So build stuff that completely disrupts entire industries, and eliminates whole categories of jobs, but STFU about it's actual effect on people? Just cash the check, geek out about the tech, and get on with your life?
> So build stuff that completely disrupts entire industries, and eliminates whole categories of jobs, but STFU about it's actual effect on people?
Yes. The jobs weren't their responsibility when the existed and shouldn't be when they're gone. We have other entities to worry about things like that, governments.
Maybe I'm missing something but that number sounds hard to believe. An S-Class in the US is $100K. Even if a stripped down "utility" version was available at $50K that's $5B worth of cars. Yes, it's a "long term" order (i.e., not paid for and delivered at once), but that seems way beyond anything even Uber would do.
The deal is probably similar to the way an airline buys planes. E.g consider when Ryanair bought 200 737s for $22Bn [1] which is about the same in it's entire market cap.
An order like this is probably:
* For a delivery spread over 10+ years
* The vehicles will almost certainly be leased/finance
* Each vehicle will probably assume a 5+ year working life and have a residual of about perhaps 25% of list after 5 years given the likely mileage
* There will be a big initial discount given the size of the order
So assume each car, is $100k new, but given an order that size is perhaps a 40% discount. So that's a $60k sale. After 5 years, the car is perhaps worth 20k.
So the unit economics are that each car costs (before financing costs) 40k over 5 years, or $8k a year. This is a relatively low cost given the number of rides it can take and the cost of the driver who will be driving it.
No way. Absolutely no way. Looking online I'm seeing estimates of 300,000 to 500,000 miles per year in a taxi. If Uber is even NEAR that max, this car is going to have 300,000 miles on it. Hell even 150,000 is a ton of miles on a used vehicle.
Looking at KBB with a base S-Class that's 5 years old with 300,000 miles you're looking at roughly $12k in "good" condition (because, let's face it, people are going to be in this thing constantly and "good" is the rating the majority of used cars are in when they're sold).
Then factor in that Uber is not going to become a used car company (at least I would imagine they wouldn't) they're going to have to sell even lower than KBB to a third party so that third party can make any money. So I'd bet one of these cars would end up selling for $6k to $8k depending on mileage and condition after 5 years.
True which is a $250k difference if my numbers are even correct (I mean I think they're closer than parent's but who knows). But $250k isn't that much when the company is a billion dollar company.
A difference of 250m, rather than 250k, which again, I guess still isn't that much for a 60 billion dollar company. Total depreciation on these is going to eat up up a billion in value a year, or only about 2% of market cap, assuming they keep or grow their valuation.
Cars are devalued by mileage because the average car is taken care of so poorly that small damage accumulates into big, irreversable damage over time. For example, waxing wears off -> unwaxed surface pits -> rust forms -> holes form. If you re-wax the car often enough to prevent it from ever pitting, you'll never see rust or holes no matter how long you own the car. Same for most of the other components.
Individual drivers may not be able to take very good care of their cars, but large companies that use fleets of cars can take them regularly (perhaps even every night, as their default storage) to maintenance garages and have them restored.
Doesn't matter how many miles are on a car, all that matters is how many are left and incremental cost per additional mile due to maintenance/repair. :)
Great analysis but this makes it sound even less likely. Going from zero marginal costs to something like this seems totally against their current model.
In the states the franchise laws do not allow Uber to buy directly from the manufacturer. Also, the margin on an S class sold in the US is approximately 15%, not 60%.
"Uber had placed a long-term order" [...] "Uber is particularly interested in autonomous driving vehicles, the magazine reported, adding that such cars are expected to be available after 2020."
Perhaps the long-term order is a commitment from Uber to motivate Mercedes to invest more heavily in autonomous vehicles? If the long-term strategy of Uber is to have a fully autonomous fleet then a long-term commitment of $5bn with one manufacturer seems plausible.
I'm sure there's a volume discount when you order 100,000 of anything, even an S-Class. There's also the possibility of this not entirely being a cash sale.
Yeah but how much of a discount? The example in question was already assuming $50k per car which is already a tremendous discount. Even if you cut it in half again to $25k (which there's no way the price per car is that low) that's still $2.5B in cars. That's insanity.
Depends on how this is structured, if it's say 33k cars on a five year lease, renewable twice that's ~2.5B over 15 years. Also, Uber has a huge and arguably inflated market cap, so if they get this deal in exchange for stock it could be very valuable to them in the short and long term.
Uber is what you need to make an auto-driving automobile acceptable to the general public. With Uber spin, Daimler can push on the driver-less car in many markets..
Both the Tesla Model S and X are Autonomous Level 3 capable:
"The driver can fully cede control of all safety-critical functions in certain conditions. The car senses when conditions require the driver to retake control and provides a "sufficiently comfortable transition time" for the driver to do so."
Its expected their Model 3 mass market vehicle will contain the same, if not a greater level, of driving automation.
Disclaimer: I've traveled down the interstate in a friend's Model S for ~2-3 hours at a time at ~85mph in autopilot mode with no intervention required.
Especially if there is no middle-man dealer to pay. On a $100k S-Class, Invoice comes in around $93k. Some people are able to pull off sub ~88k sale prices at dealers.
I wouldn't be surprised if the wholesale (with profit) cost on a S-Class Benz is somewhere around 65-70k. I'd imagine that the cost of building an S-Class (100k retail) over a C-Class (~40k) is nominal.
Respectfully, your inference is entirely off base. Trivial research gives you the wholesale value. A slightly deeper dive gives you the manufacturer margin. Franchise laws prohibit direct sales.
Well, if they expect to use them as self driving cars (which the article mentions), the investment can pay out pretty quickly. Say they can make on average 5$ per ride. To make $60k they need 12k rides. A self driving car should be able to easily make 12k rides in one year (only 32 rides per day).
Only 32 rides per day? I would think that's pushing the limit. You will have to buy cars for peak times, so most of them will see only a few hours of use each day. At a guessed 6 hours of busy service a day, that's 5 trips an hour, or 6 minutes to drive to a customer and 6 to drive him where he wants to be.
Also, a risk here is that other large parties will make the same calculation, flood the market (anybody with money will be able to start a cab company with a lot less hassle from labor laws because you don't need that much personnel) and drive margins down.
To win in this space you probably will need both a lean model of operations and a good image in the customer's eye. Uber currently seems to have both, but committing _now_ to a provider of cars is risky (what if other manufacturers turn out to have better or cheaper self-driving cars?). On the other hand, it also may be necessary to commit now in order to stay lean (committing now probably gets them a nice price cut)
Perhaps they're purchasing these to handle the constant/baseline load of riders throughout the day, and then will continue to use human drivers & contractors to supplement demand beyond that, eg. the peaks times you mention.
So it'd be the best of both worlds for Uber: being able to put the self-driving vehicles to use around the clock and not having to make a capital investment to handle spikes in demand, which would just continue to be handled by existing drivers (for now). Just call in the human backup to help out when required.
I'm also wondering if they made the huge order so that they'd be able to influence and guide the requirements for the vehicles to Uber's specs. It seems that the requirements for a self-driving car for an individual's use differs from that for commercial taxiing.
6 minutes to drive to a customer and 6 to drive him where he wants to be.
You're assuming that each ride is independent, but that's already not the case with their Smart Routes - the driver picks up a customer, then picks up another one on the way, then drops off the first and picks up a third, etc.
The goal stated by their CEO is "perpetual rides", in which the car is never without a passenger.
Perpetual rides may be their goal, but I don't see how they will not get there. For example, there's no way they are going to find as many people wanting to go to sport stadiums as are wanting to get away from them, just after the end of the game, and stadiums typically are so far out of about every other destination that they cannot make a detour there with a paying passenger on board to pick up a second passenger.
That applies to a lesser extent to such things as theaters and cinemas, and even suburbs (who wants to get picked up there at 1 AM to fill the car that that theater goer took home?)
They will get below 50:50 for "at least one passenger on board", but it would surprise me if they managed to beat a 25:75 ratio.
>> "...what if other manufacturers turn out to have better or cheaper self-driving cars?"
Cheaper, certainly. Everyone will have cheaper SD cars than Benz, just as everyone has cheaper cabs than an S-class today. But better? If history is any guide, German luxury will be the gold standard of automotive UX for our lifetimes and beyond.
I don't think they need to tackle peak driving time at the start. They still have all of those regular drivers. Surge pricing should still draw out humans.
It's hard to come up with a huge number of cars on the spot once self-driving cars are available. It's much easier to retrofit your already existing cars.
That seems way harder unless they plan on buying a very small number of car models. Every different car model (even the same model between years) has different performance characteristics (do you issue the same orders for "hit the brakes" to a car that needs 100ft to go from 40-0 as a car that needs 50ft?) and physical dimensions which would necessitate different software optimizations and sensor calibrations. Development plus rigorous testing of every configuration means this quickly gets out of hand unless you standardize on 1 or a very small number of models.
"it's the heart of their business" but the fact that it's a fundamentally alternative business model from anything they've taken a cent of revenue on is important to note.
It's like if airbnb bought $5B of Manhattan real estate. Yes, it's "the heart of their business" but also - wow.
Sure - but I think it's always been the expectation that Uber/Lyft/Sidecar before it went bellyup were participating in the sharing economy only as a stopgap until autonomous cars are available.
With Airbnb, I don't think anyone expects them to pivot into owning their own property. There's no real benefit.
I don't know, if I were an investor in Uber and saw them place a $5B order on Mercedes S-Class cars, I would think that there's a good chance they're worth $100B.
Haha, I just checked. A recent valuation is $68B. (Dec '15)
Consider occupational therapy as well. It was very very helpful for my daughter, who was "behind the curve" with her gross motor skills. It's not just about increasing physical ability, either. Lack of core strength can affect the ability to sit still and focus as the body gets fatigued more easily.
I think it's about creating something entirely disposable, and the freedom that
Part of that freedom comes from the level of privacy I think. But from looking at those tweets maybe I'm over estimating how people are explicitly thinking about privacy.
It just goes to show that is not always about creating something where the individual bits of functionality are new. Sometime the most compelling thing is putting a novel spin on what we already do and building a network of users around that.
You're missing the point. People are realizing that it's probably not a good idea to have every pic you ever take be out there for the world to see. But they still want to share them with certain people. They (rightfully) don't trust other people to delete them (or lose there phone, etc.) and they don't trust the privacy settings of facebook and the like. Given that, having a mechanism for sending a pic and (almost) guaranteeing it is deleted is a compelling use case. Snapchat could certainly fail, but I think the general use case will be enduring.
The Economist obits are indeed wonderful. It's almost always the first thing I read in it. But, as a point of clarification, this article is not the weekly obit. It's part of the Babbage blog. It remains to be seen if something about him will make the print edition.
I agree. Technology and media over the past two decades have done more to sanitize war (and thus make it more palatable). It's good to see the oposite happening. As dickc says, "twitter brings you closer." The more we experience the reality of it, the better our decisions will be regarding it IMHO.
Goes back farther than that. German metal band Accept had a song on their 1986 "Russian Roulette" album called "TV War" basically lamenting the (already present) desensitization towards war brought about by bringing it safely into the living room while it remained "entertaining and far-far away".
