In the wake of the Uber crash death and the resulting increased scrutiny, Waymo is launching its commercial ride-sharing service to the early test customers that have been its beloved guinea pigs. Should the Waymo One service prove successful, Waymo can use the success in Arizona to convince other states that they should approve its operations – using self-driving cars to create a highly optimized fleet service.
Of course, Waymo has to prove that this system is profitable. Wage costs are certainly one of the most significant costs on a per-mile-driven basis, but the cost of the fleet has to be considered too. Whether the higher upfront costs of a highly complex vehicle will be offset by lower operating costs remains to be seen, but one of the most fundamental principles of the computer-optimized fleet service has been that you can do the same job with far fewer cars – a more efficient and less wasteful system.
So then, Google’s Waymo has to prove that this is the case. Rivals Uber and Lyft will be paying close attention, as both are committed to using self-driving vehicles in their fleets. It’s interesting that Waymo arrived at this juncture in the reverse fashion than the ride-sharing services – getting the car first, and then building arguably the simpler platform to serve customers with.
The automakers are also interested in the outcome from Waymo’s pilot. They may eventually become licensing partners, using Waymo’s technology in their own designs, but they are also potential major suppliers for Waymo’s expansion. Chrysler’s Pacifica minivan has a 62,000 vehicle commitment from Waymo, but the Alphabet firm is also planning to buy 20,000 Jaguar i-Pace SUVs, as part of its roll-out strategy. Lyft is closely tied to GM, while Uber has placed a prospective order for Volvo SUVs.
A recent Morgan Stanley research note valued the Waymo ride-hailing business as being worth $80bn, with the trucking and technology licensing options apparently worth another $96bn. That makes Waymo a $176bn business, according to a well-respected Wall Street firm, before it has taken even a single commercial passenger. The firm also believes Waymo is talking to over 50% of automakers by volume.
This is a gigantic valuation, larger than Uber’s by some way. As a pure ride-sharing service, it’s easy to make the case that it is overvalued (try and find a $10bn taxi firm). However, these cars represent a captive audience, one that can be targeted with advertising. Given that you book with an account, if Waymo can tap into Google’s advertising business, it could charge a tidy sum for very precisely targeted advertising, catered to the specific occupants of a vehicle. That could be used to improve margins, or even cut the cost of rides, so that Waymo can snare a bigger share of the market. It’s something that is likely to draw the eye of competition regulators, however.
The US is thought to be close to passing a bill that would let companies sell fully autonomous cars, which would of course be a boon to Waymo. However, that bill has been ‘close’ for quite a few months now, and with recent political turmoil, companies should not be relying on the US government for timely legislation.
Similarly, a couple of studies have appeared recently that suggested ride-sharing services have worsened congestion in cities, which if correct would certainly damage one of the main arguments in favor of these services. The revolutionary vision of the future relies on people relinquishing private ownership of vehicles, and car culture and convenience are major obstacles to this. Working out how to coexist with mass transit systems is also another significant roadblock.
According to the testimony of the 400 ‘Early Riders,’ the capabilities of the Waymo fleet have improved significantly. Before, the cars were often over-cautious, which could lead to a frustrating ride for the passenger. Apparently, the cars now behave much more like human drivers, for the maneuvers that would previously have caused the irksome delays.
The human test drivers are still in the driver’s seat, ready to take over if needed, but again, according to the accounts from the Early Riders that have made it into daylight, these drivers very rarely intervene. Waymo isn’t giving a timeline for when it will remove these supervisors, but it will have to wait until local legislation allows it, at the very least. Waymo does seem to have proven that its cars can get around adequately with no people on board.
Graduating the system from suburban Phoenix to the chaos of busy inner cities will prove challenging. Waymo has provided an undisclosed number of driverless trips to the Early Riders, but has apparently put the supervisors back into all the vehicles. The four suburbs currently covered (Chandler, Gilbert, Mesa, and Tempe) will be expanded upon, as part of the Early Rider program, with the goal of porting these to the full Waymo One service.
Waymo also has to finalize the ‘language’ of the experience too. The current setup features a panel of four buttons that the customers use to have some level of control over the car. The blue Start Ride button occupies the right-most spot, and three black buttons flank it – Pull Over, Lock/Unlock, and Help. Screens on the back of the front seats will display the route the car is taking, so that even though there’s not a human at the wheel, the passenger can still take action if needed. This avoids the dreaded sensation that the car is running away with you.