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As Uber’s robot cars hit the streets in Pittsburgh, the fears of its human drivers have become a reality

But as the tech develops, self-driving cars may make more economic sense.

Uber self-driving car

It turns out, with all apologies to Philip K. Dick, robot cars have no need to dream of electric sheep and can drive all night long. And this sci-fi-to-reality moment that many Uber drivers have feared was coming is now here:

The ride-hailing juggernaut’s customers can now hail a self-driving Uber in Pittsburgh.

But the debut of robot cars should not come as a surprise either, since Uber CEO and co-founder Travis Kalanick predicted in 2014 in an interview at the Code conference that the end of human drivers was eventually going to arrive.

“And when those bad boys are made, look, the way to think about it, the magic of self-driving vehicles, is that the reason Uber [is] expensive is because you’re not just paying for the car, you’re paying for the other dude in the car,” said Kalanick, in a moment of bare-knuckles candor. “And so, when there’s no other dude in the car the cost of taking an Uber anywhere becomes cheaper than owning a vehicle ... And of course that means safer rides, that means more environmentally friendly, that means a lot of things.”

“Look, this is the way the world is going,” Kalanick said, answering how he might explain it to Uber drivers who might lose their jobs down the road. “The world isn’t always great.”

After much negative blowback at the remarks, Kalanick tried to assuage drivers with a tweet:

But, only two years later and not 20, those robot cars are now deployed by Uber on the road in Pennsylvania.

It’s still not as futuristic as all that, though. Hailing a self-driving Uber is still a lot like hailing a regular Uber at the moment, although it’s only available to Uber’s most “loyal” customers at first. If a self-driving car is available when one of these customers hails an UberX, they will be greeted by a car with close to two dozen cameras and sensors, along with one engineer and one “safety driver” in the front seats. Customers input their destination, the car drives itself there, with the safety driver only taking over if the system needs it to.

While this is the big and potentially scary moment, to be sure, a lot still has to happen before Uber drivers become completely obsolete. Such as: Self-driving cars have to become legal to drive without a safety driver; users will have to want to get in a self-driving Uber; and, perhaps most importantly, Uber will have to buy and trick out enough cars with self-driving technology to make it worth the investment.

What’s most striking about the effort, though, is that it is probably the first time that Uber will actually own physical assets.

Before beginning to deploy its self-driving cars, Uber neither employed drivers nor owned any cars, operating in a completely virtual manner. That doesn’t necessarily mean Uber’s operating costs were low — they spend money on everything from research and development to discounting worldwide to hiring lobbyists — but it did mean that Uber figured out a way to avoid adding drivers’ employee benefits and car ownership, maintenance and insurance to those costs.

That’s clearly all about to change.

As part of its partnership with Volvo, Uber bought 100 XC90s that it hopes to retrofit with self-driving technology and have driving down the streets of Pittsburgh by the end of the year. While it’s probable that Uber bought the Volvos at a discount, the 2017 XC90s start at $45,750. And that is without all the pricey self-driving technologies added on.

Presumably, if initial efforts work, Uber will continue to buy cars and retrofit them with its own self-driving technology as the company ramps up its fleet of driverless cars. Whether it’s from Volvo or another automaker, Uber will likely have to buy, maintain and insure its own cars.

As complex as that will likely be for the company, it still may be more economical than paying drivers.

Today, Uber pays drivers 65 to 80 percent of each fare, so for every dollar a driver brings in, Uber only takes home 20 to 35 cents. Eventually, when drivers are replaced by robot cars, Uber could capture close to 100 percent of the fare.

For example, if a driver performs 100 rides at $5 a ride, Uber will take home $100. With Uber’s new “drivers” — the robot cars — the company will take home close to $500.

The robot cars will also likely do those 100 rides in a shorter time, because it only has to stop to recharge or refuel. Self-driving cars can also potentially be on the road non-stop, racking up more fares in the same time, unlike human Uber drivers who are limited to driving 12 consecutive hours.

For startups, one important metric to prove is fast growth, which is what investors are ultimately betting on. Generating four times more revenue per fare would certainly help that, even if the costs to growing the top line are also higher initially.

These cars, however, will also rack up more miles and consequently wear and tear much faster than today’s cars, which in turn might mean Uber will have to replace them faster.

Still, the economics in favor of the robot cars could be compelling.

On June 25, 2016, in New York City, for example, Uber had nearly 30,000 drivers and performed close to 180,000 rides that day. It doesn’t necessarily mean that all its drivers were active, but if one self-driving Uber does 100 rides a day — a very doable four rides an hour — then Uber would only need 1,800 cars.

The company is also not under much pressure to completely make up the cost of buying each car immediately, because it can spread out that cost over several years. But it will have to reallocate much of the capital it once spent on things like competing in China and attracting and retaining drivers to buying actual cars.

While this is just a small, single-city test for Uber — experiments that will be happening more and more across the world by a range of players — it creates a host of controversial but inevitable issues from the prospects of computers increasingly replacing humans to questions about liability and safety to declines in car ownership to the cascade of industries (insurance, gas stations, automakers and more) that are affected by the changes.

And while we’re not in the “Blade Runner” future yet, it’s just one more step toward it.

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