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Uber’s CEO says he’s willing to lose money on flying cars — at first

Dara Khosrowshahi spoke at length on growth plans, e-bikes, business model for the flying cars and when it’ll get back to testing its self-driving cars.

A photo of a prototype of Uber’s vision of unmanned flying cars Uber

Uber’s flying car efforts got a big boost when its new CEO Dara Khosrowshahi made an appearance on the second day of the company’s aviation industry summit. When Khosrowshahi took on the CEO role in August 2017 he was charged with prioritizing Uber’s many offerings, both in terms of geography as well as the types of services the company was investing in.

It turns out Uber’s flying car arm, called Elevate, made the cut.

But that took some convincing, Khosrowshahi said at Uber’s flying car summit on Wednesday.

“It took a couple of sessions and a bunch of reviews and I was going through the math of cost per mile, etc.,” he said.

Khosrowshahi now believes Elevate fits into Uber’s mission to be a platform for all types of transportation.

“What you’re trying to do as a company is take growth that is coming in today and stage them and invest them in forward opportunities down the road ... opportunities four years and six years and eight years from now,” he said.

Khosrowshahi outlined Uber’s growth plan in three stages:

Stage 1: Over the next two to three years, continue to invest in the core rides business and create growth by expanding in some of its markets as well as improving Uber’s matching technology to enable more shared rides.

Stage 1.5: Focus on investing on UberEats, which Khosrowshahi said is the biggest food delivery service in the world.

Stage 2: Then in years two through five, focus on investing in things like e-bikes through its acquisition of dockless bike company, Jump.

Stage 3: In years five to 10, Khosrowshahi said they’ll focus on getting growth from businesses like Elevate.

“And we need a couple of shots five-10 because five years from now gets here a lot faster than you think,” he said.

That stage 3 bet may not bring a return on investment right away, Khosrowshahi conceded, but he’s willing to incur short-term losses if they think the economics will eventually work — as Uber has done when it expanded into new markets. The flying cars Uber plans to operate, at least initially, will not be fully autonomous, which means the company has the added cost of paying a pilot.

“We’ll take short-term losses in order to bring long-term business,” he said. “If over the short term we need to have a pilot in the vehicle in order for the vehicle to be safer and in order to create comfort as far as the passengers in the vehicles goes ... we will do that.”

Khosrowshahi also addressed a number of other topics, both on flying cars and self-driving. Here are the key points:

On potential business models for eVTOL or flying cars:

Khosrowshahi said the business model is still to be determined but suggested a number of options, including one akin to airlines.

“We don’t want to be in the vehicle ownership business,“ he said, citing the possibility of manufacturers leasing vehicles to the operators.

“You can also imagine funding models that you see for example in the hotel space,” he added. “Hilton doesn’t own the hotels where people stay. There are property owners ... that are investing in these heavy, heavy capital businesses and earning income on them.”

Food delivery via drone:

Uber is participating in a test sanctioned by U.S. regulators to deliver food by drones in San Diego, according to Khosrowshahi. He wouldn’t give too many details, but said, “This is a great example of public working with private enterprise.”

On liability in the case of a flying car crash:

“I think if it’s our service, then we would probably be liable,” he said. “But my honest answer to you is it’s not something that we’ve looked deeply into. We want to solve this problem with the many partners we have here, there are many challenges that we have to take on. ... If we build [the system] to be as safe as possible, we’ve done our job.”

Uber has also been in discussions with Kitty Hawk:

Kitty Hawk is a flying car startup backed by Alphabet CEO Larry Page and is run by Sebastian Thrun, the former head of Google’s self-driving project. Khosrowshahi said they have had early discussions with the company about becoming one of Uber’s flying car partners.

“I have not talked with Larry [Page] but I have talked with Sebastian [Thrun] who runs Kitty Hawk,” he said. “It’s the beginning of the conversation with them, they are unbelievably smart. ... We would love to have them as partners.”

On Uber’s self-driving crash:

Uber grounded all of its semi-autonomous cars that were being tested on public roads after a fatal crash in Arizona. Khosrowshahi says they might begin testing those cars again within the next few months.

“It’ll be within the next few months, I don’t know,” he said. “And the time will be right when the time is right because we are doing a top-to-bottom safety review both internally and with independent folks to take a look at our culture, practices, etc., so when we get back on the road we know we’re getting back on the road in as safe and responsible a way as possible.”

“I think for us it really brought home this idea that safety has to come first,” he said.

On the NTSB investigation into the crash:

The Information recently reported that Uber’s internal investigation found that the software detected the pedestrian, Elaine Herzberg, but did not stop right away; however, the NTSB investigation into the crash is ongoing.

“We have been working hand in hand with them and we’ve been giving them all the data they need,” Khosrowshahi said. “We will not be tweeting ahead of their findings.”

(The NTSB has been in a public spat with Tesla because Tesla released information about a crash involving a Model X before allowing the agency to vet it.)

On the company’s acquisition of Jump Bikes:

Khosrowshahi said that e-bikes have the ability to replace short car trips because the average trip distance on these new form factors is about 2.6 to 2.7 miles. (We previously argued that’s why Uber acquired the company in the first place — because e-bikes could eat into its business.)

“What I told the Jump team is if the unit economics and technology is there our appetite to invest is infinite,” he said in response to a question about how the company plans to compete against other dockless bike and scooter companies.

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