The singular irony of economic disruption is that everyone-even and especially the one-time garage operations that have since flourished into sharing economy giants-is eventually vulnerable to the same threat. Uber, whose shrewd gaming of outmoded taxi industry’s outmoded regulations and hailing processes has become the most common, if debated, instance of technological disruption, is increasingly vulnerable to the very same mechanism that began chasing taxis from the market some seven years ago. But whereas Uber exploited a technological blind spot that merely hobbled an incumbent industry, the threat ridesharers face in the advent of autonomous vehicles is an existential one that could torpedo its narrow value proposition. As out-of-work cabbies might say, what comes around goes around. And yet ridesharers’ fate, unlike the cabbies, isn’t a foregone conclusion. Ridesharing platforms have succeeded by peddling convenience (why own a car when you can simply take a care-free ride in theirs?) while reducing liability (its fleet of more than 400,000 cars are not only operated and but wholly owned and maintained by the company’s “partner-drivers”). Their success today and possible misfortune tomorrow has a proximate cause: their model relies on a dizzying number of cars that it neither owns nor operates. But the future of transportation is one of owned autonomous, electric fleets. Said another way: ride-sharers thrive today by assigning the responsibility and cost of ownership and maintenance to their drivers, but the radical shift to autonomous electric vehicles will require a fundamental business reorganization (or strategic partnership with organizations capable of marshaling and managing massive fleets, like automakers) that is in many ways antithetical to their low-cost structure today. Within ten years of government regulators giving the green light to fully autonomous vehicles, the think tank RethinkX estimated in a new study this month that 95% of U.S. passenger miles traveled will be logged in on-demand autonomous electric vehicles owned not by individuals but fleets. The same forecast held that human-operated, internal-combustion vehicles (that is, conventional cars) will still represent 40% of the U.S. fleet, but account for only 5% of passenger miles traveled. The transportation-as-a-service revolution has possible business-ending implications for the likes of Uber and Lyft. Barring dramatic and considered action, they’re hurtling towards the same fate as yellow cabs. Characteristic of the same brash ambition that made it a household brand, Uber has begun developing a limited fleet of prototype self-driving vehicles, but hasn’t indicated to what extent its future would depend on fleet ownership. (Asked in an interview last year with Business Insider, Uber CEO Travis Kalanick said, “I don’t know who is going to own the fleet.”) Kalanick doesn’t know who’ll own the fleet, and neither do I, but I can tell you this much: whoever owns the fleet owns the future. The challenge before ridesharers in many ways mirrors the one before automakers, each racing the next to bring to market a Level Five autonomous vehicle (a true automobile requiring no human control or safety fallback). According to the same RethinkX study, demand for new passenger cars and trucks will plummet by 70 percent as ride-share adoption rises, especially in urban centers. The result, allowing even a more conservative estimate, would be a historic blow to the car value chain, stretching from manufacturers all the way to local dealers. In risk, there is opportunity. Both ridesharers, whose model relies on not owning a lot of cars, and dealers, whose model relies on, well, selling a lot of cars, must adapt. When Uber launched its first test run in 2010 with three black cars roaming New York, its skeletal operations crew had no idea their clever hack of the taxi industry’s deficiencies would one day grow so successful that it would contend with the same disruptive threat it once posed. If anyone can stave it off, bet on the guys who beat back one of the most entrenched, well-lobbied industries in the nation. Eric Tanenblatt leads the public policy practice at the global law firm Dentons. He previously served in the administrations of President George H.W. Bush and President George W. Bush, as chief of staff to Governor Sonny Perdue, R-GA, and as a senior adviser to late U.S. Senator Paul Coverdell, R-GA. He often writes on the intersection of regulation and innovation. Reach him @ericjtanenblatt.
