Forget self-driving cars. Uber and Lyft have much bigger ambitions.
Ride-hailing leaders are embracing active transportation services
Only a year ago, the self-driving revolution seemed inevitable. Drivers would be out of work within a few years and computer-driven pods would be shuttling us from place to place at a staggeringly low cost — or at least that’s what tech-industry leaders led us to believe. However, as companies working on autonomous-vehicle technology have come up against its boundaries, their message has changed. Nowhere is that more obvious than with the ride-hailing giants.
Uber was once among the most ambitious in forecasting the autonomous future. In 2014, now-disgraced CEO Travis Kalanick predicted that self-driving cars would replace drivers and documents later showed he was looking for shortcuts and “cheat codes” to beat Waymo in the development of the underlying technology. But, with the company under new leadership and trying to reckon with the fatal accident in Tempe, it’s become abundantly clear that Uber’s strategy has shifted — and it’s not the only one.
Lyft similarly saw a major role for self-driving cars in the future of its ride-hailing service, but it was arguably ahead of Uber in seeing the need to diversify its offerings beyond its roots in challenging the taxi industry. As a result, both companies are speeding up plans and acquisitions to expand transportation options to become the dominant app in the growing mobility-as-a-service space.
Moderating expectations for self-driving cars
The annual Automated Vehicles Symposium took place in early July, and the mood was much different than last year. Claims about the future of autonomous vehicles were more reserved than in the past as those at the forefront of the technology’s development and rollout have begun to accept that there will be significant limitations on its capabilities “[f]or at least a few decades to come.”
Lyft Vice President of Autonomous Vehicle Programs Nadeem Sheikh was among those moderating expectations for the role of self-driving cars in the future of its business. Last year, Lyft was promising that most of its rides would be handled by autonomous vehicles in five years — not anymore.
Sheikh’s presentation focused on Lyft’s intention to create a human-hybrid network and detailed the long list of limitations that exist for a large-scale rollout of autonomous vehicles. The self-driving fleet could result in higher operating costs from having to build service centers to maintain and clean the vehicles, along with a possible increase in “dead miles” — when vehicles are driving without a passenger. The vehicles also have a number of limitations on where they can drive, how fast they can drive, and whether they’d be able to pick up passengers in a timely manner.
In short, these considerations led Sheikh to outline a three-stage rollout plan where humans will continue to handle the overwhelming majority of rides in the first stage, and more than half in the third stage. Meanwhile, the promise to automate nearly all the rides within five years was nowhere to be seen — it was never a realistic target.
This change in tone can be directly linked to the chill that has hit the industry in the aftermath of the first pedestrian death caused by a self-driving vehicle in Tempe, Arizona in March. People are finally putting aside the rosy and over-ambitious claims that self-driving cars will revolutionize urban transportation in the next few years, and admitting that they’re still years away and will have significant restrictions on their use.
In the aftermath of the collision, CEO Dara Khosrowshahi halted Uber’s autonomous-vehicle testing and his actions in the following months made it clear he was shifting away from Kalanick’s focus on developing the technology. Since the crash, Uber announced it wouldn’t resume testing in Arizona and laid off all of its safety drivers in San Francisco and Pittsburgh. They’ll be able to reapply for fifty-five new, more advanced positions, but that number is down from nearly 400 safety drivers at the company’s peak.
At the end of May, Khosrowshahi went even further in an interview with Kara Swisher at the Code Conference, telling her that Uber “needed to have access” to autonomous-driving technology in response to a direct question on whether Uber had to make the technology itself. He elaborated, saying Uber “will license out our own technology, and then we’ll look to build around other autonomous technology as well. We’re neutral. We’re a network company.” That neutrality, however, is a major shift from Uber’s previous position, but it’s further evidence that Khosrowshahi has a very different vision for Uber’s future than Kalanick — and that vision involves being the “Amazon for transportation.”
Rapid expansion of mobility options
Since the beginning of the year, Uber and Lyft have been aggressively making acquisitions and investments to expand the number of transportation modes on their apps, recognizing the changing nature of urban transportation and the shift away from cars that will not be stopped by the false promise of self-driving cars.
The accelerated change in focus is, in part, a result of the explosion of scooter and dockless bike-share companies that have flooded the sidewalks of U.S. and European cities. Some residents and policymakers are annoyed at how the services seemed to appear overnight, taking valuable sidewalk space, but it forced the ride-hailing companies to adapt their model to integrate the new services before risking the cannibalization of their existing offerings.
Earlier this year, Uber acquired Jump Bikes to add its bike-share service to the Uber app in San Francisco and Washington, D.C., with plans to expand it to additional North American and European markets. The company also invested in Lime, adding its bikes and scooters to the app, and has added transit tickets in some markets through a partnership with Masabi and car sharing via Getaround.
Since the investment, Uber has seen Jump’s e-bikes take ride share from Uber’s vehicle service in San Francisco — trips by new Jump users increased by 15%, while their trips in cars and SUVs dropped by 10% — though that might not be bad news for Uber. It remains a wildly unprofitable company, losing $4.5 billion in 2017, and shifting users to the far-less-costly bike-share service might end up being good for its finances. Khosrowshahi has also said he’d be open to having Waymo and GM’s autonomous-vehicle services on Uber’s app, but it remains to be seen whether they’d be interested.
While Uber has made some reference to its new focus, Lyft co-founders John Zimmer and Logan Green have been much more explicit in their desire to “decoupl[e] people’s right to mobility from car ownership” through transit, bikes, and small electric vehicles. They’d already been targeting a goal of 50% shared rides on their ride-hailing service, but with the purchase of Motivate — the leading U.S. bike-share operator — and the rollout of Lyft Bikes and Scooters, the company is clearly positioning itself as a key player in the diffusion of on-demand active-transportation services.
As part of this expansion, Lyft is also planning to build bikes and scooters into its trip-planning service, so the app will be able to tell users if a bike or scooter would allow them to more quickly reach their destination. The co-founders also claim to want “to provide capital and technology solutions that expand protected bike lanes and reduce speeding,” and to discount scooter rides that start or end near transit.
Lyft’s vision is appealing; it appears to be going all-in on more sustainable transportation and claims to want to support better infrastructure for pedestrians and active transportation, while promoting transit use when it’s the best choice for the user. However, the question that always comes with promises made by the ride-hailing companies is whether they’ll keep to them. We’ve heard that they’ll work more closely with local governments many times, including by sharing their data, but that doesn’t always happen.
What we can say, quite definitively, is that Uber and Lyft are no longer betting their futures on self-driving cars. The goal of automating drivers to achieve profitability has been abandoned for a more expansive plan to offer more mobility services — many of which will have lower operating costs that could help their bottom lines if they’re priced properly and cannibalize the traditional ride-hailing service. But even that isn’t certain, as Uber, in particular, has become notorious for its huge losses and it remains to be seen whether a significant change to its business model can alter that.
