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Will Tesla Make Uber and Lyft Obsolete?
There's been some discussion over Twitter and online forums about Tesla, Uber, and Lyft. The biggest question and discussion I'm seeing is around, "Will Tesla make Uber and Lyft Obsolete?" That is, will Tesla put Uber and Lyft out of business?
The answer to this question depends on several things and I'll go over what those are now, along with what I think Tesla, Uber, and Lyft should each do individually.
As you probably know, if you've been reading my articles, Tesla is working on software that will allow a Tesla vehicle to drive itself - FSD (full self-driving). Right now, the software is in a beta, which means it is not ready to be released to every Tesla customer just yet and it requires human intervention to pay attention to roads in case the car makes a mistake.
Uber and Lyft are two ride sharing businesses, meaning anyone can use their car to drive people around and make money doing so. Uber and Lyft have opened up a new category of job for people who want to earn money while driving around.
How Tesla Would Put Uber and Lyft Out of Business
Tesla would put Uber and Lyft out of business if it can solve FSD in the next year. If we start to see autonomous robotaxis from Tesla in 2023, this is going to be very bad for Uber and Lyft. 2023 is coming in less than a year and there are no other widely spread autonomous platforms that come close to Tesla, despite what "news" you might hear.
This would be bad for Uber and Lyft because someone could own a Tesla - or Tesla could use their own cars, to function as a ride hailing platform and there wouldn't need to be a driver. The biggest advantage of autonomous driving is that no driver has to be in the vehicle.
This is a big deal because given the choice, most people probably do not want to drive a car in order to make money. Most people would rather the car drive itself while they do other things like sleep, and make the money that way. Elon Musk even has in his Master Plan Part 2, to create full self-driving software that is super human and lets you make money with your car while you sleep.
This is the number one thing that would put Uber and Lyft out of business, unless those two businesses get a large pile of cash and start buying Tesla vehicles right now (like Hertz has done), in order to be prepared for autonomous vehicles.
How Uber and Lyft Could Survive
Uber and Lyft could survive even if Tesla creates autonomous vehicles. But they will only survive if Tesla takes longer than a couple years to solve that problem. By that time, there's going to start to be other options that might make it viable for a car to be autonomous.
One of those options is Comma, AI. Comma, AI is a device you can put in your car that will put a camera on your dashboard and hook up to your car and allow the software on the device to make decisions for your cars driving, making it an autonomous vehicle.
Right now, Comma, AI is in the same camp as Tesla. You cannot use the software without being ready to take over at any time. Comma, AI is not autonomous yet.
I see it as kind of a race - and not a bet I would just want to leave up to chance if I was Uber and Lyft. The race is who will get to widespread autonomy first? Will it be Tesla, or will it be Comma, AI, or some combination of other companies?
I think it's going to be Tesla getting their first and it will be sometime in 2023. When this happens, there is going to be at least 4 million Tesla vehicles on the road that can drive themselves instantly. If other autonomous software platforms aren't able to match what Tesla can do at that time, then Uber and Lyft are going to be in big trouble.
They would only be safe if Comma, AI, or some autonomous manufacturer has something that all Uber and Lyft drivers can install to let their car be autonomous. Then it makes sense to keep using Uber or Lyft's platform.
Tesla Can Still Win Even If They Are Slow Solving Autonomy
Tesla can still put Uber and Lyft out of business even if autonomous software from all companies arrives at about the same time. Lyft appears to take about 20% of what their drivers make and Uber appears to take about 25%. Tesla can put them out of business even with these margins by simply charging a 10% cut to be part of their autonomous ride sharing network.
If Tesla creates an autonomous ride sharing network and only takes 10% of other people's Tesla vehicles driving fees, then Uber and Lyft will have to drastically cut what they are taking from their drivers in order to remain competitive.
And then, Tesla will start to make cars that they keep for the business and not sell to customers. Because it makes a lot more sense to have your own car that drives as a robotaxi where you don't have to pay 90% to an owner and instead keep 100% of the profits for yourself.
Tesla may end up not charging much at all for a drivers fee and instead make FSD a monthly subscription of around $500 or more for each person who owns the software and that will be how Tesla makes money from it - regardless of how much the owner of the Tesla drives.
I think we'll see a hybrid approach from Tesla - a monthly FSD fee, and a % cut from rides taken in Tesla vehicles owned by customers who bought the vehicle.
Without Uber and Lyft being able to be autonomous at around the same time Tesla achieves full autonomy, they run the risk of going out of business very quickly when millions of Tesla vehicles come online and can drive themselves.
I disagree. Short-term, Uber is a great reopening play post-covid. Uber is -50% off its peak, is now solidly EBITDA positive and trades at just 2.5x EV/Rev. Longer-term, Uber will benefit as various mnfrs get to L4/L5 autonomy and owners add their AD cars to the Uber fleet. $tsla— Gary Black (@garyblack00) February 10, 2022
What do you think about Tesla putting Uber or Lyft out of business? Will Uber and Lyft need to use something like Comma, AI in order to be competitive or will they create their own software?
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Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter or LinkedIn to stay in touch and follow his Tesla news coverage on Torque News.
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