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The peculiar economics of autonomous cabs 

Ashley Nunes is a research associate at Harvard Law School. His work examines how innovation affects markets.

Lyft drivers get their money’s worth. Some anyway. The ride-hailing giant recently announced that robots, rather than human drivers, will soon be wheeling riders around on five percent of rides. Autonomous vehicles are ahuge opportunity‘ said Lyft President John Zimmer, who is planning a hybrid network that ‘will grow with our autonomous partners.’ Those partners include industry heavyweights like Ford, Argo, Motional, and Waymo, all itching for a slice of the Robocab pie.

This cake is said to be the stuff of dreams. Investors — SoftBank, T Rowe Price, and Microsoft, to name a few — may have spent millions bringing Robocabs to market, but the price is worth a lot more. Intel-owned developer Mobileye herring the total addressable market at $160 billion, a conservative number according to the company’s own figures. Chinese investment group says CITIC Securities the true figure is closer to $500 billion. And never be surpassed ARK Invest claims that Tesla’s Robotaxi platform alone could be worth over $9 trillion over the next decade. If you’re looking for a place to drop some cash, robo-taxis are a safe bet, it seems.

Such vigorous optimism reflects how market participants feel about the so-called mobility on demand, also known as the taxi industry. A significant portion of taxi revenue goes to paying drivers. Knock out the driver and a financial windfall awaits. The elimination of labor costs is particularly attractive to dispatchers looking to balance their books; Organizations whose financial statements have been described as “a bleeding fountain of red ink with no path to profitability”. Driverless technology should change all of that by eliminating its biggest cost of ownership.

Such reasoning makes intuitive sense. But intuition is not always right. And when it comes to robocabs, intuition is dead wrong.

On the one hand, driver salaries are considerable, affect Revenue generation is far less than the taxi’s load factor – the percentage of miles it travels with a fare-paying passenger in the back. And this is a problem because in some cities motorists spend a fraction of their time to generate revenue (the rest is spent finding them). This inefficiency in matching supply and demand is not unique to any particular market. From Singapore to Shanghai to San Francisco, taxi drivers struggle to keep the back seat full at all times. Robocab technology is not designed to solve this problem. The result? Poor utilization – and therefore lower revenue – regardless of whether people or machines are at the helm.

A bigger problem is the myth of full autonomy. When technology is perfected, the demand for human labor will—we are repeatedly told—be eliminated. However, autonomous does not mean devoid of people. in the Our robots, ourselves: robotics and the myths of autonomyMIT historian David Mindell explains why.

“There are no fully autonomous systems,” Mindell argues. “The machine that works completely independently of human direction is a useless machine. Only a rock is truly autonomous.” In other words, the kind of automation Lyft relies on to boost its bottom line doesn’t exist. It never has and never will.

Which probably explains why Lyft’s Zimmer only wants to use autonomous taxis for 5 percent of its trips. That’s a long way from 2016 if His predictions were more ambitious, to say the least. At the time, Zimmer released a 14-page manifesto saying that by 2021, “autonomous vehicle fleets will quickly become widespread and account for the majority of Lyft rides.” He also predicted that robocabs could offer “better service at a lower cost” compared to private car ownership. It turns out that’s not quite the case Is correct either.

Resisting the financial lure of autonomy is not easy. Why resist a simple stroke of luck made possible by algorithmic capabilities? This explains why Wall Street, Silicon Valley and government officials are in charge of the matter constant promote the virtues of autonomy. But autonomy never seems to fully arrive.

Maybe it’s time we accepted that. Perhaps it’s time to acknowledge that investors would benefit from more intelligence and less temperament in AVs. Maybe it’s time we saw autonomy for what it is: a Disneyland-style spectacle it can’t Account“lives up to its sci-fi vision, a series of very expensive and glitzy pilot projects that don’t make it in the real world.”

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