Uber and Lyft are betting on self-driving cars to become profitable. But that may not happen, new research from MIT suggests.
- Autonomous vehicles are key to Uber and Lyft's grand plans for global expansion.
- The technology could slash fares for customers and cut operating costs by massive percentages.
- But new research from MIT has thrown cold water on some of those dreams, showing that operating costs may still be more than personal car ownership.
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Uber and Lyft lose a lot of money.
Combined, the ride-hailing firms lost some $3.8 billion in 2019 alone, according to the companies' IPO filings.
Most investors, and many Wall Street analysts, are pinning the premise of ever turning a profit on self-driving cars. After all, paying drivers is a massive expense that could be all but eliminated with autonomous vehicles.
But new research from MIT has thrown cold water on the idea that robotaxis will save the ride-hailing operators much money, at least not without massive improvements to their algorithmic dispatching efficiencies.
"Although the cost proposition of autonomous taxis (ATs) may be improved by more closely matching supply with demand, we demonstrate that achieving maximum utilization would still leave ATs fiscally uncompetitive with conventionally driven vehicles (CDVs)," authors Ashley Nunes and Kristen Hernandez write in their paper.
Specifically, their findings - based on data from San Francisco, a single market - point to a cost between $1.58 and $6.01 per mile to operate autonomous vehicles with single occupants. That's much higher than the widely used $0.40 (or less) per mile estimate, and higher than the average costs of personal car ownership (which is around $0.59 per mile, according to US' Bureau of Transportation Statistics).
Read more: Lyft executive suggests drivers become mechanics after they're replaced by self-driving robo-taxis
What's more, Uber and Lyft currently pay drivers up to $2 per mile in some of the more expensive cities, like New York.
Here's the researchers' full breakdown of estimates AV operating costs:
It all comes down to utilization rates
Utilization rates are a key measure for ride-hailing operators. In short, the measure accounts for the fraction of time that a driver (or autonomous vehicle) is shuttling a fare-paying passenger.
Multi-passenger trips, like those of current Uber Pool and Lyft Line offerings, could help bring costs down and increase those utilization rates, but the increases in efficiency will need to be dramatic, the researchers found.
"In a single ridership model, we find capacity utilization rates would need to improve by nearly 100% and margins lowered by 37% for autonomous vehicles to achieve cost parity with their conventionally driven counterparts," they write. "In a multiple ridership model, achieving cost parity requires a 30 percent increase in occupancy rates and a 75 percent increase were a stronger cost proposition offered to incentivize shared autonomous vehicle use over conventionally driven vehicles."
Lyft did not immediately respond to a request for comment from Business Insider and Uber declined to comment.
For their study, the MIT researchers used a utilization rate of 52%, based on their San Francisco sample data. But even if those rates do reach 100% utilization, operating costs might still be more than a traditional vehicle.
That might be complicated even further given that most consumers expect a steep discount when sharing rides with other customers, according to UBS research.
"If passengers are willing to share utilization can improve even further," the Wall Street bank's autos group, lead by Colin Langan, said in a research note to clients this week. "Unfortunately, the potential for sharing is low as consumers tend to demand a large discount for the added trip length & discomfort."
More Robo-taxi news:
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