Truckers everywhere can rejoice. Uber’s self-driving trucks have been put out of service.
According to Eric Meyhofer, Head of Uber Advanced Technologies Group, “We’ve decided to stop development on our self-driving truck program and move forward exclusively with cars. We recently took the important step of returning to public roads in Pittsburgh, and as we look to continue that momentum, we believe having our entire team’s energy and expertise focused on this effort is the best path forward.”
Uber has decided to redeploy the engineering teams involved in the self-driving truck project to work inside of Uber’s autonomous passenger car business. This shouldn’t be a shock. Uber is the dominant leader in the on-demand passenger market and not a huge player in the trucking freight market.
With Uber planning one of the largest tech IPOs since Facebook, they must have a compelling story to tell investors about how they plan to maintain their position in the passenger vehicle segment and not be lapped by other players with more compelling technology.
Human drivers, contracted as independent owner-operators, are far more expensive for car-sharing services than autonomous vehicles. Purchased transportation is as much as 80% of a ride in a car sharing vehicle. Eliminating the need for human-based cars will dramatically cut the operating cost of a ride in a car-sharing service, allowing companies to charge much less per ride and reap higher profits.
Companies ranging from Waymo (part of Google’s parent company), Ford, Tesla, Daimler, Lyft, Cruise, and dozens of others are working on self-driving on-demand car services. If Uber were to lose the autonomous race, their business model would be completely at risk.
Uber’s track record in the autonomous passenger segment is not stellar. They have higher incident rates than other companies, measured in Miles per Intervention. Miles per Intervention is a stat published by Pitchbook showing how often autonomous vehicle’s computers require a human to take over. Uber ranks far behind Waymo and Cruise. Waymo is best-in-class with 5,600 miles per intervention. Uber is just 13 miles per intervention. GM’s Cruise has better stats, with 1,250 miles per intervention, nearly 100x better than Uber.
Clearly, the company has a lot of work to do to ensure that Waymo or another competitor doesn’t Blockbuster them.
What does this mean for Uber Freight?
So far, Uber Freight appears to be a part of Uber’s business plan. Originally started do the same thing for truckload freight that the ride-hailing app did for passengers, the freight brokerage was constructed using industry professionals who understood the freight brokerage business. And, like the ride-hailing side of the company, autonomous technology promised to deliver much wider margins per ride/load for the Freight side of the business. So far the Uber Freight’s strategy of gaining market share has been working, but many in the industry have questioned whether Uber has been subsidizing the Uber Freight operation to allow it to gain market-share at the expense of gross margins. The strategy has been followed at other digital brokerages with some significant gains.
For other VC-backed startups, using investor capital to build share might be the most efficient way to prove out the model, after all, they have no choice but to get big and optimize the franchise.
But Uber Freight is different. Up until today, the goal (at least from the outside) appeared to be the use of Uber Freight’s brokerage arm to build out network density, so when self-driving trucks are market ready, the trucks had volumes of loads to pull from. Now Uber Freight says that it doesn’t need self-driving truck technology to compete effectively in the digital brokerage space.
Additionally, Wall Street investors prefer simple business models that they can understand. Uber’s passenger business is easy to grasp.
Also, easy to grasp: Waymo and other the player’s threat to Uber’s core business.
If company executives are distracted in markets where the company is a small participant and unlikely to dominate, then what is the point?
Freight brokerage and logistics is massively complicated. Shippers are not ordering many trucks on the Uber app (yes Morningstar suggested that people would order a 53′ on the same Uber app that people use to order a car). Savy supply-chain executives manage their business on a mode agnostic basis, using an enterprise ERP and TMS system to route freight. They will not see much value in a mobile app for freight booking.
If Uber Freight loses the benefit of selling the concept of an autonomous trucking future, investors might prefer company executive attention on protecting and building out the core business. Few would care if Uber Freight went away, but if Uber were to lose the position as the dominate player in the passenger on-demand market, college courses on innovation and business failures will replace the section on Blockbuster with the story of Uber.
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