Uber's new $1.4B autonomous car fleet

A 2017 Volvo XC90 SUV shown in three-quarter view.

A 2017 Volvo XC90 SUV shown in three-quarter view.

Uber’s vision for transportation was never limited to a ride-sharing service that would disrupt old-fashioned yellow cab taxi companies—it extended to a future where no one owns or drives personal vehicles, but instead buys rides from a connected, autonomous, shared, and eventually electric fleet owned by Uber. 

Now that vision is one huge step closer to reality: yesterday Uber announced that it has agreed to buy 24,000 self-driving Volvo XC90 SUVs for about $1.4B. The most inexpensive base model of the high-end, luxury SUVs retails for $47,895 in the United States. Volvo will deliver the cars between 2019 and 2021, which is exactly when experts predicted that level 4 (mostly self-driving) and level 5 (completely self-driving) autonomous vehicles will be market-ready. The deal allows Uber to order additional vehicles from other OEMs to expand its fleet even further.

Last weekend at The Future of Mobility conference at Columbia University, which FreightWaves attended, Patrick Hertzke (McKinsey Automotive), Stephen Buckley (WSP, formerly Parsons Brinckerhoff), and Bern Grush (Grush Niles Strategic) all agreed that autonomous shared transport would be introduced in numbers large enough to cause major disruptions in the automotive industry sometime between 2020 and 2025. 

Uber wants to make that transformation happen sooner rather than later. Still, this deal should be viewed as a mere first response to Waymo’s announcement that its customers will begin riding in autonomous Chrysler Pacificas in a few months, rather than as a major transformation of the company. 

“This new agreement puts us on a path toward mass-produced, self-driving vehicles at scale,” said Jeff Miller, Uber’s head of auto alliances. “The more people working on the problem, we’ll get there faster and with better, safer, more reliable systems.” 24,000 autonomous Volvos, after all, are a long way off from replacing Uber’s pool of 2 million drivers. Uber’s announcement follows last year’s autonomous taxi tests in Pittsburgh, which used 100 XC90s.

Autonomous taxi fleets will likely be introduced in dense, wealthy cities where there are already high costs to car ownership—places like New York City or Singapore where efficient mass transit, expensive parking, and legendary congestion problems already deter many people from car ownership. The technology will spread only gradually to rural areas and displace privately owned cars there because of cultural and infrastructure reasons. In rural Middle America, people value the perceived freedom and status that comes with owning utility vehicles like pickup trucks, and they will have to wait much longer, on average, for a ride they’ve hired from a company like Uber.

How will autonomous on-demand transportation disrupt the auto industry? Industry observers predict that the used car market will be flooded with vehicles as reluctant car owners—those who only own cars out of necessity and would prefer to use a different mode of transportation—sell their cars. The price of used cars will drop dramatically, which should result in large reductions in demand for new cars. New cars for personal ownership will be manufactured in smaller numbers and will be priced higher to offset the automakers’ lower volumes. In theory, a ‘death spiral’ could emerge that pushes more and more people into buying autonomous shared rides instead of their own cars.

Dean Wise, VP of Network Strategy for BNSF, thinks that autonomous trucking will emerge in the opposite direction. Wise spoke last weekend at the Future of Mobility conference about how major railway carriers perceive the coming competition from autonomous, platooned tractor trailers: he thinks that nighttime hauling in the wide open spaces of rural America will be the safest lanes to introduce autonomous trucks. Wise predicted that the American public would only become comfortable with driverless commercial vehicles on suburban and urban roads once they established proven safety records elsewhere, in less demanding environments.

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