If you thought Lyft and Sidecar were Uber’s biggest competitors, you may be wrong.
Travis Kalanick, CEO of Uber, believes his company will ultimately go neck and neck with car dealerships. He wants to make Uber so affordable that riding Uber consistently becomes cheaper and easier than actually owning a car.
“Our intention is to make Uber so efficient, cars so highly utilized that for most people it is cheaper than owning a car,” Kalanick said Saturday morning on Twitter. Kalanick was responding to a reporter who questioned whether or not Uber would keep rates low once there are fewer ride hailing competitors.
“Uber doesn’t grow if car ownership is cheaper than taking Uber,” he said.
For some drivers, Kalanick’s logic might make sense. But what about for road trips or running errands where people don’t want to be chauffeured?
Kalanick has already said Uber’s future will probably include driverless cars. So that could take a potentially-awkward chauffered grocery shopping experience off the table eventually. Uber is also launching new initiatives like UberPool, a ride-sharing service, to make trips more affordable by splitting fares. It’s easy to see a service like this being popular for longer distance trips.
For now, Kalanick recommends pairing his service with a car rental company like Zipcar to be cost-efficient and car-ownerless. (That hints at a service Uber will either need to build or acquire, since Uber currently has no real Zipcar competitive offering.)
But can Uber really compete with a $US30 tank of gas and the convenience of stashing a car in your garage?
Some people say the car hailing service already is doing that.
One startup founder, Kyle Hill, did some complicated maths and concluded that if you drive less than 9,480 miles per year, it can actually cheaper to take UberX rides all the time than to own a vehicle. UberX is Uber’s cheaper service, where average people like you and me can sign up to drive other people around. It’s cheaper than Uber Black Car or SUV, which lets you ride in style. Hill rides a bike for short distances, and relies on UberX for anything that’s 3-5 miles away.
Sam Altman, head of startup accelerator program Y Combinator, says riding UberX in San Francisco is cheaper than owning his Tesla Roadster.
“The people who say Uber is only worth $US4 billion or whatever don’t think enough about people like me who will go from spending ~$US500 a year on taxis and car service to ~$US12,000 now that the experience and cost have reached a tipping point,” Altman wrote in July.
Another hint at Uber’s future goals can be seen in the company’s evolved tag line.
When Uber launched, its goal was to become “Everyone’s private driver.” Now it’s “Transportation as reliable as running water, everywhere for everyone.”
Kalanick knows that order to justify his company’s rapidly increasing valuation, Uber must compete with all transportation services on reliability and affordability. That means Uber will eventually have to undercut all the costs associated with having a car, from the automakers and car dealerships who sell you vehicles, to the parking garages that stow them, to auto-repair shops and gas stations.
“If we don’t lower prices sustainably below car ownership, market oppty significantly limited,” Kalanick tweeted.