IMAGE: Martin Kollar — 123RF

The evolution of the taxi: Didi Chuxing puts its pedal to the metal

Didi Chuxing, the Chinese company created in 2015 by the merger of the country’s two largest taxi companies, Didi Dache and Kuaidi Dache, has closed a record $5.5 billion funding round, the largest by any technology company, raising its valuation to $50 billion, rivaling Uber’s $70 billion. Both companies maintain a shareholding in the wake of the agreement that allowed Uber to leave China in exchange for a 20% stake in the joint operation, reducing the chances of hostile competitive dynamics.

What is the appeal of the urban passenger transport industry driving these investments, and what ill omens does it auger for traditional taxis? The answer is simple: this is an activity whose main cost is the driver, while the technology is already sufficiently advanced to soon provide the means for driverless vehicles. When drivers disappear, the profitability equation automatically becomes much more attractive, allowing the entry of new competitors based on this new model. Didi Chuxing’s huge funding round is not a gamble, not a whim, or just another news story: there are no less than 5.5 billion reasons to show that the technology to replace taxis as we know them is already here, and that several very important and not so dumb investors are already committed to it.

Just how mature is driverless technology? Waymo, Google’s autonomous driving spin off, has already begun offering families trips in Chrysler Pacifica minivans in Phoenix, Arizona. Starting out with 100 vehicles, it intends to move up to 500 as they see fit. What does Waymo want? Simply to accumulate experience, learn about the needs of users, continue to improve the machine learning systems that enable the autonomous operation of their vehicles, and position itself as a pioneer in an industry where it predicts that many entrants will necessarily have to use its platform, in the same way that the vast majority of smartphone manufacturers went with Android. Waymo’s vehicles still have a driver behind the wheel, but they are almost autonomous: after almost five million kilometers of experience, their vehicles only require driver intervention every several thousand kilometers. The rest of the time, they circulate without the driver having to do absolutely anything, as was formerly the case with elevator operators who spent their lives going up and down all day and doing nothing other than pushing buttons. Of course, Waymo is not the only player in autonomous driving technology: even Apple is allowing its autonomous vehicles to be seen on the roads and asking for regulatory changes from the state of California to be able to get up to speed faster.

The urban passenger transport industry is set to consolidate, in fact it is already taking place. Autonomous driving technology requires huge investments, available only to highly capitalized companies, which define themselves not as transport companies, but as technology companies. So far, Didi Chuxing has been very expansive, investing in competitors in other countries, something Uber never seems to have had an interest in doing, opting instead for organic growth. Following the recently announced funding round, it is to be hoped that Didi Chuxing will further push its autonomous driving technology and possibly carry out more of these acquisitions and takeovers. Other smaller competitors, for whom it is not possible to develop their own autonomous driving technology, are likely to end up being acquired, losing competitiveness, or opting for third-party technologies such as Waymo.

Uber now offers its drivers in the United Kingdom sickness and accident insurance in return for a fee of two pounds a week, several months after the resolution that required them to consider these drivers as employees and not as independent contractors, but in reality, the move is of little importance: the company knows that its drivers will be completely dispensable very soon.

The big picture is becoming clearer by the day: autonomous driving technology is maturing fast, supported by heavy investments and the fact that learning takes place in a coordinated fashion through fleets of vehicles, shortening the life of traditional taxis.

By the time a autonomous taxis such as Waymo’s, already operating in Phoenix, start to operate on a regular basis, traditional taxis will automatically cease to be cost competitive and the replacement process will take place quickly. What will happen to the licenses that taxi drivers paid for to carry out their activity, licenses that were granted to a particular driver, and that will simply cease to be necessary? How will the sector now be regulated?

Some people still mistakenly consider autonomous driving as science fiction, while misidentifying the true enemy, but the simple truth is that with each day the self-driving taxi comes closer: we’re now talking about less than three years. What’s more, Uber has already announced plans to offer autonomous flying taxis in 2020 in Dallas and Dubai, while Airbus has announced a fully functional prototype it says will be ready by the end of the year. Dubai says it will have autonomous flying taxis this July.

Very soon, the look of our cities and how we move around them will change, with all that entails in terms of regulation; in fact those changes will be with us within the lifetime of a taxi …

(En español, aquí)