Uber Is a $10 Billion Speed Bump
Over the last 40 years, cars on the U.S. market have gained about 100 horsepower on average, while simultaneously improving fuel economy by 10 miles per gallon and adding previously unimaginable creature comforts, reliability and safety features. But compared to the advances in computing and communications over the same period, the car's impressive engineering accomplishments seem pretty pedestrian. As the term"disruption" is increasingly thrown around, the reality that the car hasn't fundamentally changed in a century seems to be weighing on the minds of many. A wave of public and political enthusiasm for all kinds of electric car projects, beginning in the mid-2000s and culminating in the market's messianic fervor for Tesla, was the first sign of this great expectation.
More recently, as the limitations of electric vehicles have become more obvious (and concerns about "peak oil" and energy dependence have receded), focus has shifted from drive-train innovation to a broader disruption of automotive ownership. Leveraging the mobile-phone revolution, companies such as Uber, Taxi Magic and Lyft are improving consumer access to mobility by connecting them with established professional car services and, increasingly, peer-to-peer ride sharing. If you've had fewer speeding tickets than this blogger, you can even rent cars from private owners who want help making payments via RelayRides, a kind of Airbnb for cars.
The real possibility that these companies can "disrupt" the concept of car-buying by making access a real alternative to owning is a compelling story. But news that Uber is angling for avaluation of more than $10 billion in talks with Wall Street raises the specter of Tesla-style overenthusiasm. Forget the "tech bubble" talk, the reasons to avoid overvaluing these companies has everything to do with the auto industry.
First, inconsistent demand for new cars from younger buyers in developed markets is already pushing the more prescient automakers into the car-sharing business. Especially when it comes to so-called green "compliance cars" that get media kudos but evade buyers, the notion of turning cars that won't sell at a profit into revenue streams is extremely attractive. That's what Daimler did in 2008 by creating Car2Go, a mobile service that lets drivers find Smart and (Tesla-powered) Smart Electric Drive cars scattered around San Diego, Seattle and other cities. Here in Portland, Oregon, Car2Go appears to have single-handedly rehabilitated the Smart Car's image from overpriced oddity to unique and beloved semi-public utility.
As with the emerging mix of hybrid, electric, diesel, natural-gas and improved internal-combustion vehicles, no single player seems likely to single-handedly dominate the "mobility access" business in the short term. Rather, a mix of driver-service, peer-to-peer car-share and drop-and-ride, operated by automakers and traditional car rental companies, will probably grow together with the new Silicon Valley upstarts for at least some time, as companies with more footprint and (in theory anyway) experience serving mobility consumers adapt to the changing market.
So while I can't say whether Uber is worth billions, I'm fairly certain it isn't going to remake the auto industry. The real game changer, still and always, is the self-driving car. Mobility startups will play a crucial transitional role, but they seem fated to ultimately be mere flies on the windshield of the autonomous car revolution. That transformation, slated to begin around 2020 according to some manufacturers, will complete the triumph of access to private mobility over ownership. After all, why go through the struggle of purchasing a car when the one you want at a given moment can drive itself to you?
In light of the real technological opportunities in private mobility, overvaluing Uber could be like betting too big on a horse-sharing app just as Henry Ford was just about to start on the Model T.
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