4 Reasons Uber Will Beat Google and Tesla to Monetizing Driverless Cars

Uber has officially launched their first self-driving cars, and while you might think they’re late to cross the starting line, they’re actually engaged in a clever version of the tortoise and the hare. While Google and Tesla have actively been testing their cars for the last several years, Uber has access to a business model that’s simply out of reach for the competition — they’ve figured out how to monetize the testing process.

This gives Uber an advantage that will propel them forward and help them be the first to implement driverless technology in a meaningful way. Their strategy is fourfold: they can easily collect usage data, they can selectively deploy their cars, the cost is built into their business model, and they have a large enough base to handle a transition smoothly.

Roads Unknown

An essential component of Google’s driverless tech is having detailed data for the road the vehicle is travelling on. Having this data ahead of time greatly simplifies the algorithms needed to drive the vehicle, allowing precious CPU cycles to be dedicated to other, more urgent tasks (like avoiding duck chasing grannies). Assuming others will employ a similar technique, companies competing in this space will be burdened with the arduous (and expensive) task of collecting this data, less they opt to license it. Google has proven itself capable of such a task before with its Street View product; however, with its globally distributed fleet of cars and drivers, Uber is in an optimal position to be collecting this valuable information. After retrofitting even a small portion of its ever expanding network of vehicles, Uber will be able to leverage its position to collect data at a rate and scale far beyond past efforts.

Choosing the Path of Least Resistance

Uber can limit autonomous vehicles to a small number of routes it ⁠⁠knows ⁠⁠ the car can handle. Tesla, Google, Ford, and other competitors are aiming for a different market: their cars need to be able to go anywhere the user desires, which means they essentially need to be able to handle every potential route, or they’re completely useless. Uber can put a driverless car on the road that can handle only “most” situations — while individually owned vehicles must achieve perfection.

Because Uber will have both a fleet of self-driving cars and a fleet of regular vehicles, they can see a user’s chosen start and end point, and only send those cars to routes they know the new technology can handle. They won’t need cars that can handle back roads or small towns.

Similarly, if it was a foggy day (which could wreak havoc with current camera-based driverless tech), Uber can simply not use their driverless cars on that day.

Earning Back the Bottom Line

If a self-driving Tesla costs an extra five or ten thousand dollars, most consumers will consider that an added convenience — a luxury option. This puts driverless cars into a bracket similar to convertibles — some people will splurge, but it won’t be a necessity for most households.

Uber, on the other hand, can calculate a precise (and significant!) return on investment on the cost of autonomous cars. If a self-driving Uber costs even twenty or thirty thousand more than a traditional model, the ability to drive essentially 24 hours a day (breaking only to refuel) means Uber will effortlessly earn back that investment.

A Smooth Transition

Uber has a stable of drivers who work anywhere from an hour a week to upwards of 90 hours; but at least half of those ‘partners’ are working part time hours, often picking up jobs here and there when they find themselves at loose ends. This means that there won’t be a huge shock to the system as they make a slow transition to driverless cars.

While full-time partners will certainly lose out on work, it will be easy to keep their stable of part-time drivers on. They will be able to fill gaps in conditions the driverless cars can’t handle, and in smaller cities where the driverless technology is less likely to be rolled out. This doesn’t put them ahead of the competition in direct terms; rather, it gives them the resiliency to continue the battle.

For these reasons, Uber’s ascent to the top is inevitable. It only remains to be seen whether the war will be one of attrition, or whether there will be room for all the players once Uber makes driverless cars ubiquitous.

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written by Wren Handman for Leviathan.ai. Read the newsletter here!