How Uber (and Tesla) plan to dominate 21st century transport and how it could come unstuck

How Uber (and Tesla) plan to dominate 21st century transport and how it could come unstuck, by Alex Pollack.

Increasingly, it is clear that 21st century transport will rely on self-driving, or autonomous vehicles. Uber is rolling this out Pittsburgh at present; Tesla too, and it is clear many other companies – including Google, GM, Apple and Chinese search giant Baidu are investing heavily.

Uber … use the size of the driver network itself to build scale. The passengers will use the network with the most drivers because that gets them the quickest ride, which in turn attracts more new drivers into the network, which therefore grows faster. It’s the virtuous circle.

But the equation starts to break down as more of ride-sharing takes place in autonomous cars. … Taking the driver out of the equation is a real problem for Uber, since no driver means no car. …

[I]n a world of self-driving cars, where the ride is the thing (not the car itself) it will make sense for operators to run fleets of cars to manage transport. A personally-owned autonomous car, by contrast, will make about as much sense as owning a plane for a regular commute to Melbourne.

The critical point is that Uber at present is enjoying its day in the sun not just because it transferred the cost of the car to the driver (taxi companies have been doing this for years) but because it brought certainty and quality to the ride business, which has been missing from taxis for years.

But if the future of cars is autonomous, Uber’s competitive advantage – driver financed cars – could quickly disappear, leaving the way open for the true ride-sharing model.