Will Tesla Ultimately Replace Uber and Lyft in Ridesharing?

The question of whether Tesla will eventually take over ridesharing from Uber and Lyft has been circulating recently. Let's explore whether Tesla's electric vehicles have the potential to disrupt the existing market and how feasible this could be.

Will Tesla Buy Uber or Lyft?

Many have speculated that Tesla might buy Uber or Lyft. However, the likelihood of this happening is slim. Instead, Tesla is more likely to create its own ridesharing division, leveraging its brand and technology to enter the market creatively. Driving an Uber or Lyft requires a number of factors that an electric vehicle like a Tesla may not fully meet, such as range and cost-effectiveness.

Challenges for Tesla in Ridesharing

Tesla's electric vehicles are not well-suited for ridesharing due to several limitations. These vehicles offer a limited range and a long recharge time, which could significantly hinder a driver's productivity. On average, an Uber or Lyft driver can earn 18 to 20 miles on a $10 booking. Given a Tesla's average range of 175 to 200 miles on a charge, a driver would have to stop mid-shift for an hour to recharge, thus decreasing the number of fares they can book.

Additionally, Tesla's cars are expensive, and their depreciation rate is higher than what Uber pays per mile. The depreciation rate averages 0.50 to 1.00 per mile, while an Uber driver receives only 0.63 per mile when they have a fare in the car. During driving periods without fares, the Uber driver receives 0.00 per mile. For this reason, Tesla would not be a practical choice if a driver is looking to pay to work rather than get paid.

Collaboration Possibilities

One might wonder if Tesla could collaborate with Uber or Lyft to enhance ridesharing services. However, a manufacturer joining with a service provider seems improbable as it would be an unconventional business model. Tesla's primary strength lies in its technology and automotive capabilities, while Uber and Lyft focus on the service aspect and the algorithmic distribution of orders.

Tesla's Strengths in Ridesharing

Despite the challenges, Tesla does have some distinct advantages when it comes to entering the ridesharing market:

Access to Off-the-Shelf Vehicles: Tesla can benefit from off-the-shelf vehicles when it starts its ridesharing operation, either by using new purpose-built vehicles or used ones. This provides a significant cost advantage in terms of capital expenditure. Showcase of Tesla's Innovation: Every ride using Tesla's vehicles can be seen as a live demo drive, showcasing the capabilities of Tesla's cars. As each ride would also sell new Teslas to customers, it is a win-win situation for both the service provider and the manufacturer.

However, it is important to note that the widespread belief in the industry that autonomous rideshare services will be significantly cheaper is unlikely. Uber currently pays a calculated rate to a driver who provides a compliant car, which typically includes a financed, registered, insured, and maintained vehicle. The owner bears all the associated costs and does most of the maintenance, saving money in the process. This constant scrutiny of the vehicle helps ensure its quality and reliability.

When Uber takes over full ownership, it retains the minimal amount it pays to the drivers but assumes all the costs. This includes significant capital expenses, as well as ongoing costs such as cleaning and maintenance. On top of these, the utilization rates of a fleet present another challenge.

Furthermore, there is a shared concern over work distribution among human drivers, with the fear that users could get all the best rides, leaving the existing drivers with less attractive fares.

In conclusion, while Tesla has some advantages in terms of showcasing its vehicles and potentially reducing costs through off-the-shelf vehicles, the complexities and costs associated with full ownership and operation of ridesharing services make it unlikely for Tesla to significantly disrupt Uber and Lyft in the near future. Nevertheless, the possibility of collaboration between Tesla and established ride-sharing platforms cannot be completely ruled out, as both entities have unique strengths that could complement each other in innovative ways.