Autonomous Vehicles Won't Save Uber and Lyft

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="No two companies have cannonballed onto the public markets like Uber and Lyft&nbsp;(NASDAQ: LYFT)&nbsp;are doing right now. Not only are the two ridesharing leaders making their debuts on the heels of one another, they’re also losing more money than any other IPO ever.&nbsp;&nbsp;” data-reactid=”11″>No two companies have cannonballed onto the public markets like Uber and Lyft (NASDAQ: LYFT) are doing right now. Not only are the two ridesharing leaders making their debuts on the heels of one another, they’re also losing more money than any other IPO ever.  

Lyft revealed a net loss of $911 million in 2018, while Uber had a pre-tax loss of $3.7 billion last year, which doesn’t include significant gains from investments. In other words, both companies are drowning in red ink, though Uber and Lyft both believe it’s worth investing in growth and market share for now, and focusing on generating profits later.

That’s a typical strategy for high-growth tech companies who spend heavily on marketing and research and development to drive top-line growth before shifting to profitability as they mature, but the ridesharing industry differs in an important way.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Though Uber and Lyft have a duopoly in the U.S., the rise of autonomous vehicles will disrupt the industry in a big way, bringing in new competitors and changing unit economics. Both Uber and Lyft have been preparing for such a transition, making their own investments in autonomous vehicles and forming partnerships with other companies. Not surprisingly, both companies expect to benefit from the self-driving revolution.” data-reactid=”14″>Though Uber and Lyft have a duopoly in the U.S., the rise of autonomous vehicles will disrupt the industry in a big way, bringing in new competitors and changing unit economics. Both Uber and Lyft have been preparing for such a transition, making their own investments in autonomous vehicles and forming partnerships with other companies. Not surprisingly, both companies expect to benefit from the self-driving revolution.

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Image source: Getty Images.

<h2 class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="The way they see it&nbsp;” data-reactid=”27″>The way they see it 

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Uber outlined its autonomous vehicle strategy in its S-1 filing, and the company envisions a long period of hybrid autonomy where both self-driving and human-driven vehicles are on the road. The company believes that AV’s will initially be used for simple, short drives, and human drivers will be necessary for most trips, especially ones in more difficult conditions due to challenges like weather, traffic, and road construction.&nbsp;” data-reactid=”28″>Uber outlined its autonomous vehicle strategy in its S-1 filing, and the company envisions a long period of hybrid autonomy where both self-driving and human-driven vehicles are on the road. The company believes that AV’s will initially be used for simple, short drives, and human drivers will be necessary for most trips, especially ones in more difficult conditions due to challenges like weather, traffic, and road construction. 

Uber believes its base of drivers will give it an advantage, as well as its “liquidity network”, or how the company is able to meet rider demand as this transition plays out. Uber also argues that it will have an advantage in knowing when to deploy driverless or non-driverless vehicles. 

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Lyft, on the other hand, describes its strategy as "two-pronged". First, the company has an open platform that allows developers of AV tech to allow their vehicles to pick up riders with the Lyft app. Meanwhile, Lyft is also working on its own AV technology at its Level 5 Engineering Center, which got a boost last October after the company acquired Blue Vision Labs, a computer-vision company. Additionally, Lyft has a number of strategic partnerships, including with&nbsp;Aptiv, with whom it’s provided more than 35,000 rides in AV’s (with a safety driver) in Las Vegas.” data-reactid=”30″>Lyft, on the other hand, describes its strategy as “two-pronged”. First, the company has an open platform that allows developers of AV tech to allow their vehicles to pick up riders with the Lyft app. Meanwhile, Lyft is also working on its own AV technology at its Level 5 Engineering Center, which got a boost last October after the company acquired Blue Vision Labs, a computer-vision company. Additionally, Lyft has a number of strategic partnerships, including with Aptiv, with whom it’s provided more than 35,000 rides in AV’s (with a safety driver) in Las Vegas.

Like Uber, Lyft sees a long transition to autonomous vehicles, and the company has a goal of deploying AV’s for a majority of rides in ten years and having AV’s that are capable have providing nearly all kinds of rides in 15 years.

<h2 class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="The competitive landscape” data-reactid=”32″>The competitive landscape

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="The biggest problem for Uber and Lyft with the transition to autonomous vehicles is that they will face several new competitors, including&nbsp;General Motors&nbsp;(NYSE: GM),&nbsp;Alphabet’s&nbsp;(NASDAQ: GOOG) (NASDAQ: GOOGL) Waymo, Tesla&nbsp;(NASDAQ: TSLA)&nbsp;and&nbsp;Ford.” data-reactid=”33″>The biggest problem for Uber and Lyft with the transition to autonomous vehicles is that they will face several new competitors, including General Motors (NYSE: GM), Alphabet’s (NASDAQ: GOOG) (NASDAQ: GOOGL) Waymo, Tesla (NASDAQ: TSLA) and Ford.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Though it may not seem like it, Uber and Lyft are in an advantageous position right now, as they've essentially formed a duopoly in ridesharing. In most industries, duopolists tend to be considerably profitable as operators only have one significant competitor, and as long as they don't compete on price, profit margins are generally wide. Some examples include&nbsp;Coca-Cola and Pepsi in soda,&nbsp;Google and&nbsp;Facebook&nbsp;in digital advertising, or&nbsp;Visa&nbsp;and&nbsp;Mastercard in credit cards. All six of those companies have significant profit margins as they’ve learned to differentiate on things other than price.” data-reactid=”34″>Though it may not seem like it, Uber and Lyft are in an advantageous position right now, as they’ve essentially formed a duopoly in ridesharing. In most industries, duopolists tend to be considerably profitable as operators only have one significant competitor, and as long as they don’t compete on price, profit margins are generally wide. Some examples include Coca-Cola and Pepsi in soda, Google and Facebook in digital advertising, or Visa and Mastercard in credit cards. All six of those companies have significant profit margins as they’ve learned to differentiate on things other than price.

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