Uber a touchstone for changing habits and the future of transport

By September 28, 2016
La voiture autonome arrive dans la flotte d'Uber

Autonomous cars, content distribution, collecting information – the future of Uber is being decided right now. How can the on-demand vehicles platform constantly adapt its business model to advances in technology and people’s changing habits?

More than a million people worldwide have now worked as an Uber driver at one time or another. This flexible driver pool is the basis of the online transport platform’s profitability to date. “A service which has the most drivers is the least expensive and the most efficient,” argues Kevin Echraghi, an analyst and one of the co-authors of a report entitled Uber: The Transportation Virus published by digital initiatives specialist FaberNovel. However, this approach is also Uber’s Achilles’ heel, since those same drivers are free to sell themselves to the highest bidder. In addition, this all raises questions for our society. Uber does not regard its drivers as employees but independent service providers. So to what extent does the legal debate over this point threaten to undermine the Uber business model and how is the company planning to deal with the situation? Below we try to provide some of the answers to these questions.

Out-ubering Uber: what are the chances?

Kevin Echraghi reckons that the risk of Uber being ‘uberised’ by its own drivers is very small. “Most competitors end up aligning their fares with Uber rates. So the drivers tend to stay.” If not, “they work for the two main firms and divide their time between the two,” i.e. Uber and Chauffeur-Privé in France and Uber and Lyft in the United States. Even the new firms who offer “more attractive conditions for their drivers, taking only half the commission and giving them a stake in the company” are not managing to threaten the San Francisco-based platform. Nevertheless, since October 2015, many Uber drivers have been complaining about the low fares the company has set. So some leave Uber… but meanwhile others continue to come on board.

Driver turnover at Uber is in fact reported to be high, estimated at 50% in the United States. In France, for every driver who leaves, another twenty sign up, Jean-Luc Albert, Secretary-General of the non-profit organisation Actif VTC, told a leading French media outlet. And as long as there are willing drivers, there is no threat to the company’s existence. But we should not forget that the Uber model has a direct impact on society as a whole. A recent study by French economists Augustin Landier and David Thesmar, entitled Working in the on-demand economy; an analysis of Uber driver-partners in France, underlines that working as a driver for Uber is one alternative to unemployment. Some 25% of UberX drivers were jobless – 43% of them for over a year – before they started working as Uber drivers, the survey reveals.

In fact, some drivers admit to using the platform only on a temporary basis, with the aim of establishing their own loyal customer base. Their avowed goal is to be able to do without Uber’s intermediation. Could this attitude undermine Uber’s basic strategy? The same question is also frequently asked of other platform-based providers, especially those that specialise in reservations – Booking.com for hotels and La Fourchette for restaurants. Like the Uber drivers, partner firms are often tempted to encourage customers to contact them directly, bypassing the platform. However, Kevin Echraghi argues that this would have only a marginal impact on Uber. “My reasoning comes from my own experience because basically we’re all users. When it comes to it, I would prefer to use Uber and know for certain that I’ll have a car there when I want it, fast, and for a lower fare, rather than having to look up a driver’s number in my phone, not knowing how far away s/he is at that moment. I can see this type of approach happening, but I don’t think they’ll be able to compete with Uber,” says the FaberNovel analyst.

Self-driving cars to the rescue?

In order to mitigate such risks, Uber is currently looking at implementing an approach which, if it can be made to work, looks like the solution to the driver issue: autonomous cars. The on-demand transport provider has been developing the technology that will enable it to do without human drivers in its vehicles at its Pittsburgh R&D centre since 2015. Uber has hired dozens of robotics researchers from Carnegie Mellon University, has invested several million dollars in the venture and has sworn to invest over a billion more over the next few years.

The first concrete results of this initiative were announced on 14 September. Four autonomous Ford Fusion cars are now part of the Uber fleet in Pennsylvania. These new vehicles are equipped with seven cameras designed to detect the colour of traffic lights, a radar system for weather conditions, and twenty laser beams to constantly monitor and plot the immediate 360° environment around the car on a three-dimensional map.

As a safety measure, a technician is seated behind the steering wheel at all times and a second person sits in the passenger seat to analyse the driving. “The technician is there only in case of unavoidable situations and above all because there’s still a legal requirement to have a driver in the car,” explains Echraghi. The second person’s role is to “make adjustments and understand how autonomous cars are evolving. All the data they collect while out on the road will be used for their own research,” he adds. The service is still in its infancy and only the thousand most loyal customers in Pittsburgh will be entitled to use the new service if they so wish. Uber is making clear progress, but the moment when drivers might be totally replaced is still some way off. The company is using these experiments to replicate existing initiatives such as that of Delphi Automotive in Singapore, on which L’Atelier reported recently.

Meanwhile, legal obstacles remain. The use of driverless vehicles on the public roads is still not authorised, either in Pennsylvania or in France. However, testing these cars on the roads is allowed, which clearly indicates that the law may be about to change. To push in this direction, Uber and “all those involved in the future of autonomous vehicles – Volvo, Google, Lyft, Ford, and so on – have set up the Self-Driving Coalition, a lobbying group whose purpose is to convince legislators and regulators of the advantages of autonomous vehicles and ensure that they become accepted soon. All these players have put aside their rivalries in order to push for progress in the legal arena and help create a market in which they can all compete.” Kevin Echraghi reckons that the advent of the self-driving car in tandem with the on-demand vehicle services provided by Uber and others will change people’s habits. “I think the number of cars on the roads will decrease overall.  Our generation has less disposable income than previous generations and people don’t want to spend too much money on having their own car. As prices fall – and the self-driving vehicle will really succeed in bringing the cost of transport down – I don’t see why people would continue to own a car, except for the pleasure of it, because they take a materialistic attitude, or because of concerns about freedom of movement,” says the analyst, adding: “It’s not impossible that in the long term non-autonomous cars will be outlawed because statistically you’re safer in a self-driving car than a manually driven car. There are fewer deaths, fewer errors.”

How Uber is adapting to change

So it looks certain that the transport sector is going to see major changes in the coming years. In order to anticipate these changes and be able to adapt as well as possible, Uber is constantly changing its outlook. To illustrate this process of evolution, the FaberNovel study lists the company’s goals over the past years. “At first the target was ‘we’re going to be everyone’s private driver, then the watchword became ‘transportation as reliable as running water’ and now the slogan is ‘moving bits and atoms”. Uber now hopes to “capture as much of the transport market as possible and “achieve growth across all the possible areas of car-based usage,” the analyst explained.

Do you need to get from A to B? That is the basic ‘raison d’être’ of the service. “Are people prepared to be driven by a non-professional driver in order to pay less? The firm set up Uber Pop – UberX in the United States. Will customers agree to have a slightly less enjoyable experience and waste a bit of time? Uber Pool allows them to ride-share with strangers.” Could a delivery service using the same model be profitable? For the food sector you have Uber Eats, and for parcels there’s Uber Rush. “This is also a way of optimising their vehicle fleet, enabling their drivers work for as long as possible,” Kevin Echraghi points out.

So what does the future hold? “Some people think that Uber could move into the aviation market. They might also look at long-distance transport; after all, in the US they’re already covering medium-distance routes between the outskirts and the city centres.”  Echraghi also points to the notion of ‘available travelling time’, which he associates with ‘available brain time’. He interprets this as the ‘moving bits’ part of the firm’s mission, explaining: “They can argue: we have people in a car for X amount of time and we can distribute content to them, so we’re going to position ourselves as a platform between the media and the user. They could thus become information collectors rather like Facebook, and also position themselves as collectors of information on traffic, which they then sell to city authorities, the government, or anyone who’s interested.”

It remains to be seen whether Uber will opt for a model that is “very closed, like Apple’s, which resolutely sets out to persuade people to use their technology in their cars”, or instead “go for a more open system such as Google’s, along the lines of: what we’re offering is putting parties in contact with each other, serving as the orchestrators of the transport market overall and so we’re happy to incorporate any conceivable service. If you’re an auto manufacturer and you build autonomous vehicles, we can manage them for you, and get paid by you to transport people in them. If you’re a train, a subway, a bicycle hire service, we can send people to you.” Kevin Echraghi feels that the second of these options is the most plausible. We will find out in due course.

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