The piece makes a strong case that AVs strengthen the marketplace because supply constraints ease and pricing drops attract more riders. Fair enough. But the durability question is whether Uber keeps extracting the same take rate as AV penetration rises. The article assumes that hybrid network advantage translates into permanent pricing leverage. What I would want to see is whether take rates actually hold up once AV operators have enough scale to negotiate harder—or whether the platform's bargaining power erodes as those operators become bigger, more sophisticated, and less dependent on Uber's network to hit their own utilization targets. The economics work great for Uber today; the open part is whether that math survives when AV operators are no longer desperate for distribution.
(1) By end of 2027, across all providers (Uber, Lyft, Waymo etc.) projections indicate that only ~3% of ALL rides in USA will be through AV. i.e. AV_rides/Total_rides = 3.3%. So Non-AV rides still sit at 97% by end of 2027. Therefore, AV risk is miniscule for the next 1-2 years for Uber.
(2) You underestimate the take rate benefit for Uber for AV ride-share. The important point is even if the take rate becomes lower, it is a lot "cleaner" than human scenario. i.e. Uber makes more per AV ride due to lack of insurance liability and driver incentives.
(3) AV market is on track to become largely fragmented with many players (not just Waymo and Tesla). You are ignoring that the large AV utilization boost provided by Uber for its partners becomes a very important scaling factor for the partner. AV cars are expensive. These independent operators can't burn capex too quickly and inject AVs on the road, unless their cars are going to highly utilized, ensuring a reasonable ROI for the capex. Uber unlocks this utilization for the same, which gives huge incentive for establishing partnerships.
(4) Uber has other ways to win through delivery, ads, and memberships. These will continue growing their revenue and FCF.
I don't think we're actually disagreeing on the next couple of years. My question isn't whether AVs matter in 2027. It's who captures the economics once they do matter.
If AV operators remain fragmented, Uber's marketplace becomes more valuable and the take-rate story likely holds. If a handful of scaled operators end up controlling most of the fleet capacity, the bargaining power equation could look very different.
The part I'm trying to underwrite is not AV adoption. It's whether Uber remains the price setter or eventually becomes the negotiator.
The piece makes a strong case that AVs strengthen the marketplace because supply constraints ease and pricing drops attract more riders. Fair enough. But the durability question is whether Uber keeps extracting the same take rate as AV penetration rises. The article assumes that hybrid network advantage translates into permanent pricing leverage. What I would want to see is whether take rates actually hold up once AV operators have enough scale to negotiate harder—or whether the platform's bargaining power erodes as those operators become bigger, more sophisticated, and less dependent on Uber's network to hit their own utilization targets. The economics work great for Uber today; the open part is whether that math survives when AV operators are no longer desperate for distribution.
@Phaetrix: Please read this: https://substack.com/home/post/p-182389243
You seem to have misunderstood a few things:
(1) By end of 2027, across all providers (Uber, Lyft, Waymo etc.) projections indicate that only ~3% of ALL rides in USA will be through AV. i.e. AV_rides/Total_rides = 3.3%. So Non-AV rides still sit at 97% by end of 2027. Therefore, AV risk is miniscule for the next 1-2 years for Uber.
(2) You underestimate the take rate benefit for Uber for AV ride-share. The important point is even if the take rate becomes lower, it is a lot "cleaner" than human scenario. i.e. Uber makes more per AV ride due to lack of insurance liability and driver incentives.
(3) AV market is on track to become largely fragmented with many players (not just Waymo and Tesla). You are ignoring that the large AV utilization boost provided by Uber for its partners becomes a very important scaling factor for the partner. AV cars are expensive. These independent operators can't burn capex too quickly and inject AVs on the road, unless their cars are going to highly utilized, ensuring a reasonable ROI for the capex. Uber unlocks this utilization for the same, which gives huge incentive for establishing partnerships.
(4) Uber has other ways to win through delivery, ads, and memberships. These will continue growing their revenue and FCF.
I don't think we're actually disagreeing on the next couple of years. My question isn't whether AVs matter in 2027. It's who captures the economics once they do matter.
If AV operators remain fragmented, Uber's marketplace becomes more valuable and the take-rate story likely holds. If a handful of scaled operators end up controlling most of the fleet capacity, the bargaining power equation could look very different.
The part I'm trying to underwrite is not AV adoption. It's whether Uber remains the price setter or eventually becomes the negotiator.