Whenever I see one of Waymo’s driverless cars tooling around town, I think of the Johnny Cab from Total Recall. We may not have colonies on Mars yet, but watching an empty driver’s seat pull up to the curb certainly makes it feel like we’re living in the future.
And at first glance, the business seems like a slam dunk.
Uber and Lyft charge passengers for rides, then hand a large portion of the fare to the human driver. Waymo removes the driver.
Problem solved. Keep the money.
Except the driver wasn’t just a labor expense—the driver was also an investor.
And that makes robotaxi economics considerably more complicated than they first appear.
What the Driver Brings
Consider what happens when someone signs up to drive for Lyft.
Lyft doesn’t have to buy that person a car. The driver does.
Lyft doesn’t make the monthly car payment. The driver does.
The driver also absorbs depreciation, maintenance, tires, much of the insurance expense, and the financial consequences when the car isn’t generating revenue.
That last one is particularly important.
Suppose a Lyft driver takes only one passenger today. That may not be a great day for the driver, but Lyft doesn’t care that the car spent the other 23 hours sitting in a driveway.
For Waymo, an idle vehicle is different. Waymo has capital tied up in that vehicle. Every hour it sits waiting for a fare is an hour in which an expensive asset isn’t earning money.
It’s a lot like an airplane sitting at the gate.
Utilization Changes Everything
That doesn’t mean robotaxis can’t work. Quite the opposite.
If Waymo can keep a vehicle carrying paying passengers for much of the day, the economics could become excellent. Removing the driver eliminates a major recurring expense, while one vehicle can potentially generate revenue far more often than a privately owned automobile.
But that makes utilization critical.
Robotaxi demand won’t be evenly distributed throughout the day. People want rides during commuting hours, evenings, weekends, airport rushes and major events. A fleet large enough to meet peak demand inevitably risks having vehicles sitting idle at other times.
There are empty miles too. A robotaxi traveling to pick up its next passenger is consuming electricity, tires and depreciation without generating a fare.
Then there’s charging, cleaning, maintenance, parking and fleet operations.
Those costs don’t disappear just because nobody is sitting behind the steering wheel.
Waymo’s own business increasingly reflects this operational reality. It now lists outside companies including Flexdrive by Lyft and Moove as fleet partners that help keep vehicles clean and operating, along with separate automotive, integration and charging partners.
Tesla’s Interesting Solution
Tesla may be arriving at an especially revealing answer to this problem.
The company is exploring a model in which outside entrepreneurs would invest in and operate Cybercab fleets. Those operators could take responsibility for things like financing, parking, charging, cleaning and maintenance.
In other words, Tesla could potentially recreate one of Uber’s greatest advantages: Somebody else owns the cars.
That’s fascinating because it suggests the winning robotaxi company may not necessarily be the company that owns millions of robotaxis.
The more attractive business might be owning the autonomous-driving technology, the customer network, or both—while persuading somebody else to supply the capital-intensive fleet.
The Hidden Question Behind Robotaxis
None of this means Waymo is failing. Quite the contrary: Waymo said in March that it had reached 500,000 paid rides per week across ten U.S. cities.
The question is whether those rides ultimately produce attractive returns on all the capital and infrastructure required to provide them.
And that suggests a better way to think about robotaxi economics. The key question isn’t simply how much money do you save by eliminating the driver? It’s who owns the vehicle, and who pays when it isn’t carrying a passenger?
Uber discovered an extraordinary business model because its drivers supplied both labor and capital.
Robotaxis can eliminate the labor.
The capital (and everything else) still has to come from somewhere.
Jayson L. Adams is a technology entrepreneur, artist, and the award-winning author of The Quantum Mirror, Ares, and Infernum.
His novels blend high-stakes science fiction, psychological tension, and character-driven suspense. Explore the books at www.jaysonadams.com.