True which is a $250k difference if my numbers are even correct (I mean I think they're closer than parent's but who knows). But $250k isn't that much when the company is a billion dollar company.
A difference of 250m, rather than 250k, which again, I guess still isn't that much for a 60 billion dollar company. Total depreciation on these is going to eat up up a billion in value a year, or only about 2% of market cap, assuming they keep or grow their valuation.
Cars are devalued by mileage because the average car is taken care of so poorly that small damage accumulates into big, irreversable damage over time. For example, waxing wears off -> unwaxed surface pits -> rust forms -> holes form. If you re-wax the car often enough to prevent it from ever pitting, you'll never see rust or holes no matter how long you own the car. Same for most of the other components.
Individual drivers may not be able to take very good care of their cars, but large companies that use fleets of cars can take them regularly (perhaps even every night, as their default storage) to maintenance garages and have them restored.
Doesn't matter how many miles are on a car, all that matters is how many are left and incremental cost per additional mile due to maintenance/repair. :)
I don't know, if I were an investor in Uber and saw them place a $5B order on Mercedes S-Class cars, I would think that there's a good chance they're worth $100B.
Haha, I just checked. A recent valuation is $68B. (Dec '15)
At that scale, customization is a given. Uber could leverage their own robotics resources together with Mercedes' to speed up autonomous vehicles time to market which Uber stands to benefit from substantially enough to justify this kind of investment.
At that kind of volume, would it make more sense to have MB develop a bespoke car for Uber?
The S-Class is a great car, but I'm sure there are Uber-specific improvements that can be made. Why would you order some many of something 'off-the-shelf'?
I don't think you'd find any manufacturer who would tool up for a bespoke car. Uber either needs to buy an existing manufacturer with existing large scale capacity, or build out their own capacity. And we've seen with Tesla how much and long that capacity takes to build out for only 100K vehicles/year.
Uber is capital chasing a potential treasure chest. Google, Tesla, GM/Lyft/Cruise are the real players it appears.
They might do a special trim package for that volume.
That's one way a precommit makes sense to me; a contract could be structured such that Uber gets a certain price as long as they keep up with their commitments, if they don't keep up, they pay a penalty.
I could see a trim package, but if autopilot hardware is only a few thousand dollars, it would behoove Mercedes to put it in all of its vehicles. At that point, any startup could build an interface to allow any Mercedes owner with the hardware to lease out their car through a P2P ridesharing platform.
As it turns out, going from sensors to working self-driving car is a pretty difficult task, and Uber has some of the best self-driving researchers in the world working for them.
Right, but Tesla has vehicles on the road, now, with a high level of autonomy (driving across the country autonomously 96 percent of the time: http://jalopnik.com/we-set-a-cross-country-record-in-a-telsa...) that are gathering massive amounts of data (40 million/miles/month) from vehicle owners as they drive.
Its an uphill climb for Uber. They will need to fund their vehicles; Tesla funds their battery manufacturing, vehicle manufacturing, and autopilot telemetry corpus buildouts using the vehicles owners have paid for.
1. I was responding to your Mercedes/Uber scenario; the comment I was replying to literally didn't mention Tesla (which fits more aptly to Apple's position in the desktop computing analogy).
2. Interstate driving autonomy and city driving autonomy are different beasts. Gathering a ton of data about task X isn't necessarily helpful for task Y; ML isn't magical. If anyone, Google is ahead of the pack in the market Uber is vying for (automated taxis).
There are contract manufacturers also in the automobile industry. For example the Finnish Valmet Automotive has been building Porches, and is now doing some MB cars.
100k vehicles/year is 1/2 to 1/4 of capacity of a vehicle production line; any automaker would retool for 100k guaranteed sales, if the price was right.
This makes a lot of sense. S-class cars already have the sensors for self-driving in highway conditions. Uber UATC is actively working on the software for autonomous drivers.
This is a large scale capital investment in a safe luxury service that Uber can sell in certain markets. I'm betting the s-class needs very little hardware to wire into what UATC is developing.
self-driving Uber cars? What could possibly go wrong?
...
There comes a point at which the helpfulness of technology becomes a form of oppression: walled gardens, predictive services making the wrong predictions, and every social platform forcing us to use our real names. It's cute when it's small, but what happens when self-driving cars can collude with the cops?
It Daimler can deliver cars that are able to handle Uber rides without a driver, including driving empty to location (considering Uber would send a destination location) then 100k vehicle does not sound like a lot.
That feels like a big if, though.
Having a deal in stock rather than cash also makes sense: it is unlikely that many people would buy cars from Daimler or anyone if Uber charges at cost (gas + maintenance).
The S-Class is an interesting choice. I'd wager that most people have never been in a car as nice as an S Class before -- no comparison really to the town car people associate today with Uber Black. The back seat has massage, heat and cool, individual entertainment options, power recline. Some of these things could be customized, but Mercedes isn't going to tarnish the reputation of their flagship sedan so Uber can have a more utilitarian taxi.
Yes Mercedes taxis are common throughout Scandinavia also but they are workhorse models, still very nice but without the "S" level of luxury details and engine power.
Unfortunately I don't have any articles to back this up, just anecdotal discussions with drivers in Germany, but;
First: they're a domestic car manufacturer, lower cost to deliver to local drivers.
Second: they're able to offer specific taxi options, such as manual front seat adjustment (vs automagic).
Third: they offer a substantial discount to taxi drivers (they justify the discount through the marketing value of having large number of individuals ride in their cars).
Such discounts for marketing purposes is quite common in the industry. I've also heard dealerships sell cars to rental car companies at a loss, just to make sure customers have access to their cars (and will possibly consider buying that type of car for the next purchase).
In Denmark, you could buy a car for taxi use at a much lower tax rate than normal people, but after driving it with passengers for around 250,000km and 2 years you could sell it as a private vehicle. The calculation made the car extremely cheap (I've seen a calculation of deprecation of 20% over 2 years despite the heavy use ) -- so you might as well get a nice Mercedes.
The tax a private person has to pay to buy a car was 180% in 2015 so essentially a luxury car is nearly triple of what it might be in US, with a new S350 being $250k.
Thos taxi rules have changed recently however, so Mercedes may lose their 90% taxi market share.
I've always curious about why the taxi differences between North America and the rest of the world. When I was younger in Asia, we had these "luxury" taxis that were still very reasonably price. I was appalled that taxi rates in North America were so high and the cars were just terrible.
At that quantity, an S class is the badge on the trunk, otherwise whatever Uber wants it to be. Likely the technology for automation, but maybe not all the luxury bells and whistles.
Another concern for uber is what are people going to do to the inside of these driverless cars now? Passengers today are respectful to ridesharing vehicles they sit in--because the owner of the vehicle is close at hand and the human connection commands some respect. But when its just a group of (maybe drunk) passengers in an empty vehicle--where's the accountability?
Cameras? You could even just take a picture when they come out and when the cars come back for the cleaning crews, they'll find out pretty quickly which rider to charge the cleaning fee.
Car rentals are fairly expensive. People tend to take better care of things they've put a lot into. Case in point, rental cars tend to be in much better condition than the back seats of taxis, which in turn are in better shape than the back seats of buses. I think people's concern is that single rides in self-driving cars might even rank below buses.
Have you heard of Zipcar? There are lots of reasons to be skeptical that we'll see autonomous taxis in less than decades but this doesn't seem like one of the bigger problems.
A car sharing company accused me of leaving a dirty vehicle. Apparently I had picked up smoking and gotten a dog without knowing it. They were quite adamant about charging me a cleaning fee until I got American Express involved.
Presumably there were one or more intervening drivers between whoever caused the issues and you who didn't notice or didn't think enough about it to complain. (Both the things you describe are probably way more irksome to some people than others.)
I imagine it'll be kinda like car2go or ZipCar where if you get in a car and it's messy or damaged you're supposed to report it. Presumably the person before you did the damage. If you don't report it you risk the next person reporting it and you get the blame.
Imagine Daimler can produce 100,000 self-driving cars. They would continue to produce and sell self-driving cars to other people as well. They could sell self-driving cars to Lyft. Individuals could operate their own self-driving car services. They could organize in to cartels and have a single app that competes with Uber or Lyft.
Uber is destined to be a commodity in an open marketplace of taxi services as soon as they adopt self-driving cars. Their primary roll right now is as a labor organization. They currently create the economic incentives needed to attract a fleet of drivers. Self-driving cars are not motivated by economic incentives. Uber can't control the sale, distribution and organization of self-driving cars.
All that riders care about is being able to reliably get from one side of town to another. They'll know that they can trust Daimler self-driving cars, regardless of the dispatcher.
We're going to end up right back to where we started, with a commodity system of private taxi dispatchers and a productive industry of automobile manufacturers, with an emphasis on the automatic nature of this new form of transportation.
Daimler is the big winner here if they can bring a self-driving car to market.
I think the other function Uber serves is not just an aggregator of supply (of cars and drivers) but of demand (passengers). It is far from a trivial effort to have a sufficient amount of users know of your app/service, download and install it, trust it enough to add payment details and use it.
While not quite as insurmountable an obstacle as, say, making a new smartphone platform (sorry Palm/Nokia/BlackBerry/Microsoft), it is enough of one to make this far from a perfect, liquid market.
Customer acquisition is, I mean, it's not like you literally just snap your fingers, but it's very straightforward. There are hundreds of channels to acquire customers, and services to help you do it.
In a hypothetical world in which we have fully autonomous vehicles and someone wants to compete with Uber, anyone who can afford capital investment in a fleet is not going to have much difficulty generating a customer base (and then they can have a mutually destructive price war with Uber).
> I think the other function Uber serves is not just an aggregator of supply (of cars and drivers) but of demand (passengers).
I think you misunderstand Uber. Most of its perceived value is in arbitrage between drivers' perceived and actual costs of car ownership: drivers mostly think in terms of wages minus cost of gas, ignoring all of the other costs. Given that business model, I doubt Uber is actually looking at buying these cars. They will presumably force drivers to buy or lease the cars themselves.
So do individuals buy or lease self-driving cars in the future? Would they then set up their self-driving car to take instructions from Uber's central dispatch service in exchange for a cut of the profits?
Currently both Uber and Lyft handle the task of vetting drivers and making sure there is a good experience for their customers. They organize and control the labor required for a good experience for the riders.
Think about a rider in a world where Lyft and Uber are both dispatching self-driving cars. What's the difference between the services if they're all using Mercedes S-Class SelfDrivers? The rider knows that all Mercedes S-Class SelfDrivers are the same experience. There's no question of if the driver is trustworthy or competent. Uber and Lyft would be providing the exact same commodity experience of sending a self-driving car to your location to then do your bidding in exchange for money.
> So do individuals buy or lease self-driving cars in the future? Would they then set up their self-driving car to take instructions from Uber's central dispatch service in exchange for a cut of the profits?
In Uber's perfect world, yes. And Uber will do its best to hide the true costs of insurance, depreciation, regular maintenance, etc. from owners and lessors, just like they do today. It's worth understanding that Uber only works as long as it doesn't own any cars, or employ any drivers. If they switch over to owning some self-driving cars, they'll have to maintain and insure them.
Uber's (differential) advantage is not so much in labor organization, but rather, in having already built out a customer network and having solved all the logistical and (passenger-side) UX problems that are specific to this kind of application -- how to store, retrieve, and exploit the data, what UX decisions make the app easier to use, how to manage support, etc.
Other entrants (Tesla or Mercedes) will have to reinvent this wheel and have to market themselves and get users to download/use yet another app that does the same thing.
Personally, I think the right move for Tesla/Mercedes is to just rent out SDCs and focus on their core business rather than expand out into a different one they're new to.
(That's not an advantage against Lyft, of course.)
It's probably more along the lines of:
"Whenever you guys are done making it fully autonomous, we want 100,000 of 'em to replace our drivers"
If that was the case, the volume makes sense. Makes zero sense to buy 100,000 of today's model and watch it depreciate in value while providing none back 'cause you still need a driver.
Uber is an interesting company for a number of reasons, but here's the part that interests me the most:
Uber operates in a grey-area legal environment in the cities it operates in. Uber's defense / view on this is that they generate such a societal positive in terms of jobs that it outweighs the legal constraints.
But, when your goal is to eventually use a fleet of self-driving cars and eliminate the job possibilities for drivers, isn't that a moot point?
"Back in September of last year, Kalanick said at a conference that Uber was creating 50,000 new jobs for drivers around the world every month—more than doubling the 20,000 new monthly jobs Uber estimated it was generating in May.
...
Usually when we talk about job creation, we’re thinking in terms of the Bureau of Labor Statistics’ monthly payrolls report. So the economy added 126,000 jobs in March and 264,000 in February, while the unemployment rate was basically unchanged. That’s the language of the labor market. Because the drivers who use Uber’s app to accept your request for a ride and pick you up are independent contractors, they fall under the BLS’s umbrella of “alternative employment arrangements.” "
When that happens, skirting the law will no longer be necessary. A company with no personnel costs, rather than low personnel costs, should have little trouble cutting a more attractive deal with municipalities. Or they can just lease the technology to the existing medallion-holders.
> "über's defense/view on this is that they generate such a societal positive in terms of jobs that it outweighed the legal constrains"
I doubt they care a bit about the amount of jobs they are creating, I would say their view is "they generate such a positive amount of cash that it outweighs the legal constrains" and if they see a possibility of removing their highest expense of getting that cash - they won't bat an eye on doing so because they already have a history of doing stuff that is on the edge of legality/morality.
I think it will be very interesting to see what happens with self-driving car regulation. I foresee the money going from taxi drivers -> Uber -> Gov/Uber Split & no more jobs.
If Uber really is buying 100,000 cars, or anywhere near that number, it totally undermines their argument that they are a ride sharing app and not a straight up taxi/limo company.
The S Class has been Mercedes platform for autonomous driving cars. The current generation actually has a very capable installed sensors for autonomous mode. Per https://m.youtube.com/watch?v=fhDqgh6DClo
Very telling that Uber is trying to go with Mercedes, when Tesla is really their first choice. It's an open secret that Elon Musk will be launching an Uber competitor using Tesla vehicles. I expect a "surprise" announcement from Tesla within 18 months.
The other thing is Tesla can't make this volume of cars yet & it carries a certain amount of risk for such a large deal.
They only made about 50,000 cars last year and have capacity for around 90000 this year. Even if Uber's order was spread on a number of years, Tesla will have trouble filling the order.
Uber has some of the best researchers in the world. I'd bet Mercedes builds the cars, specialized with Uber specified additional sensors and hardware for self driving. Uber customizes the source to deal with tough driving conditions, and turns the code back over to Mercedes.
Uber gets it's fleet, Mercedes gets the tech. It's getting competitive. Mercedes will get the tech perfected, but this kind of deal could get them there much faster. Access to Uber's team, and more importantly mountains of data that Uber is taking the risk for will probably speed up refinement of the tech.
This has to be the answer if the rumors are actually true (the article does say one source said this, one source said this wasn't happening).
All auto companies need to get into the self driving space. Uber wants to get into this space for transporting people. If Uber and a car company work together Uber could get a discount, help develop the tech and share with the car company; it's a huge win for both sides.
At least that's how I'd try structuring the deal. You know, from my billion-dollar-company-CEO-arm-chair.
212 comments
[ 3.6 ms ] story [ 240 ms ] threadEdit: to be clear, these are regular taxis, not high-end/limousine/whatnot-service
EDIT We are being pedantic apparently. Are there any cash or cash like payments or is the subsidy purely in the form of a tax reduction?
"A subsidy is a benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction."
If I sell you a donut for $3 and then give you $1 back, or I sell you a donut for $2, is there any meaningful difference?
"markets where regulations are enforced"
That is, if the report is even true.
Sci-fi days ahead methinks.
"The driver can fully cede control of all safety-critical functions in certain conditions. The car senses when conditions require the driver to retake control and provides a "sufficiently comfortable transition time" for the driver to do so."
https://en.wikipedia.org/wiki/Autonomous_car#Classification
Its expected their Model 3 mass market vehicle will contain the same, if not a greater level, of driving automation.
Disclaimer: I've traveled down the interstate in a friend's Model S for ~2-3 hours at a time at ~85mph in autopilot mode with no intervention required.
If you can't beat them, join them.
I wouldn't be surprised if the wholesale (with profit) cost on a S-Class Benz is somewhere around 65-70k. I'd imagine that the cost of building an S-Class (100k retail) over a C-Class (~40k) is nominal.
Perhaps the long-term order is a commitment from Uber to motivate Mercedes to invest more heavily in autonomous vehicles? If the long-term strategy of Uber is to have a fully autonomous fleet then a long-term commitment of $5bn with one manufacturer seems plausible.
It's like if airbnb bought $5B of Manhattan real estate. Yes, it's "the heart of their business" but also - wow.
With Airbnb, I don't think anyone expects them to pivot into owning their own property. There's no real benefit.
If these are self-driving cars, it makes sense to me, otherwise it doesnt.
Also, a risk here is that other large parties will make the same calculation, flood the market (anybody with money will be able to start a cab company with a lot less hassle from labor laws because you don't need that much personnel) and drive margins down.
To win in this space you probably will need both a lean model of operations and a good image in the customer's eye. Uber currently seems to have both, but committing _now_ to a provider of cars is risky (what if other manufacturers turn out to have better or cheaper self-driving cars?). On the other hand, it also may be necessary to commit now in order to stay lean (committing now probably gets them a nice price cut)
So it'd be the best of both worlds for Uber: being able to put the self-driving vehicles to use around the clock and not having to make a capital investment to handle spikes in demand, which would just continue to be handled by existing drivers (for now). Just call in the human backup to help out when required.
I'm also wondering if they made the huge order so that they'd be able to influence and guide the requirements for the vehicles to Uber's specs. It seems that the requirements for a self-driving car for an individual's use differs from that for commercial taxiing.
You're assuming that each ride is independent, but that's already not the case with their Smart Routes - the driver picks up a customer, then picks up another one on the way, then drops off the first and picks up a third, etc.
The goal stated by their CEO is "perpetual rides", in which the car is never without a passenger.
That applies to a lesser extent to such things as theaters and cinemas, and even suburbs (who wants to get picked up there at 1 AM to fill the car that that theater goer took home?)
They will get below 50:50 for "at least one passenger on board", but it would surprise me if they managed to beat a 25:75 ratio.
Cheaper, certainly. Everyone will have cheaper SD cars than Benz, just as everyone has cheaper cabs than an S-class today. But better? If history is any guide, German luxury will be the gold standard of automotive UX for our lifetimes and beyond.
An order like this is probably:
* For a delivery spread over 10+ years
* The vehicles will almost certainly be leased/finance
* Each vehicle will probably assume a 5+ year working life and have a residual of about perhaps 25% of list after 5 years given the likely mileage
* There will be a big initial discount given the size of the order
So assume each car, is $100k new, but given an order that size is perhaps a 40% discount. So that's a $60k sale. After 5 years, the car is perhaps worth 20k.
So the unit economics are that each car costs (before financing costs) 40k over 5 years, or $8k a year. This is a relatively low cost given the number of rides it can take and the cost of the driver who will be driving it.
On that basis is doesn't sound that expensive.
[1] http://corporate.ryanair.com/news/news/14908-ryanair-places-...
No way. Absolutely no way. Looking online I'm seeing estimates of 300,000 to 500,000 miles per year in a taxi. If Uber is even NEAR that max, this car is going to have 300,000 miles on it. Hell even 150,000 is a ton of miles on a used vehicle.
Looking at KBB with a base S-Class that's 5 years old with 300,000 miles you're looking at roughly $12k in "good" condition (because, let's face it, people are going to be in this thing constantly and "good" is the rating the majority of used cars are in when they're sold).
Then factor in that Uber is not going to become a used car company (at least I would imagine they wouldn't) they're going to have to sell even lower than KBB to a third party so that third party can make any money. So I'd bet one of these cars would end up selling for $6k to $8k depending on mileage and condition after 5 years.
Individual drivers may not be able to take very good care of their cars, but large companies that use fleets of cars can take them regularly (perhaps even every night, as their default storage) to maintenance garages and have them restored.
Uber placed an order for 10,000 vehicles with the option to purchase 90,000 more.
Haha, I just checked. A recent valuation is $68B. (Dec '15)
Or were you comparing that to total volume? Market leaders sell a bit over a thousand per month.
The S-Class is a great car, but I'm sure there are Uber-specific improvements that can be made. Why would you order some many of something 'off-the-shelf'?
Uber is capital chasing a potential treasure chest. Google, Tesla, GM/Lyft/Cruise are the real players it appears.
That's one way a precommit makes sense to me; a contract could be structured such that Uber gets a certain price as long as they keep up with their commitments, if they don't keep up, they pay a penalty.
Bye Uber.
As it turns out, going from sensors to working self-driving car is a pretty difficult task, and Uber has some of the best self-driving researchers in the world working for them.
Its an uphill climb for Uber. They will need to fund their vehicles; Tesla funds their battery manufacturing, vehicle manufacturing, and autopilot telemetry corpus buildouts using the vehicles owners have paid for.
2. Interstate driving autonomy and city driving autonomy are different beasts. Gathering a ton of data about task X isn't necessarily helpful for task Y; ML isn't magical. If anyone, Google is ahead of the pack in the market Uber is vying for (automated taxis).
http://www.valmet-automotive.com/automotive/cms.nsf/pages/in...
This is a large scale capital investment in a safe luxury service that Uber can sell in certain markets. I'm betting the s-class needs very little hardware to wire into what UATC is developing.
...
There comes a point at which the helpfulness of technology becomes a form of oppression: walled gardens, predictive services making the wrong predictions, and every social platform forcing us to use our real names. It's cute when it's small, but what happens when self-driving cars can collude with the cops?
https://motherboard.vice.com/read/one-star ( previously: https://news.ycombinator.com/item?id=11149653 )
Self driving cars in our current world, in our current system will not go well. We need changes in the heads first.
http://m.manager-magazin.de/unternehmen/autoindustrie/a-1082...
It says they plan to buy "a six digit number of cars", and they're only interested in self driving cars.
Having a deal in stock rather than cash also makes sense: it is unlikely that many people would buy cars from Daimler or anyone if Uber charges at cost (gas + maintenance).
First: they're a domestic car manufacturer, lower cost to deliver to local drivers. Second: they're able to offer specific taxi options, such as manual front seat adjustment (vs automagic). Third: they offer a substantial discount to taxi drivers (they justify the discount through the marketing value of having large number of individuals ride in their cars).
Such discounts for marketing purposes is quite common in the industry. I've also heard dealerships sell cars to rental car companies at a loss, just to make sure customers have access to their cars (and will possibly consider buying that type of car for the next purchase).
The tax a private person has to pay to buy a car was 180% in 2015 so essentially a luxury car is nearly triple of what it might be in US, with a new S350 being $250k.
Thos taxi rules have changed recently however, so Mercedes may lose their 90% taxi market share.
Thanks for your clarification!
I found this list of sizes for existing commercial fleets. They would be besting UPS for total fleet size if all 100k were on the road at once. http://www.fleet-central.com/content/pdf/AUTOF_top300commerc...
Driverless rental vehicles will very quickly look like the back of public buses. "Dave {hearts} Christina" inscribed on every surface.
Imagine Daimler can produce 100,000 self-driving cars. They would continue to produce and sell self-driving cars to other people as well. They could sell self-driving cars to Lyft. Individuals could operate their own self-driving car services. They could organize in to cartels and have a single app that competes with Uber or Lyft.
Uber is destined to be a commodity in an open marketplace of taxi services as soon as they adopt self-driving cars. Their primary roll right now is as a labor organization. They currently create the economic incentives needed to attract a fleet of drivers. Self-driving cars are not motivated by economic incentives. Uber can't control the sale, distribution and organization of self-driving cars.
All that riders care about is being able to reliably get from one side of town to another. They'll know that they can trust Daimler self-driving cars, regardless of the dispatcher.
We're going to end up right back to where we started, with a commodity system of private taxi dispatchers and a productive industry of automobile manufacturers, with an emphasis on the automatic nature of this new form of transportation.
Daimler is the big winner here if they can bring a self-driving car to market.
While not quite as insurmountable an obstacle as, say, making a new smartphone platform (sorry Palm/Nokia/BlackBerry/Microsoft), it is enough of one to make this far from a perfect, liquid market.
In a hypothetical world in which we have fully autonomous vehicles and someone wants to compete with Uber, anyone who can afford capital investment in a fleet is not going to have much difficulty generating a customer base (and then they can have a mutually destructive price war with Uber).
I think you misunderstand Uber. Most of its perceived value is in arbitrage between drivers' perceived and actual costs of car ownership: drivers mostly think in terms of wages minus cost of gas, ignoring all of the other costs. Given that business model, I doubt Uber is actually looking at buying these cars. They will presumably force drivers to buy or lease the cars themselves.
Currently both Uber and Lyft handle the task of vetting drivers and making sure there is a good experience for their customers. They organize and control the labor required for a good experience for the riders.
Think about a rider in a world where Lyft and Uber are both dispatching self-driving cars. What's the difference between the services if they're all using Mercedes S-Class SelfDrivers? The rider knows that all Mercedes S-Class SelfDrivers are the same experience. There's no question of if the driver is trustworthy or competent. Uber and Lyft would be providing the exact same commodity experience of sending a self-driving car to your location to then do your bidding in exchange for money.
In Uber's perfect world, yes. And Uber will do its best to hide the true costs of insurance, depreciation, regular maintenance, etc. from owners and lessors, just like they do today. It's worth understanding that Uber only works as long as it doesn't own any cars, or employ any drivers. If they switch over to owning some self-driving cars, they'll have to maintain and insure them.
Other entrants (Tesla or Mercedes) will have to reinvent this wheel and have to market themselves and get users to download/use yet another app that does the same thing.
Personally, I think the right move for Tesla/Mercedes is to just rent out SDCs and focus on their core business rather than expand out into a different one they're new to.
(That's not an advantage against Lyft, of course.)
If that was the case, the volume makes sense. Makes zero sense to buy 100,000 of today's model and watch it depreciate in value while providing none back 'cause you still need a driver.
Uber operates in a grey-area legal environment in the cities it operates in. Uber's defense / view on this is that they generate such a societal positive in terms of jobs that it outweighs the legal constraints.
But, when your goal is to eventually use a fleet of self-driving cars and eliminate the job possibilities for drivers, isn't that a moot point?
http://www.slate.com/articles/business/moneybox/2015/04/uber...
"Back in September of last year, Kalanick said at a conference that Uber was creating 50,000 new jobs for drivers around the world every month—more than doubling the 20,000 new monthly jobs Uber estimated it was generating in May.
...
Usually when we talk about job creation, we’re thinking in terms of the Bureau of Labor Statistics’ monthly payrolls report. So the economy added 126,000 jobs in March and 264,000 in February, while the unemployment rate was basically unchanged. That’s the language of the labor market. Because the drivers who use Uber’s app to accept your request for a ride and pick you up are independent contractors, they fall under the BLS’s umbrella of “alternative employment arrangements.” "
I doubt they care a bit about the amount of jobs they are creating, I would say their view is "they generate such a positive amount of cash that it outweighs the legal constrains" and if they see a possibility of removing their highest expense of getting that cash - they won't bat an eye on doing so because they already have a history of doing stuff that is on the edge of legality/morality.
1) They fall under the traditional pre-arranged/limo exemption since they aren't doing street hails.
2) They massively increase the convenience and affordability of getting a ride, which cuts down on drunk/bad driving and saves money.
Neither of those points is affected by the move to SDCs.
The fetishism of "job-creation" is misguided and unsustainable. The purpose of life is not 'work'.
High-availability self-driving Ubers are undoubtedly better for the majority of urban consumers than taxis or individual car ownership.
They only made about 50,000 cars last year and have capacity for around 90000 this year. Even if Uber's order was spread on a number of years, Tesla will have trouble filling the order.
Uber gets it's fleet, Mercedes gets the tech. It's getting competitive. Mercedes will get the tech perfected, but this kind of deal could get them there much faster. Access to Uber's team, and more importantly mountains of data that Uber is taking the risk for will probably speed up refinement of the tech.
All auto companies need to get into the self driving space. Uber wants to get into this space for transporting people. If Uber and a car company work together Uber could get a discount, help develop the tech and share with the car company; it's a huge win for both sides.
At least that's how I'd try structuring the deal. You know, from my billion-dollar-company-CEO-arm-chair.