‘LET’S Uber.” Few companies offer something so popular that their name becomes a verb. But that is one of the many achievements of Uber, a company founded in 2009 that is now the world’s most valuable startup, worth around $70 billion.
Its app can summon a car in moments in more than 425 cities around the world, to the fury of taxi drivers everywhere. But Uber’s ambitions, and the expectations underpinning its valuation, extend much further: using self-driving vehicles, it wants to make ride-hailing so cheap and convenient that people forgo car ownership altogether. Not satisfied with shaking up the $100-billion-a-year taxi business, it has its eye on the far bigger market for personal transport, worth as much as $10 trillion a year globally.
Uber is not alone in this ambition. Companies big and small have recognized the transformative potential of electric, self-driving cars, summoned on demand. Technology firms including Apple, Google and Tesla are investing heavily in autonomous vehicles; from Ford to Volvo, incumbent carmakers are racing to catch up. An epic struggle looms. It will transform daily life as profoundly as cars did in the 20th century: reinventing transport and reshaping cities, while also dramatically reducing road deaths and pollution.
In the short term Uber is in pole position to lead the revolution because of its dominance of chauffeured ride-hailing, a part of the transport market that will see some of the fastest growth. Today ride-hailing accounts for less than 4 percent of all kilometers driven globally, but that will rise to more than 25 percent by 2030, according to Morgan Stanley, a bank. The ability to summon a car using a smartphone does not just make it easy for individuals to book a cheaper taxi. Ride-sharing services like UberPool, which put travelers heading in the same direction into one vehicle, blur the boundaries between private and public transport. Helsinki and other cities have been experimenting with on-demand bus services and apps that enable customers to plan and book journeys combining trains and buses with walking and private ride-sharing services.
But in the longer term autonomous vehicles will drive the reinvention of transport. The first examples have already hit the road. Google is testing autonomous cars on streets near its headquarters in Mountain View, California. A startup called nuTonomy recently launched a self-driving taxi service in Singapore. Tesla’s electric cars are packed full of driver-assistance technology. And within the next few weeks Uber itself will offer riders in Pittsburgh the chance to hail an autonomous car (though a human will be on hand to take back the wheel if needed).
It is not clear which companies will dominate this world or how profitable it will be. Uber will not win in its current form: A ride-hailing business that depends on human drivers cannot compete on roads full of self-driving cars. But this existential threat is spurring the firm’s innovation. With its strong brand and large customer base, Uber aims to establish itself as the leading provider of transport services in a self-driving world. It is also branching out into new areas, such as food delivery and long-distance cargo haulage using autonomous trucks. There is logic in this ambition. Carmakers lack Uber’s experience as a service provider, or its deep knowledge of demand patterns and customer behavior.
But firms that pioneer new technological trends do not always manage to stay on top. Think of Nokia and BlackBerry in smartphones, Kodak in digital cameras or Myspace in social networking. Much will depend on which firm best handles the regulators. Technology companies have a history of trying new things first and asking for permission later. Uber’s success in ride-hailing owes much to this recipe, yet when it comes to autonomous vehicles, the combination of vague rules and imperfect technology can have deadly consequences.
Its recent rapprochement with Didi, its main rival in China, has removed a major distraction, allowing it to devote its $9-billion war chest to developing new technology. Its vision of the future is plausible and compelling. It could yet prove a Moses company, never reaching its promised land. But whether Uber itself wins or loses, we are all on the road to Uberworld.
© 2016 The Economist Newspaper Ltd., London (Sept. 3, 2016). All rights reserved. Reprinted with permission.
Image credits: Sam Hodgson for The New York Times