We haven’t heard much about Uber these days. The ride hailing company continues to do what it does — provide people who need to get from Point A to Point B in congested urban areas with an alternative to taxis using an app-based system that allows customers to request a ride with just a tap on a smartphone.
The business model created by Uber a decade ago is a thing of beauty. It puts all the expenses of buying, maintaining, insuring, and fueling the vehicles used to transport its customers on its drivers. In exchange, it operates the software, collects the money, and distributes the appropriate share of each fare to the drivers. It’s pure genius.
Uber Designing Specialized Vehicles
The company is encouraging its drivers to switch to electric cars partly to burnish its green credentials and partly to satisfy the climate initiatives of the states and cities where it operates. Last week, Uber CEO Dara Khosrowshahi attended a Wall Street Journal event, where he revealed his company is working with several automakers to develop and create custom EVs that are purpose built for ride sharing and delivery. It’s part of Uber’s larger goal of electrifying its entire fleet by 2040.
What would these purpose-built cars be like? Acceleration and top speed are not prime considerations for a ride hailing or delivery vehicle. Nor are nimble handling and off-road capability. For ride hailing, the priorities are ease of access and comfortable seating. Seats that face each other so passengers can communicate easily are much preferred as well. The hope is cars with lower top speeds will cost less to manufacture while being more efficient at carrying multiple passengers.
According to Inverse, the possibility of cars that have “lower top speeds” and seats “where passengers can face each other” makes it easy to write the plan off as another example of “Silicon Valley invents the bus,” but if anything, the cars Uber describes are similar to any number of mobility concepts that have appeared at major trade shows like CES for the past decade.
For delivery vehicles, cargo capacity in a package capable of negotiating urban congestion are high on the wish list. Uber imagines using two- or three-wheeled vehicles that are more mobile but still have room for storing packages, groceries, and more. The company previously announced a partnership with Arrival, an EV startup based in the UK, to create custom ride hailing cars. Arrival teased a design that could be a good example of what the company is looking for.
Uber & Arrival
As we reported at the time, Arrival planned to partner with Uber in the UK to develop and manufacture a low-cost electric vehicle designed specifically for ride hailing duty, according to Reuters. Presumably, that means big doors, plenty of headroom and cargo space, a range of around 250 miles, and few frills. Arrival and Uber said in a joint statement the Arrival Car would be an “affordable, purpose-built electric vehicle for ride hailing,” and would go into production in the fourth quarter of 2023.
Uber plans to be a fully electric mobility platform in London by 2025 and has raised more than $188 million to help its drivers in London upgrade to an electric vehicle. “Our focus is now on encouraging drivers to use this money to help them upgrade to an electric vehicle, and our partnership with Arrival will help us achieve this goal,” said Jamie Heywood, Uber regional manager for northern and eastern Europe. Uber planned to sign up 20,000 more drivers in the UK after Covid restrictions were lifted.
Ride hailing cars in the UK average more than 31,000 miles of driving each year. The companies said the Arrival Car would prioritize “driver comfort, safety and convenience, while ensuring the passengers enjoy a premium experience.” Arrival said the cars would be “affordable” without giving any further pricing details. Since then, Arrival has canceled its plans to build those vehicles and stopped its business activities after it ran out of cash.
Back in 2018, Uber began to envision how it could change its business model to expand its customer base. Speaking at a Recode Decode conference in May of that year, Dara Khosrowshahi said, “Let’s create a cheaper form of transportation from A to B, and for you to come to Uber, and Uber not just being about cars, and Uber not being about what the best solution for us is, but really being about the best solution. Just like Amazon sells third party goods, we are going to also offer third party transportation services. So we wanna kinda be the Amazon for transportation.” Perhaps this latest announcement is an extension of that new attitude.
Uber is no stranger to promoting electrified rides. The company launched Uber Green years ago, and lowered prices last spring. More recently, it expanded the option of hailing all-electric rides to two dozen US cities. The company has also made EVs more accessible to some drivers by making Tesla and Polestar cars available to rent through a deal with Hertz. It built an “EV Hub” in the Uber Driver app — a one-stop shop where they can get information and incentives to join the electric revolution and compare the cost of ownership of an EV with a non-EV.
Partnering with an established automaker could widen access to electric cars for drivers and customers by lowering the price of entry and speeding up deliveries. The interview with the Wall Street Journal did not say which company or companies Uber is talking to about building these optimized vehicles, but since the total would probably be quite low, an informed guess is that Foxconn might be involved. The Taiwan-based company now owns the former GM factory in Lordstown, Ohio, and is looking for things to build there.
Uber is under pressure to transition to EVs quickly. Internally, it plans to go pure-electric in some regions by 2030, and in cities like London by 2025. Governments in Europe, the UK, and North America will also ban sales of combustion engine cars as early as 2035.
At one time, Uber was all in on self-driving cars, but this latest announcement makes it clear the company still envisions drivers being part of its business model for the foreseeable future, even as it continues to explore self-driving and delivery robots. Anything that makes running a ride-hailing business less expensive in the long term is worth considering.
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