Tesla’s Ride Sharing Plan Could Save Auto Industry

4 months ago by Steven Loveday 42

Tesla CEO Elon Musk’s ‘Master Plan’ includes a self-driving ride-sharing component that could singlehandedly save the current automotive market from imminent decline.

Tony Hughes, managing director and researcher at Moody’s Analytics, recently explained this concept to TheStreet. Hughes believes that it’s not self-driving cars that will eventually lead to the fate of the auto market as we know it, but instead, ride-sharing services. But Elon Musk’s ‘Tesla Network’ could actually do the opposite of current companies like Uber and Lyft. Hughes shared in a research note:

Tesla

Moody’s Analytics researcher, Tony Hughes, believes that ride-hailing companies like UBER (in their current format) could lead to the death of the auto industry as we know it.

“Our bold prediction is that if ride-sharing companies become truly huge, they will seek to buy vehicle manufacturers and shift research and development efforts firmly in the direction of cost reduction and reliability.”

We have read and shared multiple projections stating that car ownership may become a thing of the past. If people can hail a ride, especially an autonomous one, they may not want to own and maintain a vehicle. This will prove especially true in urban areas where parking is limited and drivers don’t want to deal with traffic. Ride-sharing also leads to increased productivity. Hughes told TheStreet:

“The nature of the vehicles by my reasoning will be that they become more homogeneous where ride-sharing is everywhere. If [vehicles are all for] ride-shares, there’s no room for investment, for niche vehicles. You imagine the taxi fleet; taxis are very homogeneous. If ride-sharing becomes 100% of all journeys — no privately owned vehicles — that trend would be very bad for car makers. It means that their product would become commoditized. As a general rule, businesses want to maintain that their product is special. If something becomes a commodity, it means they lose the ability to charge excessive prices…That’s less profit.”

Musk’s plan will not allow Tesla owners to use their self-driving cars in other ride-sharing networks. Instead, they will own the vehicle, and then choose to use a mobile app to offer it up for sharing. Owners will be able to make money, still be considered owners, and open up a vast, autonomous ride-sharing network. Tesla also plans to run a fleet of its own, in addition to the user-supported network. This could help meet increased demand in urban areas. Hughes continued:

“That opens up the possibility that they won’t harm the industry. I would argue the bigger threat is the homogeneity.”

Hughes hopes that other luxury automakers will joins forces with ride-sharing companies, to create similar mobility plans for the future, and to keep healthy, unique competition alive. Hughes concluded:

“I am aware of Tesla’s foray. That is the blueprint for the future.”

Source: TheStreet

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42 responses to "Tesla’s Ride Sharing Plan Could Save Auto Industry"

  1. William L. says:

    I want to see more clean cars on the street, but I want to see less total cars on the street, less car less pollution and less traffic.

    1. Peter says:

      Different markets will evolve differently. China and India will sell cheap manual BEVs for $10k soon. These cars will be sold on export also. Small city cars but clean. These small cheap BEVs will role the volume market.
      UBER style will be lost to selfdriving cars at a much lower cost.
      One thing is for sure there will be less privat expensive cars in the future. Fiat, Renault , VW and so on will have problems finding customers.

  2. unlucky says:

    It’s nothing but a grab for a slug of an existing market. It means nothing at all. It would produce the same result if Teslas were simply part of Uber, Lyft, etc. That doesn’t happen because Tesla wants the money themselves.

  3. Chris O says:

    Not sure why anybody would actually buy an autonomous vehicle only to throw it back into the shared vehicle pool.

    Anyway there is limits to the extend ride sharing fleets can take over demand for transportation due to the rush hour phenomenon. The fact that such demand peaks exist means that a large part of the fleet would sit idle all day which would not work for their operators.

    1. Doggydogworld says:

      Rush hour is the only time it would pay to put your private car into a ride-share pool. Off-peak pricing won’t cover your incremental cost.

      Of course, this only works for car owners who don’t need their car during rush hours.

      1. Chris O says:

        Sounds like a catch-22 to me.

        1. La frennia di Mamata says:

          Sounds like the start of communism ..

          1. Jay Cole says:

            /obligatory

  4. ANewHope says:

    Very interesting times ahead, we are embarking on a new social experiment…
    Will electric/autonomous/network cars be good for the environment or bad? Maybe it results in way more urban sprawl + more cars + more miles + more congestion as the driver/passenger can now entertain themselves or work or sleep, rather than be stuck in what would otherwise be wasted time in a brutal commute.

  5. Julio says:

    Nonsense. How is that different from Uber right now? Why people are not selling their cars and jumping into Uber?

    Owning a car is a lot more than just transportation for most people.

    1. Doggydogworld says:

      It’s different than Uber because it’s much cheaper.

      Plenty of people in dense, urban areas use Uber/Lyft instead of owning a car. This would multiply 10-100x at the kind of prices being contemplated.

      1. ffbj says:

        Yeah, that’s really where that sort of service comes into it’s own. With huge urban populations in China & a 100 or so million plus cities, that would be great for the overall environment, which is horrible.

      2. Pushmi-Pullyu says:

        “Plenty of people in dense, urban areas use Uber/Lyft instead of owning a car. This would multiply 10-100x at the kind of prices being contemplated.”

        Only because the prices being contemplated are every bit as unrealistic as the idea that people will give up the convenience of owning their own car, en masse, in favor of putting themselves at the mercy of a taxi service.

        Reality check: You need X number of cars on the road carrying people from Point A to Point B during rush hour. Switching car ownership from private citizens to a car sharing service would not in any way reduce the number of cars required, unless a significantly greater number of people carpool.

        Anyone who has ever carpooled should not need to be told that reducing the price isn’t going to persuade more people to carpool. It’s not the expense that keeps most people from carpooling; it’s the inconvenience and the time wasted.

        Convenience is worth paying for. Self-driving cars are not going to change that.

        1. arne-nl says:

          “Switching car ownership from private citizens to a car sharing service would not in any way reduce the number of cars required, unless a significantly greater number of people carpool.”

          Not true. During rush hour not all cars are on the road simultaneously. Maybe 30% is my guess. So, yes, you’d still need a a lot less cars. A private car only makes a single trip per rush hour, no matter how short it is. A shared car could make multiple.

  6. FISHEV says:

    Since ride sharing would shift from current 1.2 people per car to 10 people per car, hard to see it increasing car ownership.

    Current car buying decline is totally in line with about seven year cyclical buying patterns. We are coming off a peak so sales should decline for another 4-5 years.

    This will tend to exaggerate EV sales growth in percentage terms.

    With many of us waiting for affordable, full tech EV’s (add AWD and dynamic cruise to the Bolt) and we’ll have choices in 2019 and 2020, EV’s should get a nice sales boost while overall market is declining.

    1. ffbj says:

      It’s more than a cyclical decline. It’s a major change which is coming around the time of cyclical decline, but it’s more a wolf in sheep’s clothing.

      Legacy car makers, who are in a heap of trouble, tout this line of bilge. It’s just too easy for we know, or should, that anything that comes from them is garbage.

      1. FISHEV says:

        It is totally a cyclical decline if you look at the graphics of car sales for the last 30 years. If one forgets history, one ends up making outlandish statements thinking this is some new phenomenon when it is an historical pattern.

        “Legacy car makers” are coming off 7 years of record sales and profits, if that is anyone’s idea of a “heap of trouble”, they are happy to be on top of that heap.

        Should consumer demand want EV’s, all the major mfgs are in a position to provide it as we see with Chevy’s EV’s nip and tuck with Tesla and all the rest having EV and PHEV models and expertise they can ramp up if/when demand ramps up.

        Meanwhile they all know the cycle and are cutting back on production as the down cycle begins.

        Hopefully the major mfgs will expand their EV/PHEV line in the down cycle to catch that segment. A $50K AWD, hatchback, 300 mile range EV will be a big seller as will a $50K, AWD, hatchback, 100 mile EV/PHEV.

        1. ffbj says:

          Hardly convincing. I think my pov is more logical and supported by the evidence and experts in the field, of which you are not one.

  7. DJ says:

    Am I the only one that doesn’t really buy in to the whole automotive market imminent decline bit?

    With China, India, and many other countries growing their middle class like crazy those people want certain things they haven’t been able to have before. Cars being one of them. Seems like there is a huge market still to be had in the future. When actual self driving capabilities are a reality I do expect some people to car share but I genuinely don’t think I would. It’s just not worth it financially for me to and I suspect a lot of people feel the same. I don’t want to deal with the hassle of having to make sure a car will be there when I need it to be there, I don’t want to have to pick up after the prior driver who left their trash in the car, I don’t want to have to put in my kids car seat and then take it out and lug it around with me, nor do I want to vacuum every time I go to the beach to get the sand out when I get home because I’m tired, or put on a friggin roof rack and then take it off.

    Ride sharing services are great but it’s $70 for me to go to the airport and then another $70 home. Or I can spend like $1 in electricity and pay $15 to park for a couple days ($30 total). I know which option I’ll chose!

    I just don’t see there being 8X as fewer cars on the road as FISHEV does. Sure, some people will use it. I think it makes sense in certain circumstances (say you live in an apartment in NYC) but I can’t even see half of the people who currently have a car give up their own car given our love for them.

    1. ffbj says:

      Apparently so.

    2. Pushmi-Pullyu says:

      “Am I the only one that doesn’t really buy in to the whole automotive market imminent decline bit?”

      No, not everyone is buying into this delusion. I’m surprised and shocked that so many are.

      “I just don’t see there being 8X as fewer cars on the road as FISHEV does.”

      That number is about as realistic as claiming that self-driving cars will be made from rainbows by unicorns. Maybe he thinks the cars will zip around at 8x their current speed, so they can pick up and deliver all the additional riders to their destination in the same amount of time? Driving at 240-280 MPH in residential areas, and 480-600 MPH on the highway… what could possibly go wrong there? 🙄

      Definitely a lack of critical thinking on this subject.

    3. James P Heartney says:

      Why do you think it would still be $70 for your airport ride in a world of ubiquitous autonomous taxis? A big part of what would drive that world would be that the cost of any given trip would decline to close to its marginal cost.

      A ride-share fleet that was running taxis 24/7 would get more value out of the taxi you took to the airport than you would get out of your own car by letting it sit in a parking spot. Their amortized ownership cost per mile (which is far more than the $1 in electricity you posited; it includes purchase price, licensing, taxes, maintenance and storage) will be lower than yours. So the cost to take one of their taxis should be lower than your cost to do the same ride in your own vehicle. (At least that’s the theory.)

    4. Someone out there says:

      It would be far cheaper with a robotaxi. Also, you didn’t include depreciation in your price, that is a huge factor

    5. Jason says:

      I think the indicators are based on Millennials who are less material focused than other generations, living in cities and basically poor as shit because it’s older generations have been so greedy we’ve pushed the prices of everything sky high. I doubt I will get rid of my car (plus fact I live in rural area so transport is harder to get here). I see the way taxis look, and that is with a driver in there all the time, imagine what your car will look like if you rent it out? Is there going to be some sort of bond in case of damage?

      Why does LA have so many freeways? It has been stated over and over all these initiatives to reduce cars on the road, but guess what? More cars year on year and more roads.

      Even Elon doesn’t really believe this, otherwise why look at building tunnels? If you have less cars then you don’t need tunnels, do you?
      When they invent the matter transmitter or worm holes (year 2156, I believe), then you will see car sales go away as they won’t be needed.

  8. orinoco says:

    Somebody predicted that in the future we will need about 80% less cars. I doubt that car sharing with save the car industry. It just reduces the number of cars needed even more.

    Today is car industry’s paradise: millions of cars standing 95% of the time and losing value without being productive. Increasing their efficiency means more use value and less profit for the car industry. EVs and increasing use value are just its last chance to sell cars at all.
    Right now a pedelec with a trailer is in urban areas already way more efficient than owning a car or can replace a second car completely.

    Folding bikes close the gap to public transport and need even less costly space. Cities like Copenhagen show how bikes are getting more and more important.

    Yes. the future is getting interesting.

    1. DJ says:

      Here is the problem with that. Most people commute between 7 and 9 AM and 4 and 6 PM. As a result you have to have enough cars to handle those periods. No way 80% fewer cars will be able to handle that.

  9. anon says:

    Ridesharing companies will go bankrupt.

    Manufacturers understand ridesharing and that is why they are pushing so hard for autonomous cars.

    Once a manufacturer has their own network, they can just pump cars out of their factory with or without buyers. If someone doesn’t buy the car, no big deal, it just goes into the network as a taxi.

    Hell, while it’s a taxi, it can be for sale as used inventory.

    Factories will run 24/7 – like they mostly do now – but won’t be dependent on buyers exclusively.

    1. Bacarid says:

      Quite the opposite…Let’s look at GM, they invested (not to be confused with acquiring) $500M into Lyft which is the number two ride sharing company…GM then partnered with Uber which is Lyft’s arch nemesis in San Francisco…Speaking of Uber, Toyota made a sizeable investment and VW invested into Gett…

      1. anon says:

        Quite the opposite? Literally, Uber and Lyft lose money and need capital from … auto manufacturers.

        They will be acquired or just left to die. Ridesharing companies won’t ever acquire a manufacturer lol.

        Their best bet may be to attempt aggregating manufacturer networks for people who have no brand loyalty. Assuming the carmakers don’t find a way to lock them out.

        1. Someone out there says:

          I agree. Why would car manufacturers sell auto cars to Uber when they could bag that profit themselves? After all, Uber is little more than a mobile app, the value is in the cars themselves.

  10. Hate car sharing says:

    I don’t want strangers getting in my car. Whether it be a $35k Tesla or a $100k Tesla.

    Not worth it to me.

    1. James P Heartney says:

      I think that’s true. So the idea of personally-owned cars lent out for ridesharing strikes me as implausible. More likely that we’d see giant autonomous taxi fleets carrying the majority of passenger miles, once people do the math and realize how much cheaper it’ll be not to own a car.

      Once that happens, the personally owned car will be a comparatively rare status symbol, rather than a daily transportation appliance. And overall, there’ll be a lot fewer vehicles.

      1. anon says:

        It won’t be cheaper unless you drive infrequently. It will probably be more expensive, actually.

    2. Bacardi says:

      Yeah the other problem is reliablity…If you have a 9-5 and “pimp out” your vehicle inbetween those hours you’re going to have personal car and how am I going to get home aniexity…All sorts of unwanted possiblities…

  11. Pushmi-Pullyu says:

    Unless I’m missing something pretty fundamental here, and I don’t think I am, then this makes no sense whatsoever. I mean really, none at all!

    Let’s look at the reality: Using a car-sharing service is merely a less expensive form of taxi service. By reducing the cost of taxi service, it’s certainly possible that the rate of car ownership in dense urban areas — which is where taxi services are already well established — will shift slightly towards people not owning cars.

    That is the only way in which self-driving cars are going to reduce car ownership. But self-driving cars will increase car ownership among the elderly, the disabled, and others who can’t drive themselves.

    The idea that overall car ownership is going to decrease due to self-driving cars is frankly silly. The idea that car-sharing services like Uber will grow to such size they will buy out legacy auto dealers, the minnow swallowing the whale, is if anything even more silly!

    Sometimes I weep for the sorry state of critical thinking in the human species. 😐

    1. James P Heartney says:

      It depends on how much less expensive it is. The thinking behind TaaS is that the combination of low-maintenance EVs and vehicle autonomy would mean you could run a large fleet of these EV taxis with a small workforce and low costs per passenger mile. Further, competition between TaaS fleets would drive prices down, and over time, people would abandon personal car ownership the same way they abandoned landlines.

      Will it happen? Who knows. But it’s not a crazy idea.

      1. anon says:

        Pushmi is right.

        It also won’t be less expensive to use TaaS unless you just don’t drive much. For any suburb dweller who commutes daily, they will save money by owning their car.

        TaaS will inherently have empty miles (usually) between customers. Fleet cars will inherently depreciate faster. They will be replaced sooner. More cars will be buult because miles driven will actually increase.

    2. Someone out there says:

      We are already seeing younger people abandoning cars, that is a well known problem in the car industry. This will only accelerate when ride sharing is dirt cheap

  12. Ocean Railroader says:

    I personally think Uber and the Taxi’s along with the ride sharing are about as big as they are going to get.

    In that I own my own car and I don’t the idea of sharing a car with complete strangers.

    I also think autonomous cars are a massive wave of hype by the techies to add tons and tons of new costs and repair fees to existing cars.

  13. Terawatt says:

    Ride sharing is indeed the big deal, and what will change society. But autonomy is the catalyst that enables that change to happen.

    There is nothing novel in the idea of ride sharing, or “taxi” as most people call ride-sharing services that utilize a driver, not autonomous cars. Places with high population density and an iron-fisted government can make sure ride sharing becomes the norm without self-driving cars – just look at Singapore!

    Even with a driver, ride sharing can still be a more cost-effective solution than people owning their cars, provided enough people use the service and few enough use their own car, so you get high utilization.

    But it is pretty obvious that the picture changes a lot once you get rid of the driver and use algorithms to optimize utilization of the fleet. Suddenly it becomes financially viable to begin with a small fleet used by only a small part of the population. And with EVs that can easily be made to endure a lot more miles with little or no maintenance, the economics shifts further in favor of the service.

    I saw one commenter trying to argue that we will own cars because it is worth paying for convenience. That is getting things the wrong way round. Yes, convenience is worth paying for, and we do it absolutely all the time. (Convenience is why we accept shops that buys stuff and then sells it on at a higher price – they make it convenient for us to get the products or services we want.)

    But to assume owning a car is more convenient than having access to a fleet of diverse taxis that you can use more cheaply than owning a car… is crazy. At least in cities, cars are nothing but inconvenient. It’s a hassle to park even at the best of times, and nobody enjoys very much having to take the car to a service center and paying for a long, boring wait. Besides, the vast majority of the time, we wouldn’t want to drive the same cars that we buy! When buying a car, if you are a person of normal economic means, you must choose one that meets your needs for something like 99.9% of all trips. Cars get used a lot, so if a trip is any time we get in the car, drive somewhere else and then get out of the car, a lot of people go on at least 4 trips a day, and much more on some days. Let’s say a typical user goes on 1000 trips a year. Clearly if the car meets our needs for 99.9% of those trips, there’s still one trip every year where it doesn’t. All this just to justify the figure – a car that meets 99% of the trips would not meet the need 10 times a year, or nearly each month. That is simply too often.

    This need to cover nearly all needs leads to people buying cars that are totally wrong for what’s needed the vast majority of the time. Try observing cars on a highway and count people in them sometime, and you’ll quickly agree. Most cars are most of the time moving only one person, the driver, and no luggage or anything else. Using a 5-seater with a lot of luggage capacity makes no sense in such situations if you no longer own the car, but simply have a piece of a large fleet. A smaller car is more efficient, much easier to drive in the city, and just much much better. In fact, once we have a fleet, I think most cars can simply do away with any luggage compartment – and instead offer huge interiors in compact cars.

    And still we will be much less limited than with our necessarily-compromised buy-to-own cars. A cabrio for the evening date. A pick-up truck to deliver the defunct washing machine to recycling. A minibus to pick up your daughter and 13 friends after soccer practice. A tiny, but spaceous and luxurious one-seater for the office commute. Something sporty because you’re in that mood.

    Best of all, you just drive straight to the office or shop or whatever your destination is, and hop off. No need to find parking, and no need to pay for parking either. Now, THAT’s convenience!

  14. TomArt says:

    I continue to be shocked – SHOCKED – that things like Uber and airBnB not only exist, but thrive!! Therefore, I will not place any bets on the effects of vehicle autonomy.

    If anything, the success of these services strongly suggests that autonomous vehicle ride sharing is going to be very popular and cost-effective for the user, regardless of who owns the vehicles (private or corporate).

    1. Someone out there says:

      Uber is thriving? They lost $708 million in Q1 2017! They lost $2.8 billion in 2016. Not exactly my definition of thriving

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