Automaker AVs can't compete with Uber/Lyft
Skip to main content
Sister Publication Links
  • Automotive News Canada
  • Automotive News Europe
  • Automotive News China
  • Automobilwoche
AN-LOGO-BLUE
Subscribe
  • Subscribe
  • Account
  • login
  • HOME
  • NEWS
    • Dealers
    • Automakers & Suppliers
    • News by Brand
    • Cars & Concepts
    • Coronavirus Coverage
    • China
    • Shift
    • Mobility Report
    • Special Reports
    • Digital Edition Archive
    • This Week's Issue
    • CarMax
      CarMax plans bonuses for 22,000 employees to reward pandemic efforts
      COVID-19 vaccines reaching auto plants, but challenges remain
      Working online to book COVID shots, office manager Billie Jean Pellet “typed so fast smoke came off the keyboard,” said dealer Earl Stewart.
      Dealership team hunts for vaccine
      Hope stalls for rebound in European auto sales
    • Sanden's plant in the north China port city of Tianjin
      Hisense to acquire Japanese auto air-conditioner maker Sanden
      A Cadillac XT5 fitted with the 48-volt system 
      Cadillac launches XT5, XT6 fitted with 48-volt system
      Chinese tech companies are turning their sights on EVs
      Telecom firm ZTE preparing electric vehicle product line
      Changan
      Huawei, battered by U.S. sanctions, plans foray into EVs, report says
    • As EV output explodes in China, e-axle drive assembly automates
      Plus to roll big rigs on a ‘continuum' toward self-driving future
      Lidar moves beyond vehicles to underpin a reimagined logistics chain
      Factories embrace Industry 4.0
    • driverless-vehicle interior
      Consumers fear self-driving future, but like the tech that blazes the path
      The Cruise AV autonomous vehicle, based on the Chevy Bolt
      GM-backed Cruise is in talks to buy startup Voyage, report says
      Fisker's next wave: A premium people's car
      A worker fixes a power line in Austin, Texas, last month.
      Bidirectional EVs could lend a hand in power crisis
    • Elon Musk interview
      Tesla’s Model Y, on sale since March, is a showcase of EV technologies competitors will benchmark.
      Technologies of Electrification
      Cadillac’s Lyriq EV will be unveiled Aug. 6.
      Future Product Pipeline
      A CALL TO ACTION
    • driverless-vehicle interior
      Consumers fear self-driving future, but like the tech that blazes the path
      Ikuo Mori, then Fuji Heavy Industries CEO and Tom Doll, stand alongside the redesigned 2009 Subaru Forester, which debuted at the 2008 Detroit auto show. The redesigned crossover helped kick-start Subaru's U.S. sales growth.
      How Subaru survived and thrived after 2011 quake
      President Joe Biden’s nomination of FTC member Rohit Chopra as director of the CFPB signals that it could be a “much more activist bureau.”
      White House could shake up auto finance
      COVID-19 vaccines reaching auto plants, but challenges remain
    • Access F&I
    • Fixed Ops Journal
    • Marketing
    • Used Cars
    • Retail Technology
    • Sales
    • Best Practices
    • Dealership Buy/Sell
    • NADA
    • NADA Show
    • Automakers
    • Manufacturing
    • Suppliers
    • Regulations & Safety
    • Executives
    • Talk From The Top
    • Leading Women Network
    • Guide to Economic Development
    • PACE Awards
    • Management Briefing Seminars
    • World Congress
    • Aston Martin
    • BMW
      • Mini
      • Rolls-Royce
    • Daimler
      • Mercedes Benz
      • Smart
    • Ford
      • Lincoln
    • General Motors
      • Buick
      • Cadillac
      • Chevrolet
      • GMC
    • Honda
      • Acura
    • Hyundai
      • Genesis
      • Kia
    • Mazda
    • McLaren
    • Mitsubishi
    • Nissan
      • Infiniti
    • Stellantis
      • Alfa Romeo
      • Citroen
      • Chrysler
      • Dodge
      • Ferrari
      • Fiat
      • Jeep
      • Lancia
      • Maserati
      • Opel
      • Peugeot
      • Ram
      • Vauxhall
    • Renault
    • Subaru
    • Suzuki
    • Tata
      • Jaguar
      • Land Rover
    • Tesla
    • Toyota
      • Lexus
    • Volkswagen
      • Audi
      • Bentley
      • Bugatti
      • Lamborghini
      • Porsche
      • Seat
      • Skoda
    • Volvo
    • (Discontinued Brands)
    • Virtual reveals (Sponsored)
      • MITSUBISHI: 2022 Outlander
      • NISSAN: 2022 Pathfinder and 2022 Frontier
      • GENESIS: 2021 GV80
      • KIA: 2021 K5
      • LEXUS: 2021 IS
      • NISSAN: 2021 Rogue
      • TOYOTA: 2021 Venza and 2021 Sienna
    • Auto Shows
    • Future Product Pipeline
    • Photo Galleries
    • Car Cutaways
    • Design
  • OPINION
    • Blogs
    • Cartoons
    • Keith Crain
    • Automotive Views with Jason Stein
    • Columnists
    • China Commentary
    • Editorials
    • Letters to the Editor
    • Send us a Letter
    • Fisker gets a rare second chance to build his own car company
      The new Stellantis pickup: Schrödinger's Dakota
      Gerry McGovern is right man to steer Jaguar reinvention
      Forget the Ford GT; Moray Callum's biggest hit is the aluminum F-150
    • Jaguar is about to undergo its fourth reinvention in five decades as owner Tata Group takes a second crack at shaking up a brand whose glorious past has rarely translated into a profitable present or sustainable future.
      Jaguar Redo, Part IV
      view gallery
      1 photos
      Chip Shortage
      Record Dealer Profits
      view gallery
      10 photos
      Leo Michael Cartoons - Q1 2021
      Dealers hiring from hospitality sector
      view gallery
      1 photos
      Hospitality Hires
    • Shifting gears away from the stick shift
      SEMA still a wonderful circus
      Penske still has plenty of races to win
      Ford's turn in the hot seat
    • March 2, 2021 | Will EV bets pay off?
      February 23, 2021 | Reliability continues to soar
      February 16, 2021 | Apple looks to take bite out of automotive
      February 9, 2021 | ‘Super’ opportunity for automakers
    • Jamie Butters
      EV plans and some damn lies
      Mark Paul
      What dealers can do if D.C. power shift affects recalls
      Reinvention of Jaguar is a tall task for McGovern
      Are we in the midst of a fourth industrial revolution?
    • Geely HQ
      Why Geely wants to be a contract manufacturer
      Shanghai hints at how Chinese cities will pursue electrification
      How Tesla, GM transformed EV market in 2020
      Is sales recovery nearing an end?
    • U.S. Dealership lot
      Lean lots won't last without new dealer discipline
      Taiwan Semicon microchips BB web.jpg
      Chip shortage shows need for new thinking
      Digital demands squeeze smaller auto retailers
      President Joe Biden’s move to electrify all government vehicles could push forward charging infrastructure development.
      Dealers aren't wrong to be wary of EV hype
    • New look at Nissan a positive sign
      Embrace EV ideas at our doorstep
      Buying EV without dealer is just easier
      Dealers are right to worry about EVs
  • DATA CENTER
  • VIDEO
    • AutoNews Now
    • First Shift
    • Special Video Reports
    • Weekend Drive
    • AutoNews Now: Peugeot's U.S. comeback uncertain amid Alfa Romeo appointment
      AutoNews Now: Next parts shortage could be foam for seats
      AutoNews Now: Chip woes persist: GM extending output cuts
      AutoNews Now: Toyota, Mazda, Subaru, Hyundai, Kia slide in Feb.; Volvo, Genesis rise
    • First Shift: Ford criticized by ITC for SK Innovation battery deal
      First Shift: GM, LG Chem mull second U.S. battery plant
      First Shift: Stellantis aims for higher profit margins in 2021
      First Shift: Volvo's electric push includes online-only sales
    • Bert Ogden Auto Group
      How a Texas group is cutting costs, saving millions
      COVID, chips and checks: Sales headwinds and tailwinds for 2021
      N.J. dealer helps position peers for ‘electric revolution’
      DCH Millburn Audi
      'Finding the diamond in the rough': How 2020's No. 1 dealership retains talent
    • Why the pickup is the auto industry's 'battleground'
      Carlos Ghosn's quest to restore his reputation
      Why Ford must execute to avoid 'deep trouble'
      Why Honda is 'locked and loaded' for 2020
  • EVENTS & AWARDS
    • Events
    • Awards
    • Congress Conversations
    • Retail Forum: NADA
    • Canada Congress
    • Europe Congress Conversations
    • Leading Women Conference
    • Fixed Ops Journal Forum
    • ANE Shift
    • Shift: Mobility at a Crossroads
    • Shift: The Future of Mobility (CES)
    • 100 Leading Women
    • 40 Under 40 Retail
    • All-Stars
    • Best Dealerships To Work For
    • PACE Program
    • Rising Stars
    • Europe Rising Stars
  • JOBS
  • AN Solutions
  • +MORE
    • Leading Women Network
    • Podcasts
    • Webinars
    • In the Driver's Seat
    • Publishing Partners
    • Classifieds
    • Companies on the Move
    • People on the Move
    • Newsletters
    • Contact Us
    • Media Kit
    • RSS Feeds
    • Shift: A Podcast About Mobility
    • Special Reports Podcasts
    • Daily Drive Podcasts
    • AAM
    • DealerPolicy
    • Gentex
    • Reputation.com
    • Ricardo
    • Ricardo
    • Allstate: Want more from your F&I?
    • Ally: Navigating the future of automotive retailing
    • Amazon Web Services: Any place, any time, any channel
    • Amazon Web Services: The power of the cloud
    • Amazon Web Services: Universal translator: Harnessing sensor data to build better automotive software
    • Epic Games: Transforming the auto industry with digital assets
    • FTI Consulting: Crisis as a catalyst for change
    • Google: 5 trends shaping the auto industry's approach to a new normal
    • IHS Markit: Automotive loyalty in the wake of the COVID-19 recession
    • IHS Markit: Autonomous vehicles: Automotive and transportation disruption
    • IHS Markit: COVID-19: The future mobility delusion
    • Level5: 2020 Automotive E-Commerce Report
    • Naked Lime: Bring social reputation together as part of big-picture marketing
    • Wells Fargo Auto: Switching gears from LIBOR to SOFR
    • Ally: Do It Right
    • DealerSocket
    • Deloitte: Cyber everywhere: Preparing for automotive safety in the face of cyber threats
    • Facebook: The road to a zero-friction future
    • Guide To Economic Development
    • PayPal Credit: How consumer financing helps drive sales for online auto parts retailers
MENU
Breadcrumb
  1. Home
  2. Commentary
October 21, 2019 12:00 AM

Automaker AVs can't compete with Uber and Lyft

Rich Alton and Chandrasekar Iyer
Rich Alton and Chandrasekar Iyer
Alton is director of emerging research at the Clayton Christensen Institute. Iyer is a visiting research fellow at the Institute from Tata Consultancy Services.
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print

    As an autonomous future looms large, automakers such as General Motors, Ford and Toyota are racing to capitalize on self-driving technology. And while the technology itself still faces significant hurdles, there is even more uncertainty about the best ways to commercialize it. With billions of dollars of investment at stake, it is critical for automakers to make the right strategic choices in building businesses around the budding technology.

    There is one option in particular that we strongly urge automakers to reject: launching their own ride-hailing networks in competition with Uber and Lyft. Yet this is exactly what we observe some automakers and their AV affiliates considering. GM's Cruise Automation has said it intends to launch its own ride-hailing service, while Tesla has made it clear that it wants to do the same via its autonomous Tesla Network. Unfortunately, taking on the ride-hailing giants will be an expensive battle that will entail bleeding red ink for years.

    Rethink ‘disruptive'

    One mistake many observers and industry participants make is assuming that autonomous vehicles are "disruptive" and therefore entrants employing the technology are likely to upend industry incumbents, whether in long-distance trucking, farming equipment, or ride hailing. This simply isn't true. No technology is inherently disruptive; it's how the innovation is deployed in a specific market that determines its disruptive potential. In the case of ride hailing, AV technology can be readily adopted into Uber and Lyft's existing business models, with both companies eagerly developing in-house self-driving technology. This should enable the incumbents to maintain their dominant position in the market.

    AV tech will simply help Uber and Lyft do what they've always done, but better. AVs will not fundamentally change the way the ride-hailing companies make money, or redefine the service they provide to their customers. At least initially, Uber and Lyft will still charge riders a fee and share a portion of it with its suppliers of rides. AVs could also make those rides safer, thereby improving the traditional ride-hailing service.

    Further, in circumstances where new entrants try to compete head-on with entrenched incumbents, they almost always lose. Just 6 percent of new ventures that employ this strategy ultimately succeed, and that success often comes at the cost of large amounts of red ink. That's because entrenched, motivated companies such as Uber and Lyft have the resources and organizational capability to defend themselves against upstarts. Entrants such as GM Cruise and Tesla can try to beat the odds by throwing money at the problem, but they'll wind up funding losses for years as they spend to acquire customers and engage in the inevitable price wars that are so common in the ride-hailing industry.

    For instance, one resource Uber and Lyft will be able to offer that purely autonomous ride-hailing firms will struggle to replicate is a hybrid network consisting of both human and autonomous drivers. AVs will initially be deployed in limited, geofenced areas and as a result a fully autonomous ride-hailing service will not be able to take riders outside of that defined area. In contrast, Uber and Lyft will be able to serve the full range of customer destinations, likely making them the preferred choice for customers during this transitional period. For an autonomous ride-hailing firm to build out a similar network of human drivers, they would need to spend heavily on driver incentives — further contributing to the operating losses required to launch the new firm.

    Alternative approaches

    Automakers can avoid the bloody price wars and low margins associated with ride-hailing by taking either of the following approaches: They can aim to become the "brain" of the autonomous vehicle, thereby earning the more attractive margins of a software vendor, or they can provide fleets of their AVs to the ride-hailing network, which can be deployed as "drivers."

    In either of these approaches, automakers would be focusing their efforts on monetizing what is likely to be the most scarce technology in AVs — the operating system. And controlling scarce technology is almost always a route to much more attractive profits.

    When faced with the option to launch a higher-margin business within a brand-new competitive playing field vs. entering a low-margin, price-competitive business with entrenched competitors, the choice for automakers should be clear.

    RECOMMENDED FOR YOU
    EV plans and some damn lies
    Letter
    to the
    Editor

     

     

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    EV plans and some damn lies
    EV plans and some damn lies
    What dealers can do if D.C. power shift affects recalls
    What dealers can do if D.C. power shift affects recalls
    Reinvention of Jaguar is a tall task for McGovern
    Sponsored Content: 4 ways your cross-state transactions can become streamlined
    Sign up for free newsletters
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    See more newsletter options at autonews.com/newsletters.

    You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.

    Digital Edition
    Automotive News 3-1-21
    THIS WEEK'S EDITION
    See our archive
    Fixed Ops Journal
    Fixed Ops Journal 2-8-21
    Read the issue
    See our archive
    AUTOMOTIVE VIEWS NEWSLETTER: Sign up for our weekly showcase of opinions, insights, ideas and thought leadership from the Automotive News team plus readers and contributors from around the industry.
    FIRST SHIFT WITH JENNIFER VUONG: Sign up for our morning newscast and get the news you need to start your day in a quick 4-minute video.
    Get Free Newsletters

    Sign up and get the best of Automotive News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today

    Get 24/7 access to in-depth, authoritative coverage of the auto industry from a global team of reporters and editors covering the news that’s vital to your business.

    Subscribe Now
    Connect With Us
    • Facebook
    • Instagram
    • LinkedIn
    • Twitter

    Our mission

    The Automotive News mission is to be the primary source of industry news, data and understanding for the industry's decision-makers interested in North America.

    AN-LOGO-BLUE
    Contact Us

    1155 Gratiot Avenue
    Detroit, Michigan
    48207-2997

    (877) 812-1584

    Email us

    Automotive News
    ISSN 0005-1551 (print)
    ISSN 1557-7686 (online)

    Fixed Ops Journal
    ISSN 2576-1064 (print)
    ISSN 2576-1072 (online)

    Resources
    • About us
    • Contact Us
    • Media Kit
    • Subscribe
    • Manage your account
    • Reprints
    • Ad Choices Ad Choices
    • Sitemap
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Automotive News
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • HOME
    • NEWS
      • Dealers
        • Access F&I
        • Fixed Ops Journal
        • Marketing
        • Used Cars
        • Retail Technology
        • Sales
        • Best Practices
        • Dealership Buy/Sell
        • NADA
        • NADA Show
      • Automakers & Suppliers
        • Automakers
        • Manufacturing
        • Suppliers
        • Regulations & Safety
        • Executives
        • Talk From The Top
        • Leading Women Network
        • Guide to Economic Development
        • PACE Awards
        • Management Briefing Seminars
        • World Congress
      • News by Brand
        • Aston Martin
        • BMW
          • Mini
          • Rolls-Royce
        • Daimler
          • Mercedes Benz
          • Smart
        • Ford
          • Lincoln
        • General Motors
          • Buick
          • Cadillac
          • Chevrolet
          • GMC
        • Honda
          • Acura
        • Hyundai
          • Genesis
          • Kia
        • Mazda
        • McLaren
        • Mitsubishi
        • Nissan
          • Infiniti
        • Stellantis
          • Alfa Romeo
          • Citroen
          • Chrysler
          • Dodge
          • Ferrari
          • Fiat
          • Jeep
          • Lancia
          • Maserati
          • Opel
          • Peugeot
          • Ram
          • Vauxhall
        • Renault
        • Subaru
        • Suzuki
        • Tata
          • Jaguar
          • Land Rover
        • Tesla
        • Toyota
          • Lexus
        • Volkswagen
          • Audi
          • Bentley
          • Bugatti
          • Lamborghini
          • Porsche
          • Seat
          • Skoda
        • Volvo
        • (Discontinued Brands)
      • Cars & Concepts
        • Virtual reveals (Sponsored)
          • MITSUBISHI: 2022 Outlander
          • NISSAN: 2022 Pathfinder and 2022 Frontier
          • GENESIS: 2021 GV80
          • KIA: 2021 K5
          • LEXUS: 2021 IS
          • NISSAN: 2021 Rogue
          • TOYOTA: 2021 Venza and 2021 Sienna
        • Auto Shows
        • Future Product Pipeline
        • Photo Galleries
        • Car Cutaways
        • Design
      • Coronavirus Coverage
      • China
      • Shift
      • Mobility Report
      • Special Reports
      • Digital Edition Archive
      • This Week's Issue
    • OPINION
      • Blogs
      • Cartoons
      • Keith Crain
      • Automotive Views with Jason Stein
      • Columnists
      • China Commentary
      • Editorials
      • Letters to the Editor
      • Send us a Letter
    • DATA CENTER
    • VIDEO
      • AutoNews Now
      • First Shift
      • Special Video Reports
      • Weekend Drive
    • EVENTS & AWARDS
      • Events
        • Congress Conversations
        • Retail Forum: NADA
        • Canada Congress
        • Europe Congress Conversations
        • Leading Women Conference
        • Fixed Ops Journal Forum
        • ANE Shift
        • Shift: Mobility at a Crossroads
        • Shift: The Future of Mobility (CES)
      • Awards
        • 100 Leading Women
        • 40 Under 40 Retail
        • All-Stars
        • Best Dealerships To Work For
        • PACE Program
        • Rising Stars
        • Europe Rising Stars
    • JOBS
    • AN Solutions
    • +MORE
      • Leading Women Network
      • Podcasts
        • Shift: A Podcast About Mobility
        • Special Reports Podcasts
        • Daily Drive Podcasts
      • Webinars
      • In the Driver's Seat
        • AAM
        • DealerPolicy
        • Gentex
        • Reputation.com
        • Ricardo
        • Ricardo
      • Publishing Partners
        • Allstate: Want more from your F&I?
        • Ally: Navigating the future of automotive retailing
        • Amazon Web Services: Any place, any time, any channel
        • Amazon Web Services: The power of the cloud
        • Amazon Web Services: Universal translator: Harnessing sensor data to build better automotive software
        • Epic Games: Transforming the auto industry with digital assets
        • FTI Consulting: Crisis as a catalyst for change
        • Google: 5 trends shaping the auto industry's approach to a new normal
        • IHS Markit: Automotive loyalty in the wake of the COVID-19 recession
        • IHS Markit: Autonomous vehicles: Automotive and transportation disruption
        • IHS Markit: COVID-19: The future mobility delusion
        • Level5: 2020 Automotive E-Commerce Report
        • Naked Lime: Bring social reputation together as part of big-picture marketing
        • Wells Fargo Auto: Switching gears from LIBOR to SOFR
        • Ally: Do It Right
        • DealerSocket
        • Deloitte: Cyber everywhere: Preparing for automotive safety in the face of cyber threats
        • Facebook: The road to a zero-friction future
        • Guide To Economic Development
        • PayPal Credit: How consumer financing helps drive sales for online auto parts retailers
      • Classifieds
      • Companies on the Move
      • People on the Move
      • Newsletters
      • Contact Us
      • Media Kit
      • RSS Feeds