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Lyft and GM, Sidecar, the nature of competition and CES

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Lyft announced a $500M investment from GM with $500M more, pushing them to a $5.4B valuation, which is both huge and just a tenth of Uber. This was combined with talk of a push to robocars. (GM will provide a car rental service to Lyft drivers to start, but the speculation is that whatever robocar GM gets involved in will show up at Lyft.)

With no details, Lyft's announcement doesn't really add anything to the robocar world that Uber doesn't already add. It is GM's participation that is more interesting, because it's another car company showing they are not just giving lip service to the idea of selling rides rather than cars. (Mercedes and BWM have also started saying real things in this area.)

My initial expectations for the big car companies were much more bleak for them. I felt that their century long histories of doing nothing but selling cars would impede them from switching models until it was too late. That might still happen, and will happen for some companies, but more might survive than expected. The story also contains some more pure PR comments about OnStar in the new Lyft rental cars. Lyft drivers are all linked in real time with their smartphones; OnStar is obsolete technology, named only to make it seem GM is adding something. GM is not a great robocar leader. They have been very slow even with their highway "super cruise" efforts and the best they have done is partner with Rajkumar at CMU only to find Uber more successful at working with CMU folks.

Sidecar and where are you going?

Also frightening is the news last week of the death of Sidecar. Sidecar was the 3rd place smartphone-hail company after Uber and Lyft, but so distant a third that it decided to shut down. Where Lyft can raise another billion, Sidecar could not get a dime. The CEO is a friend of mine and I've been impressed that Sidecar was willing to innovate, even building a successful delivery business on top of the fact that you had to tell Sidecar where you were going. I think it's important that users say where they are going. It allows much better planning of the use of robocar resources. If customers say where they are going, you can not only do some of the things Sidecar did (deliveries in the trunk the passenger doesn't even know about, pricing set by drivers, directional goals set by drivers etc.) you can do more:

  • Send short-range cars (electric cars) for short trips
  • Send small (one or two person) cars when there is just one rider
  • Send cars not even capable of the highway if the trip doesn't involve the highway
  • Pool riders far more efficiently, sometimes in vehicles designed for pooling which have 2-12 private "cabins."

All of this is important to making transportation vastly more efficient, and in allowing a wide variety of vehicle designs, and a wide variety of power trains. It is only by knowing the destination that many of these benefits can be seen.

Uber lets you enter the destination but does not require it, and people do like having less to do when summoning a vehicle. (I always enter the destination when in places they don't speak English, it's a handy way to communicate with the driver.) The driver is not shown the destination until after they pick you up. This stops drivers from refusing rides going places they don't want to go, which has its merits. It also has serious downsides for drivers, who sometimes at the end of their shift pick up a rider who wants to go 40 miles in the opposite direction of their home.

Even more frightening is what Sidecar's death says about how much room there is for competitors in the robotaxi space. There are dozens of car makers competing for a new car customer, but San Francisco, the birthplace of Uber, Lyft and Sidecar, could not support 3 players in one of the world's hottest investment spaces. Two unicorns, but nobody else.

When it comes to competition, the ride business is a strange one. For scheduled rides (which was most of the black car business before Uber) there are minimal economies of scale. A one-car limo "fleet" is still a viable business today, picking up customers for scheduled rides. They provide the same service as a 100 car limo-fleet, though they sometimes have to turn you down or redirect you to a partner.

For on-demand rides, there is a big economy of scale. I want a car now, so you have to have a lot of cars to be sure to have one near me. I will go with the service that can get to me soonest. While price and vehicle quality matter, they can be trumped by pickup time, within reason. Sidecar, being small, often failed in this area, including my attempt to use it on its last day on my way home from the airport.

Robocars offer up a middle ground. Because there is no driver who minds waiting, it will be common to summon a robocar longer in advance of when you want it. Once you know that "I'm leaving in around 20 minutes" you can summon, and the car can find somewhere to wait except in the most congested zones. Waiting time for a robotaxi can be very cheap, well under a dollar/hour, though during peak times, robotaxi owners will raise the price a little to avoid lost opportunity costs. (Finance costs will be under 20 cents/hour at 5% interest, and waiting space will range from free to probably 30 cents/hour in a competitive parking "spot market.")

The more willing customers are to summon in advance, the more competitive a small player can be. They can offer you instant service when you actually are ready to leave, and that way they can compete on factors other than wait time. Small players can be your first choice, and they can subcontract your business to another company who has a car close by when you forget to summon in advance.)

CES in Las Vegas

I'm off to CES Wednesday. This show, as before promises to have quite a lot of car announcements. Rumours suggest the potential Ford/Google announcement could happen there, along with updates from most major companies. There will also be too many "connected" car announcements because companies need to announce something, and it's easy to come up with something in that space that sounds cool without the actual need that it be useful.

This morning already sees an announcement from Volvo and Ericsson about streaming video in cars. This is a strange one, a mix of something real -- as cars become more like living rooms and offices they are going to want more and better bandwidth, including bandwidth reliable enough for video conferencing -- but also something silly, in that watching movies and TV shows is, with a bit of buffering, a high-bandwidth application that's easy to get right on an unreliable network. Though in truth, because wireless bandwidth on the highway is always going to be more expensive than wifi in the parking space, it really makes more sense to pre-load your likely video choices to win both ways on cost and quality. I have been fascinated watching the shift between semi-planned watching (DVD rental, Netflix DVD queue, DVR, prepaid series subscriptions, watchlists and old-school live TV) and totally ad-hoc streaming on demand. While I understand the attraction of ad-hoc streaming (even for what you planned far ahead to watch) it surprises me that people do it even at the expense of cost and quality. Of course, there are parallels to how we might summon cars!

Comments

Once the robocar is ready to run (and it seems it is now), must be a totally full autonomous robocar. No driver, no steering wheel. Better delay the use of robocars than make it 50%/50%. If 1.000.000 cars are substituted by 1.000.000 robocars, the less death casualities, and injured will be astonished. Some few accidents caused by robocars, will be easily dismissed. The best will be the withdraw of ALL man driving vehicules , in one area, and let only robocars there. It must be done in 24 or less hours. First, taxi robocars,then owned robocars. Except bicycles, all other vehicules in the area must be autonomous. So the traffic can be organized according to the best circulation of robocars, and the security of pedestrians. The vehicule insurance will dissapear, same the traffic controllers, the traffic fines, the alcohol test. Unless a person hit on porpouse a car will be no civil responsability, a new general insurance system will pay for any accident (like healthcare). Then the system will start in other areas, then such areas will be connected in the same way. This is the start of the idea, can elaborate later.

I agree that there should have been room for 3 players in this market. After all, there are dozens of car companies, airlines, rental car companies, hotel chains, etc. Why only 2 neo-taxi services?

I also agree on the four bullets that shared vehicles can and will be 'right sized' for the trip- though I do think it will be a bit more complex to manage these and integrate them into a unified system. They may be completely different operators, just as Hertz doesn't operate busses or taxis.

I'm not convinced of some of the other comments though.
a) Why do you still assume personal vehicle ownership and a peer-to-peer model? I hear some people float the idea of a P2P robotaxi system, but why would individuals want to manage and own them over a fleet based model?
b) Why would anyone want to order anything in advance if there are enough liquidity in the system to manage demand?
c) Waiting time is a huge inefficiency to an operator and would be reduced at all cost to increase utilization rates.
d) With sufficient liquidity of vehicles, there would always be a vehicle with a seat heading your direction within a minute or two of you at any time requiring no wait time for you or the vehicle.

I believe you answered this question yourself in the last sentence about on demand vs advance notice of video streaming- people prefer on demand, even if they knew they wanted it long ago and they sacrifice some quality.

I'm not sure if the P2P model will emerge, but just as many people still want to own cars, and many of those like to effectively rent them out (including themselves) for Uber, I could see people who own a car saying, "Why don't I have that car make some money for me when I know I am not using it?"

Some argue they would just never own but I doubt the world shifts so fast. I also envision group ownership -- 30 people own 10 cars, giving them some ownership and style and, at a cost, slightly more guaranteed service. (Though if more than 10 are in use, they have to go out to the taxi fleets, but that's rare.)

You order in advance for instant service, for necessary service, or to avoid surge. Today, the most common example is trips to the airport. You don't know for sure when your Uber gets to you, so it is worth ordering in advance (and paying for wait time.)

Waiting is almost nothing to a robot. It's only lost opportunity cost and parking. The small cost is easy to get people to pay for the instant service.

d) Maybe. Maybe not. And not in all locations. Right now Uber often doesn't have that and solves it with a surge. Robots will surge much more easily as they are always on duty (unless needing a charge.)

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