Articles/megaposts by DaveT

[DaveT]

Just an additional info. Uber is not dominant in Japan. It's one of the smallest operators here with only 5-10 cars in whole Tokyo with 11M population. Government issues as you know. It's not allowed for an individual to operate a livery business and getting such license is very very difficult. Right know Uber is working several limo companies to assign several cars as Uber, so in Japanese law they are limos rather than taxi. Also since they are limo it's more expensive than taxi. Nobody uses such service here...

@hiroshiy Thanks for the input. I took some time to research the situation there and found a very good article that describes Uber's challenges in Japan. Can you let me know your thoughts?
How Uber’s Failure in Japan Can Help Startups Everywhere - Disrupting Japan

 

[DaveT]

On the other hand they will pile up the mileage 5-10 times faster and will probably need to be replaced more frequently, even assuming a longer lifespan for EV's.

@JRP3 Good point.

Some people are predicting for one autonomous car on a ride-sharing network can take out 30 non-autonomous individually-owned cars due to the efficiency of the ride-sharing network and assuming the autonomous cars could run around the clock (of course w/charging).

I even ran across one report predicting that the U.S. vehicle fleet will drop from 245 million vehicles to 2.4 million vehicles. Basically a 99% drop. Here's the link to the Price Waterhouse report but they don't explain their numbers at all, http://www.detroitchamber.com/wp-content/uploads/2012/09/AutofactsAnalystNoteUSFeb2013FINAL.pdf .

I think a 99% drop is extreme... maybe in like 40-50 years.

But I can see an autonomous ride-sharing network drop car ownership by a huge amount.

I'm thinking that there will be a significant portion of the population that will continue to own their own car, even up to several years after the debut of the autonomous ride-sharing market, but car ownership will decline radically. And after a while, it just won't make sense to most people to own a car anymore because the autonomous ride-sharing network will be just so good and cheap.

 

[adiggs]

Though I do see the changes being discussed as likely (reduced car ownership, people being driven, etc..), I think the timelines being discussed are overwhelmingly optimistic. For the most part, the discussion is treating autonomous cars as a technical problem and when the first version is out that solves the problem, then the problem is fully solved.

The way I see it, the technical problem of autonomous driving software that can put a car at any specific point to pick up and drop off somebody is huge, and the smaller problem.

There's a whole regulatory framework that will need to be worked out - and it might move fast, but fast isn't weeks or months. The first moment that a car is released into the wild without a driver and not in a pilot / testing program is going to be a huge moment - and it's both a necessity for this future we're talking about to occur, and it is a big leap from cars being tested.

Beyond the regulatory framework will be the societal acceptance and change. Humans change slowly, and when it comes to cars and driving, there will be holdouts that fight this change. What's the regulatory and societally acceptable framework for roads that are being shared by cars driven by humans and cars with no humans in them?


My point isn't that it won't happen - I'm absolutely persuaded that it will. But I see 10-20 years of evolution here, not 2-5 years to first technical solution, and a delivered and finished usable product a year or 2 later. We'll see this starting to happen by 2020 or soon after, but cars driving themselves will still have a human sitting in the driver's seat for awhile.

Then we get into the typical problem when dealing with changing out the automotive fleet - its a long replacement cycle and it's going to be another 10 years to build enough cars that most on the road are capable. Assuming that there's a switch that gets flipped and one day in 2020, every car being built is capable of autonomous driving.


One thing that I do see coming that will be investable - whoever gets to autonomous capable cars first, with high usability, may well see the whole industry go through a period where seemingly the only car anybody wants to buy, is an autonomous capable car built by that company. Huge demand for that company and more importantly, disappearing demand for everybody else. The high usability will need to be an electric car I believe, and it'll need a charging network that will stage cars through and plug them in (or we'll have a few years of minimum wage pay plugging in autonomous cars when the arrive and unplugging them when they're charged ).


It's coming, and signs of life may be 2-5 years away, but the kinds of societal change being discussed are (I believe), more like 10-20 years away. (And absolutely correct of the various companies being discussed to be pushing the envelope today in anticipation).

 

[bh1783]

I think Uber works better in the U.S. because of it's poor taxi and public transport system. However, I also think that Uber/Didi (and other ride-sharing companies) have a better business model than traditional taxi companies. They're able to employ part-time drivers (in countries that allow it) and they're able to better allocate supply/demand. Also, Uber's rating system allows passengers to rate drivers and Uber kicks off drivers under a 4.6 rating. All this helps to ensure driver quality.

This is why Uber has a culture problem in non-American markets. I have never taken a taxi in Tokyo, Hong Kong, Taipei, or Seoul where the taxi driver was bad. Every driver was professional and spoke the language of the country they were in. There was no need to "rank" a driver for their performance because every driver's performance was the same. Bad drivers are naturally self-selected out of the system because they crash their vehicles.

In America, the chances that a taxi driver speaks English well is fairly low and I can see where having a driving ranking system is useful. But, again it's a cultural difference where the Uber driver ranking system is akin to tipping servers at a restaurant(no tipping in Asia).

The value of Uber in America is that you can choose your driver and passenger. This is what has made airbnb successful as well. However airbnb is running into problems with racism due to this.

Uber succeeds because of social reasons in America. Poor taxi network and poor public transportation. These issues don't really exist in other countries.

 

[bh1783]

@JRP3 Good point.

Some people are predicting for one autonomous car on a ride-sharing network can take out 30 non-autonomous individually-owned cars due to the efficiency of the ride-sharing network and assuming the autonomous cars could run around the clock (of course w/charging).

I even ran across one report predicting that the U.S. vehicle fleet will drop from 245 million vehicles to 2.4 million vehicles. Basically a 99% drop. Here's the link to the Price Waterhouse report but they don't explain their numbers at all, http://www.detroitchamber.com/wp-content/uploads/2012/09/AutofactsAnalystNoteUSFeb2013FINAL.pdf .

I think a 99% drop is extreme... maybe in like 40-50 years.

But I can see an autonomous ride-sharing network drop car ownership by a huge amount.

I'm thinking that there will be a significant portion of the population that will continue to own their own car, even up to several years after the debut of the autonomous ride-sharing market, but car ownership will decline radically. And after a while, it just won't make sense to most people to own a car anymore because the autonomous ride-sharing network will be just so good and cheap.

Even though autonomous vehicles will reduce total cars, it won't be by such a huge amount. Cars will operate on the same principle that power plants and server capacity do: you need to have capacity for maximum usage. Even with autonomous cars, almost everyone needs a car on New Year's Eve or Thanksgiving break. Even if the fleet of cars is reduced, people will still need to use cars all at the same time. Yes there will be carpooling and ride sharing, but one of the main benefits of a car is privacy.

 

[DaveT]

Even though autonomous vehicles will reduce total cars, it won't be by such a huge amount. Cars will operate on the same principle that power plants and server capacity do: you need to have capacity for maximum usage. Even with autonomous cars, almost everyone needs a car on New Year's Eve or Thanksgiving break. Even if the fleet of cars is reduced, people will still need to use cars all at the same time. Yes there will be carpooling and ride sharing, but one of the main benefits of a car is privacy.

Even on New Years Eve, you just need a ride to get to the place your'e going and to get back home. You don't need the car the entire evening. With autonomous ride-sharing, each car can give rides to 20-30 people (?) to their event and back. This is much more efficient than driving your own car, parking it for the entire evening and driving it back.

 

[SebastianR]

Even though autonomous vehicles will reduce total cars, it won't be by such a huge amount. Cars will operate on the same principle that power plants and server capacity do: you need to have capacity for maximum usage.

Fully agree

Even with autonomous cars, almost everyone needs a car on New Year's Eve or Thanksgiving break. Even if the fleet of cars is reduced, people will still need to use cars all at the same time. Yes there will be carpooling and ride sharing, but one of the main benefits of a car is privacy.

I think the point about the peek periods maybe exaggerated: At New Year's taxis are full not because there are too few taxis, they are full since a) many people are on the road and b) these people are too drunk (and too responsible) to drive themselves. So if total individual car ownership goes down and car-sharing type of transport goes up I could see an improvement in these peak times (same amount of people, more cars available). The other consideration is, that even if these are busy times, transport might not be needed in the exact same instant but over a few hours.
However, I see big problems arising with stadiums where games / shows end all at the same time and all of a sudden you have some 50k people needing transport.

Lastly, a point of reflection from non-US markets: Cars in Europe are rapidly losing their value as status symbol. Some 20 years ago it was not uncommon to get your first car as soon as you got your license and then have one until you die. Today, many younger people only use Car2Go, DriveNow and similar services. I believe as gentrification continuous we will see more and more car sharing / taxi / Uber type transport usage.

 

[DaveT]

This is why Uber has a culture problem in non-American markets. I have never taken a taxi in Tokyo, Hong Kong, Taipei, or Seoul where the taxi driver was bad. Every driver was professional and spoke the language of the country they were in. There was no need to "rank" a driver for their performance because every driver's performance was the same. Bad drivers are naturally self-selected out of the system because they crash their vehicles.

I've ridden in probably over 1000 taxis across Asia, though majority of my rides were in Korea. And I've had many terrible taxi drivers, even in Korea. Most have been very good, but some were rude. Some were bad drivers. Some would yell at other cars incessantly. Some would chide me for hailing their taxi on the wrong side of the road. Some would get angry if my destination was out of his way. Etc.

I agree Korea's taxi system is 10x (or more) better than what the U.S. has. But it's far from perfect.

 

[cronosx]

I think the point about the peek periods maybe exaggerated: At New Year's taxis are full not because there are too few taxis, they are full since a) many people are on the road and b) these people are too drunk (and too responsible) to drive themselves. So if total individual car ownership goes down and car-sharing type of transport goes up I could see an improvement in these peak times (same amount of people, more cars available). The other consideration is, that even if these are busy times, transport might not be needed in the exact same instant but over a few hours.
However, I see big problems arising with stadiums where games / shows end all at the same time and all of a sudden you have some 50k people needing transport..

Just remember that an autonomous car can be deployed from a remote location in preparation for this kind of events, you have a fleet, it's not bound somewhere, it can be moved without problem during the night and be were you need it when you need it. this change much.
Say you use 20 cars on nearby town, you can reduce it to 10 and you could triple the cars in another location, and after the even all will be again like before

 

[ggies07]

What do you guys think about the teen population from 16-18 years old that drive to school? Do you think parents will allow autonomous EVs to pick their kid up from home and drop them off at school? I guess that would eventually take away bus drivers as well eh? My daughter will be 16 in ten years and I wouldn't mind her having a car that drives itself to school for her, but I'm not sure I would be ok with her getting in one that she summed from an app....

 

[JRP3]

The other consideration is, that even if these are busy times, transport might not be needed in the exact same instant but over a few hours.

How many people get out of work every day at 5, and need to go to different places?

 

[DaveT]

How many people get out of work every day at 5, and need to go to different places?

@JRP3 Another good point. Perhaps autonomous buses and mini-buses could help with that.

 

[SebastianR]

How many people get out of work every day at 5, and need to go to different places?

Good point I guess I shouldn't look at the world just from my perspective: I never leave work at 5 on the dot and my departure time varies greatly (I do come in the morning at pretty similar times though). I guess living in Denmark, you get used to the good life too much: there is a lot of great public transport and of course really well working bike infrastructure around - for instance electric busses from BYD and they are installing these ABB "powerbost" charging stations for busses...

But I'm very aware all of that wouldn't work in L.A. (and many other places).

 

[DaveT]

I'll take a few minutes and bring this discussion back to Tesla, since I brought up Uber because I care about Tesla (as a TSLA investor).

As an investor I care about finding the next 10x investment opportunity. That's why I invested heavily when Tesla was at $30/share. After much research, I thought it had a very good chance of reaching $300 within 4-5 years (from 2012 when I first invested).

After TSLA jumped to over $200/share quickly, I had a decision to make of whether to sell my shares since my investment thesis worked out or to find a new investment thesis that would justify me holding on to TSLA for longer. For me, I spent over a year (full-time in 2013) working on this question. And I came up with my own answers. I concluded TSLA had potential to do another 10x (ie., reaching $300-500 billion market cap) within 5-10 years. The reasoning was that if Gen3 was a massive success, then that could propel TSLA into becoming one of the largest auto manufacturers in the world while maintaining an industry-leading gross margin. In other words, Gen3 success would enable TSLA to go further downstream and tackle the Camry/Corolla markets with an even cheaper/economical model, the Gen4.

I also thought Tesla's future addressable market was safe and that the worldwide car demand would grow due to China/India/etc.

However, the advent of the ride-sharing phenomena, and the eventual autonomous car, changes all of this. I was following Uber since 2012 but I didn't think Uber had much impact on TSLA or Tesla's future. I thought Uber was operating in an entirely different market than Tesla.

I knew that Uber was tempting people in urban areas to ditch their cars in favor of ride-sharing, but I figured that the decreased demand for cars caused by Uber would be offset by the increase in demand by China/India's growing middle class.

But a few things happened. First, Uber and the ride-sharing networks grew much faster and larger than I had anticipated, and it is having a much bigger impact on car ownership paradigms that I had originally anticipated. In fact the bigger Uber/Didi grow, the more impact their have on car ownership paradigms (ie., people will want to own their car less). (note: that's one reason why it's important to keep up with what's going on in the ride-sharing industry because it has a direct impact on the addressable market for car ownership).

Second, the timeline for autonomous cars kept getting pushed up, and the day where we'd see a fully autonomous car is becoming increasingly imminent.

Ride-sharing impacts car ownership in limited ways. But when ride-sharing is paired with autonomous cars, then this has a tidal-wave of impact on car ownership, since it basically drops the cost of ride-sharing by probably 80% or so, thus making it that much more appealing to people.

So, what does this all mean to Tesla?

First, Tesla's (and other car makers) total addressable market will shrink substantially (70-80% over next 10-15 years?). This means Tesla and other auto makers will be competing in a smaller overall market than previously. It makes it that much more difficult and brutal.

I thought the transition to EVs would be brutal for traditional auto makers, but this transition to autonomous ride-sharing will be multiple times more brutal than the transition to EVs. For transition to EVs, you're still dealing with the same overall market size. But with the transition to autonomous ride-sharing, you're dealing with less cars needed and a smaller overall market. If the transition to EVs was going to be a slow-motion train wreck (those were the words I used), I don't know what to call this transition to autonomous ride-sharing. Maybe I'll just say it'll be a bloodbath for most auto makers.

Second, Tesla's advantage with electric powertrain won't be enough. In other words, here are the priorities for the new world order of cars:
1. Autonomous driving
2. Ride-sharing network
3. Electric vehicles

Ideally, the market leader will be the leader win all three of these areas. Autonomous driving isn't enough. You need an effective ride-sharing network to pair with the autonomous driving cars for the cars to reach their full disruptive potential.

For Tesla, they currently have two of the three: namely, development of autonomous driving efforts and electric cars.

The question is how difficult will it be for Tesla to launch their own ride-sharing network, or if they don't then what happens?

Well let's take the question if Tesla doesn't release their own ride-sharing network. In that case, Tesla owners could probably just lend their autonomous cars to Uber or other ride-sharing networks. But in this case, Tesla is just the auto maker and doesn't participate in the ongoing revenue generation of the ride-sharing network. And what Uber/Didi is proving is that ongoing revenue of transporting people from point A to point B will be substantially larger than the revenue from making cars.

If Tesla can't successfully debut a ride-sharing network, then the valuation as a company will suffer unless they can sell a ton of autonomous cars (ie., 10M cars/year by 2030?).

As the vehicle market shrinks due to autonomous ride-sharing, investors will give a lower multiple for companies in the auto industry since it will be a shrinking industry. Currently, the auto industry already has a low P/E multiple because it's not a very good business sector. Low margins, high costs, ongoing liability, etc. You might give a company a 7 P/E or so. As the industry shrinks, that multiple will probably go lower as well. This can make valuation for TSLA even more difficult.

Scenario #1: Here's what some people might consider a "decently good" scenario for Tesla, but I think it would be a poor scenario for TSLA as a stock. We'll call it "3 million cars by 2025".

In this "3 million cars by 2025" scenario, let's lay things out. Tesla is set to produce 3 million cars/trucks by the year 2025. Let's see how much TSLA will be valued.

At 3 million cars/trucks, let's say each sells for an average of $40k. That's would be $120 billion. Let's add another $10 billion (100k Model S/X). So total revenue is $130 in 2025.

Let's say gross margin in 22%.

And profit margin is 10%.

So their profit would be $13 billion.

The overall car industry is shrinking and Tesla is growing that fast, so investors give TSLA a 5X multiple.

TSLA's valuation in 2025 is $65 billion. (note: TSLA's current valuation is $33 billion). So you might say, ok that's fine TSLA doubles in 9 years. Not terrible. But that's not including dilution. Tesla will likely have to raise more money in the future, and also they give out stock incentives. So, TSLA might only go up 50% in value over the next 9 years. So, if the stock is at $220 right now, then you might see TSLA at $310 in 2025.

Of course this is assuming that Tesla Energy doesn't work out or contribute much to TSLA's bottom line. And it's assuming Model S/X demand stay stagnant. But it's also assuming that Tesla can sell 3 million Model 3/Y/truck... and that's not an easy task either.

Another twist to this scenario is that investors could give a higher multiple, maybe 7 P/E... and that would make TSLA's valuation at $91 billion. But with dilution and all, maybe that's a 100% gain from today. So about a 8% appreciate per year. Not bad. But not what most people are looking for when investing in a high-beta and high-risk company like Tesla.

So, the question is what does Tesla need to do to "break out" of this scenario #1?

Well, for one Tesla Energy could take off and become bigger than their car portion of their company. I think Tesla Energy has the potential, but I also have my doubts as well. And I'm not about to have a high degree in confidence in Tesla Energy until I can see more evidence of solid execution and market uptake.

Anyway, for sake of discussion let's call the scenario I just described as Scenario #2: "3 million cars and Tesla Energy huge by 2025"

Another scenario, we'll call it Scenario #3, is for TSLA to have another part of the business take off. It could be semi trucks or even something completely new. But I think one possibility is that Tesla could be a battery supplier to other EV companies. But I'm not sure if this would increase the valuation of TSLA that much, because with worldwide vehicle production/demand decreasing there probably will be fierce competition in the battery sector (i.e., Samsung, LG, Panasonic, BYD, etc) and it's likely to be a low margin business. Unless, of course, Tesla discovers a true battery breakthrough that significantly reduces cost beyond what any of their competitors can compete with. This has potential for Tesla to grow a very big business from. But at this moment, it's not something I see as likely. Possible, but not likely.

Scenario #4 would be Tesla making a lot more than 3 million cars/year by 2025. Let's say they make 5-7 million cars/year by 2025. In this scenario, Tesla's growth would be much faster and would justify a higher P/E multiple. This would make TSLA worth significantly more than Scenario #1. Let's work out some rough numbers. At 6 million cars/year at $40k/car, we're looking at $240 billion. 10% profit margin would leave us with $24 billion profit. Let's give them a 10X P/E multiple. That would make TSLA's market cap $240 billion... almost 7x from today's valuation but then you'd need to discount dilution. So maybe 5x from today's valuation. Not bad over 9 years. (Note: a 12X P/E multiple would value TSLA at $288 billion).

Scenario #5 would be Tesla successfully launched an autonomous ride-sharing network that successfully competes against Uber and the likes of Uber.

In this scenario, let's try to calculate what TSLA might be worth in 2025.

Now Uber's already shown us that ride-sharing is a massive market (they're already at a $20 billion/year revenue run rate and it's still very early as they're still experiencing 2-3x growth per year). My rough guesstimate would be that the ride-sharing market could be at $200+ billion by 2020 and $400+ billion by 2025. The cost of autonomous rides would be much cheaper to the passenger but there would be a massively more amount of rides given.

If Tesla by 2025, can reach $50 billion of that $400+ billion market of autonomous ride-sharing and also show that they have momentum to eventually become the market leader, that would justify a very high P/E multiple.

At $50 billion revenue, we'll give 10% profit margin, so $5 billion profit/year for Tesla's autonomous ride-sharing network. Since it's still growing and the market is still growing by then, investors might give them a 30-40X multiple on this. So let's say it's a 35 P/E multiple on $5 billion profit. That would give Tesla's autonomous ride-sharing network a valuation of $175 billion. Let's add that market cap valuation to Tesla's car division (ie., Scenario #1 of 3M cars/year by 2025) of $65 billion, and you have a $240 billion market cap company.

Of course there's always the scenario of everything Tesla touches doing super well (ie., combine Scenarios 2, 3, 4 and 5) and you'll have a company that could be the largest market cap company in the world. But the rationale investor in me chooses not to entertain that as a realistic scenario because almost-always... not everything works out like we expect it to.

So, where does this all take us?

If autonomous ride-sharing truly does shrink auto production worldwide in significant ways, then it's going to be important for TSLA to have a plan to overcome this. 3 million cars/year by 2025 would be a disappointment to most TSLA investors (as shown in scenario #1).

I think the most strategic way forward would be to try to produce 6 million cars/year by 2025 (basically more cars than people expect) and somehow find a way to successfully launch a ride-sharing network that can out-compete Uber and Didi.

But both of those tasks/goals aren't going to be easy to accomplish.

But maybe I'll end this post with some thoughts on why I'm still a TSLA investor.

I think Tesla has a decent shot at producing at least 5 million cars/year by 2025. A lot of it will depend on how well Tesla executes the Model 3. And Tesla might even need to go downstream a bit (after Model Y and the pickup truck) to release a car tailored for autonomous ride-sharing (something that isn't geared for performance but geared to be cheaper yet comfortable).

I also think Tesla has a decent shot to make a difference with Tesla Energy. I like their focus on energy innovation and I think their investments will pay off. I think there's a pretty good chance Elon and his team will find a way to make a good business out of Tesla Energy.

Personally, I think the ride-sharing (ie., transporting people from point A to point B) is going to be much, much larger than the auto manufacturing industry and I'm really rooting for Tesla to be able to pull off a ride-sharing network that outcompetes Uber's network. The "only" problem is that Tesla would need to out-execute Uber, and Uber is very good at executing. At this moment, I'm hopeful but not totally optimistic. I think Tesla's best opportunity here is if they can truly come out as the undisputed leader in autonomous driving and that will help their efforts in launching a ride-sharing network.

I also think Tesla has the opportunity to disrupt the trucking industry and if done right it could add at least $500 billion to Tesla's market cap. The trucking industry is massive. It's 5% of the U.S. GDP and employees roughly 9 million people in the U.S. And that's just the U.S.! The trucking industry is ripe for disruption.

The challenge for Tesla in the trucking industry is that Tesla needs to be super-aggressive and also near-flawless in their execution. And recently Tesla has had challenges in the way they execute. The Model X launch has been a disaster. And Tesla keeps missing on quarterly guidance. These aren't good signs when you're thinking about Tesla's chances of disrupting the entire trucking industry. Especially since Uber and others are aggressively moving into that sector as well.

Anyway, overall I think TSLA still presents solid opportunity for the future... even in a future with decreased car ownership. But at the same time, Tesla has got it's work cut out for them. Tesla needs to be sharp in strategy and precise in execution. Because competition is heating up.

 

[kenliles]

Alphabet executive steps down from Uber board as firms prep driverless cars

 

[DaveT]

Alphabet executive steps down from Uber board as firms prep driverless cars

@kenliles I saw that earlier today. Uber basically shutting out board members from Google. I was thinking Uber must have heard something that Google is prepping some kind of ride-sharing with their eventual autonomous cars or something along those lines. Whatever the case, Uber is seeing Google as a viable threat to their business. And Google being privy to Uber's financials must see the goldmine that Uber struck. Currently Google owns 5-6% of Uber (via Google Ventures) which is a healthy portion of Uber. But also Google has been working on driverless cars for quite a while and I read that Google might be ready to graduate their driverless car program from their Google X labs.

Add to this that Apple invested $1 billion into Didi Kauidi a few months ago (prior to Didi acquiring Uber), and Tim Cook said the reason for Apple's investment was to explore and learn about that space. Here's Tim Cook's words from Apple invests $1 billion in Chinese ride-hailing service Didi Chuxing, "We are making the investment for a number of strategic reasons, including a chance to learn more about certain segments of the China market," he said. "Of course, we believe it will deliver a strong return for our invested capital over time as well." ... "(The deal) reflects our excitement about their growing business ... and also our continued confidence in the long term in China’s economy," Cook said."

I wonder if Apple is positioning themselves as perhaps a partner with Didi Kauidi in China. Perhaps Apple could supply Didi with autonomous cars.

So, we've got tension between Uber and Google... as they see each other increasingly as competitors. Yet we see Apple establishing a partnership of sorts with Didi Kauidi in China. Of course, it's just a relatively small investment, about 4% of the company prior to the Uber/Didi deal. Apple probably owns about 3% of Didi right now. And Apple usually doesn't make these kinds of investments with sectors outside their supply chain. They've made investments in companies in the past but usually it's been to help supply chain partners. So, it appears Apple is taking this new sector of ride-sharing seriously, and it's likely their involvement will grow.

So, we've got some of the largest tech companies in the world eyeing autonomous cars and ride-sharing. It's going to be interesting how things play out over the next few to several years.

 

[bh1783]

Uber Is Still Trying to Figure Out If It's a Real Business

Uber Halts Abu Dhabi Operations as Drivers Detained

Here is how ride sharing is being integrated with taxis, car-sharing, and driver services:

Kakao’s deal to cut costs for designated drivers

Designated drivers in Korea are a big business. Bars never close and the country drinks a ton but drunk driving laws are really strict: .01 BAC is over the limit, police checkpoints at night and automatic loss of license for drunk drivers.

So people call designated drivers to come pick them and their cars up. The designated driver uses public transportation to get there, drives the person home and then NOW, they use a car sharing company to drive themselves home late at night when most car sharing vehicles are unoccupied. This increases the utilization of all vehicles (personal and shared cars).

 

[hiroshiy]

@hiroshiy Thanks for the input. I took some time to research the situation there and found a very good article that describes Uber's challenges in Japan. Can you let me know your thoughts?
How Uber’s Failure in Japan Can Help Startups Everywhere - Disrupting Japan

My comments to the article - it is still an American view. I think Uber's failure (no, they might be still trying?) was to forget to create any customer value. If you need a ride you need a few things...
- availability of the car. I tried calling Uber in central Tokyo and success rate 95%. My wife tried at home, about 5 miles from the center of Tokyo, 50%. Then she complained that Uber requested 2x fare since it's raining.
- price. Uber is 20% to 40% more expensive than taxi, and of course, 10 times to 20 times more expensive than train. Sometimes Uber costs more than twice of taxi, when they are busy, but taxi fares do not change.

So I think they will fail on the first day I used Uber here. Sad nobody at Uber knows how to do business. IMHO they should spend a long time to talk to individual taxi groups, not corporation operated taxis, and convince each driver to participate Uber system. In Tokyo corporate taxi 35K cars, individual taxi 15K cars. You can call individual taxi with a smartphone app, so people wouldn't know the difference though. For the first few years of market entry Uber should subsidize drivers to beat the competition with regular taxi.

Another, and big issue here is there are too many taxis in Tokyo. Most of them drive vacant around the city to catch customers. Line up at airports and wait three hours. Over supply, little demand. People don't call taxi via app or phone call, they just raise their hand to catch them. Sometimes three cars stop for you.

 

[Fallenone]

It seems to me it is really the difference in existing public transportation services between eastern Asian countries and US that makes a huge difference on Uber's venture in the respective places. It reminds me that Didi (which in Chinese means taxi taxi) just recently connecting independent drivers with customers (could be a response to Uber's entry). For the past two years or so, they were merely facilitating communications between existing corporate taxi drivers and customers. It even created some social concerns that the elderly or people without a smartphone can't get timely taxi services anymore, because the less and less taxi drivers were available without Didi.

 

[tlo]

Dave, I agree with you on a lot of points. I've been thinking about this a lot and I'm also fearful of Uber taking over the world (I'd feel better if I was an Uber investor, but I'm not).

But let's try this exercise and help me understand what will happen.

Let's say Tesla and Uber achieves full autonomy at the SAME time, say, 2019.

In 2019, Tesla is producing ~700K cars/year. COGS of Model 3 is $30K. So with one month production and $1.8B, Tesla can make ~60K autonomous Model 3s. How big an autonomous fleet do you need for a city? There are ~14K taxis in NYC and <100K taxis across the US. (Taxicabs of the United States - Wikipedia, the free encyclopedia)

Tesla can reserve 200K cars as company-operating ridesharing fleet and deliver 500K cars to customers (which can also be added to the fleet), and this will allow them to compete across the US (Uber's home market). These 200K cars will effectively pay for themselves in a year. Tesla is already invested in building service centers and charging stations to support the Model 3, so that is not a problem.

What does Uber do? Do they operate their own fleet? If so, who makes their cars? Who services and provides charging for the cars? If they continue with a hybrid driver-driverless model (keeping their existing driver network, which is their prime advantage), how do they compete on cost against autonomous cars?

Basically, once autonomous cars are available, Tesla would be able to produce a fleet in weeks (plus any customer-owned cars that are already delivered). Since costs are so much lower without drivers, where is the value in Uber's existing driver network (i.e. network effects)?