Uber is dead in 5 years

Eric Blaufarb

Senior Strategic Partnership Manager, NA

I’ve been using Uber now for about a year consistently.  It’s a great service and saves me time and money.

  • I use Uber instead of parking at the airport, car stays home, dropped off at the gate, save the company money
  • I stopped renting cars; I use Uber to all meetings when traveling and for customers I use UberBlack so I can feel like a Baller with my customers (i’m not)
  • I use Uber as a taxi, when I need a lift to the car dealership or other one-way trips
  • I make my 16 year old son use Uber after 8:00pm so I’m not his taxi – he hates that I don’t drive him; I don’t know why.

I’m a huge fan of Uber but, I started thinking about Uber’s business model and they are done before they even get started.  I think Travis Kalanick knows it.

First let me explain.  The end game for Uber is autonomous vehicles.  Fully autonomous vehicles with no drivers will be here by the end of 2020 whether we like it or not.  I’ve had several heated debates about this and I’m stubborn but I’m right.  So let’s just make the supposition that I’m correct and I’ll carry on with my thought process.

Driving hard to full autonomy is Tesla.  Elon Musk is an animal; you know he has a sleeping bag at the end of the Tesla assembly line.  He is compressing the cycle to autonomous vehicles by 3 to 4 years by my estimation.

Anyway, The legacy auto manufactures would probably sit on their asses if it wasn’t for Tesla; they have no choice but to invest billions extra to accelerate development & delivery of autonomous vehicles because of Elon & Tesla.  They’re not kicking and screaming coming to the party but, it definitely disrupts their existing business model.  Audi just announced that they will cease development and delivery of V-8 engines as the sunk costs to produce the V-8 and the need to invest capital in the development of electric autonomous vehicles outweighs the latter.

http://www.autocar.co.uk/car-news/industry/all-new-audi-v8-engine-be-last-its-kind

Beyond Tesla you’ve got Google & Apple who are in the process of delivering fully autonomous vehicles by 2020; they’d do it sooner if they could; trust me; they are salivating at this market opportunity.  Apple’s future is dependent on the Apple Car; but that’s a whole different story.

What do Google, Apple, Tesla, Mercedes, & Audi have in common that Uber does not?  Easy CASH and access to lots and lots of CASH & to a lesser degree experience (Apple excluded):

Tesla – 31B (market cap)

Mercedes – 42.2B

Uber – 50B pre-IPO

Google – 371B

Apple – 525B

Uber has to build a car period & they have to do it FAST.  Yeah they’re talking big about buying 100,000 Mercedes S class sedans and looking for tie-ups with Auto Manufacturers like Ford; it doesn’t matter; this is just muddying the water and the gang at Uber know this.  Bottom line, the cost structure just won’t pencil out & they don’t have the capital requirements to produce a fraction of the 58M cars built a year.  Right now Uber has 162,000 drivers in the US figure world wide they will need at least 2M autonomous cars per year at scale.

https://www.washingtonpost.com/news/wonk/wp/2015/01/22/now-we-know-many-drivers-uber-has-and-how-much-money-theyre-making%E2%80%8B/

Tesla can barely get 50,000 units out the door per year; lets see how they execute on the 400,000 they have in backlog with the Model 3.  Remember they’ve been at this for 10 years.  I love Tesla but again, woefully underestemating the challenges & scale.

Mercedes does over 2M annually and sells out; meaning they are at capacity every year and would build more if they could…they can’t. An Uber car is like dryer lint to Mercedes in the scheme of fully autonomous vehicle deployment.  Did you know Mercedes came up with a system to protect your ear-drums in the event of an accident airbag deployment?  Uber/Apple/Google cars…yawn.

http://www.wired.com/2015/07/mercedes-using-loud-static-protect-fancy-ears-crashes/

So contrast Apple, Google, or Mercedes to Uber.  When you launch your autonomous vehicle you are in control of the complete transportation eco-system from production down to the end customer; no one is in the middle to siphon off cash, no auto dealerships, no drivers, no auto companies to buy cars from, no insurance companies to deal with.  Just build them, put them on the road and start collection your micro-payments, sorta like the apple store but way cooler.  Uber would like to think that they can negotiate like big-boys with Mercedes and the like; sure it sounds good and they’ll take all your money gladly.  Lets get serious the Germans have been in the game since 1886; they get the pivot for transportation occurring and the gang @ Uber are full of a little too much hubris.

We have to give Uber some credit.  They’ve got a killer platform; I love it.  Apple Google Tesla & Mercedes will create equally cool platform and they are all brands you trust so you won’t care about switching; it’ll be the same BUT the big difference is the cost structure it will probably be 10-20% less than Uber without an autonomous vehicle.

When you are the average joe when you stop buying cars because autonomous vehicles are there to pick you up rain or shine day or night you’re going to be focused on one thing – price.

So where is Uber in all of this?  Well can they build an Autonomous vehicle, sure, but can they do it by 2020?  Nope.  We quickly forget that Tesla has been at it for over 10 years! And is only producing 50,000 cars with MUCH greater demand.  Again if it was easy to build autos at scale everyone would do it…it’s NOT.

In this market a year or two is the difference between winning and losing.  Uber’s not going to get their soon enough, they don’t have the cash to build a car, they don’t have the time to build a car, and they don’t have the intellectual capital necessary.  Uber is dead by 2020.

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