Ride-Sharing and Car Ownership
January 4, 2017

Autonomous vehicles aren’t supposed to be consumer vehicles. They’re going to be expensive - and they’ll probably require continuous software updates and perhaps even a data plan to maintain a live map of the world around them. If you drive yourself, it’s not attractive to most people to pay an extra $10,000 on top of your car for a novelty feature - yet ride-sharing companies like Uber or Lyft could justify that investment because, by eliminating a driver, they could make up that $10,000 in half a year. Likewise with the commercial truck industry.

Ride-sharing services are getting incredibly cheap. The two major provides, Uber and Lyft, offer a carpooling service known as UberPOOL and Lyft Line for when you only need one or two seats, so you might pick up and drop off another passenger along the way, and the fare is reduced. It’s getting very affordable.

UberPOOL rides between Hoboken and Jersey City for around $5.

A 2 zone NJ Transit fare is $2.55. Already it can be cheaper for two people to get door-to-door using ride-sharing than to take transit. I think that’s kind of a big deal. Ride-sharing has gone from being a novel luxury to sometimes being an economical way to get around.

Granted, these are short trips. $5 only gets you so far. But, this offers a glimpse into the future when autonomous cars enter the scene. We’ll just quietly notice the fare dropped to $2.50 and in highly competitive metro areas - perhaps even $1.

Credit1

A prototype from Waymo, formerly known as the Google car. One day, out of the blue, this will arrive to pick us up.

I’m under no illusion that ride-sharing will ever reach the capacity of a rapid transit system - where a single track can transport 120,000 people an hour, or come close to a the capacity of a full bus. Manhattan isn’t going to function if the subway system was replaced with Uber. I’m not anti-transit - I ride a bus and a subway train everyday for my commute. But, most of the country isn’t Manhattan, and even in Manhattan, a significant number of trips aren’t rush hour commutes. I expect ride-sharing to supplement rather than replace transit in urban areas, and I’m more interested in ride-sharing’s effect on car ownership.

There are going to be people who value owning their own vehicle—people who camp or hunt every weekend or bring a van full of tools everywhere they go. But there are many people who use a car as simply a way to get from A to B and would forgo car ownership were there a cheap and convenient alternative.

In much of the United States owning a car is still pretty cheap because many of the costs (especially parking) are sunken into the built environment. In Hoboken, where I do not have a driveway or carport, I would have to rent a parking space in a garage - and the market rate around here is $300/month.

Anytime I think it would be nice to own a car, I just have to do the math: $300 for a garage + $100 for insurance. That’s $400 a month just to keep a car sitting around (excluding buying the car, filling the tank every week, paying for parking at my destination, paying tolls, taking it to the mechanic.) Then I realize that’s the equivalent of taking four $5 (or two $10) ride-sharing trips every weekday of the month. Not needing to take that many trips in a month, I can save money while having someone else drive me the few times I need one. Imagine the effect on car ownership if ride-sharing fares keep falling to the point where it was cheaper than just paying car insurance? Combine this with a growing number of young adults entering the working world without a license and I think we are slowly transforming the way we move. I’m excited about the impact this will have on our built environment, when we can retrofit all of those empty garages into productive spaces.

The next big step will come when we experiment with different business models for ride-sharing. Services get heavily consumed when they are a sunk cost. If I had to pay per megabyte for mobile data, I would be conscious about every website I visit on my phone, but with a mobile data plan I’m going to listen to music videos on YouTube while walking down the street. Paying per ride on transit, I weigh every trip I take, while a monthly pass gives me the freedom to get around guilt-free after work and on weekends. Uber and Lyft are experimenting with this. There is even an effort to justify ride-sharing as a pre-tax commuting benefit.

Lyft and Uber are operating at massive losses. (Although I do wonder how much of their expenses goes to providing actual services, or is funneled into research and development.) As fares keep dropping, I take this as a sign that they are making massive bets on an autonomous future where fares keep falling. In the last few years alone I have seen transportation rapidly evolve. No matter whatever happens, the next decade will be an interesting one to watch to see how our cities reshape.


References
  1. https://waymo.com/
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