I wrote an article earlier this month titled ‘Cars and the Future’.
The publication of this article has coincided with an unprecedentedly large amount of news regarding the innocuous future of the transportation industry.
This includes reports on self-driving cars:
These vehicles will be equipped for self-driving.
Otto was founded by a group that consists of former participants in the Google self-driving initiative.
He made this announcement a day before the mega transport company made the announcement about its decision to expand its Waze based car sharing services all the way from Israel to the headquarters of Uber in San Francisco.
The five pieces of informative news have been presented in an order of importance, with Uber and Google gaining preeminence over the rest of the pack.
When the conversation about the possible future and evolution of transportation as a services arises, most people prefer to make an assumption that draws a straight link from Uber’s UberX, to Google’s line of self-driving cars.
Uber’s dominant position in the particular sphere of the transport industry known as ride-sharing, has been a major problem for the company.
This is because the dominance their position affords them is dependent on a double sided market, that of drivers and riders. I did a more detailed analysis of this in an article published last month.
There is a constant interaction between the rider and driver markets. This interaction is responsible for a winner takes all dynamic. In the instance of Lyft and Uber, the two mega giants of the car sharing industry, the entire business process is seen as being habitual.
The two companies strive to ensure that the prices they charge are in a similar range. Usually, the primary means used for differentiating between both prices is what is known as car liquidity. However, this only serves to work in favour of the service with a larger workforce.
That is why it is not a strange occurrence when one majority player becomes more dominant than the other over time.
This analogy is a perfect explanation of the car sharing scene. For the early months of this year, Uber dominated the market by providing more than 85% of the rides requested for all over the United States. This is even more significant when we consider the fact that this is the only market that their close competition, Lyft, competes in.
This development is in spite of Lyft’s decision and determination to expends hundreds on hundreds of millions of dollars in subsidy payments and free rides all over the country.
However, Uber has also faced this challenge in China. Earlier this month, Uber made the decision to cancel operations in China due to the dominance of their competitor, Didi. This decision was made after several billion dollar efforts have been made to dislodge this company from its dominance. Find out more information on here.
The adoption of self driving cars will bring considerable change to these two market spheres and dynamics.
Firstly, there will be no need for a driver. Drivers will no longer be a factor that will be regarded as a scarce commodity. This will automatically delete one part of the double sided market forces, the riders and the drivers.
Secondly, the companies will have an opportunity to reduce cost. It is a proven fact that one of the best ways companies change consumer preferences and habits is through the introduction of lower prices. Therefore, simply eliminating drivers will go a long way in doing this.
It does not come as much of a surprise to discover that Uber has invested so much funds into the development of self driving cars. They also employed a large team of Carnegie Mellon researchers to hasten the process.
Kalanick, an Uber executive said that the company is catching up in their bid to develop self driving cars. He said that all it takes is a look at competitors who have been at it for a long time to see how far the company have come.
He said that the research into self driving cars is an area pioneered by other companies and that he has a lot of respect for them. He said that the fact that Uber has a lot of catching up to do is a good thing, he said it only implies that they have to wake up early every day and also go to sleep at late hours.
There are five major components that characterize transportation as a service. There are external factors like riders and drivers that serve to highlight the importance of understanding the future and inevitable evolution of transportation as a service.
However, these two components are not the only factors that matter. They are also not the only areas where Uber has a comparative advantage over competitors.
These five components are drivers, cars, riders, routing, and mapping.