{"id":3190,"date":"2017-02-02T13:12:06","date_gmt":"2017-02-02T18:12:06","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/detroit-in-the-rear-view-mirror-how-uber-will-commoditize-cars-2\/"},"modified":"2017-02-02T13:13:16","modified_gmt":"2017-02-02T18:13:16","slug":"detroit-in-the-rear-view-mirror-how-uber-will-commoditize-cars-2","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/detroit-in-the-rear-view-mirror-how-uber-will-commoditize-cars-2\/","title":{"rendered":"Detroit In the Rear-view Mirror: How Uber will Commoditize Cars"},"content":{"rendered":"
\"\"<\/a>
Travis Kalanick (Image: Reuters)<\/figcaption><\/figure>\n

<\/p>\n

Understanding the big picture<\/h1>\n

The first time I used Uber in 2012, I was trying to get to Dulles Airport from a DC suburb. After a few minutes riding in the black car \u2013 the only option at the time \u2013 I remember thinking \u201cthis is so much better than a DC taxi experience!\u201d I didn\u2019t need to call the cab company three times to verify it was still on its way 15 minutes after ordering it. I didn\u2019t need to debate the payment method with the driver. I didn\u2019t need to explain how to get to my destination. I was in good company thinking that Uber might replace taxis. What I didn\u2019t see was that they would begin to replace car ownership too.<\/p>\n

Uber delivers convenience<\/h1>\n

Uber can deliver the benefits of cars, without many of car ownership\u2019s traditional pain points. Because consumers interact with Uber through their smartphone, a ride can be summoned from anywhere to anywhere. A warmed-up and air-conditioned vehicle arrivers at the consumer\u2019s feet within minutes, rather than the consumer needing to walk to where they parked the car \u2013 which could take as long or longer. So far Uber is at least par with car ownership. However, with Uber consumers don\u2019t have to drive, park, insure, refuel, or repair. Uber drivers take care of all those non-value-added steps on their own time and their own dime.<\/p>\n

Pricing: an economist\u2019s dream<\/h1>\n

The consumer is still indirectly paying for the driving, parking, insurance, and refueling (although the ride\u2019s price might not be fully covering driver\u2019s costs), but the price is set based on the demand for rides and the supply for drivers. After facing backlash from consumers on \u201csurge pricing\u201d, Uber has simplified their message and now just displays the price of the ride to the consumer who then elects whether to order.<\/p>\n

Keeping it light<\/h1>\n

If car ownership is viewed as a bundle of rides, then Uber has effectively unbundled the service and the pricing, allowing consumers to pay as they go rather than making a large, long term asset purchase up front. In this sense, they have taken the car rental unbundling model and pushed it to a far more granular level. At the same time they have remained far less capital intensive than both carmakers and rental companies because Uber does not need to own a fleet of vehicles.<\/p>\n

Ownership won\u2019t disappear, but carmakers should worry<\/h1>\n

Uber has a long way to go to replace car ownership entirely, and currently ride-sharing is more of a complement to ownership than a substitute. The demand for cars continues even through Uber drivers, but the premise behind ride-sharing is that a smaller fleet of vehicles can service the same population through the efficiency of matching seats to riders. While rural consumers will continue to buy cars, urbanization means overall car-buying rates might hold steady or even drop. Self-driving vehicles exacerbate the trend by lowering the cost of rides in the long term and increasing the number of hours a car is used in a day. The brighter the future for Uber, the bleaker for automakers.<\/p>\n

Sources:<\/p>\n

https:\/\/www.washingtonpost.com\/news\/get-there\/wp\/2015\/02\/20\/the-hidden-costs-of-being-an-uber-driver\/<\/p>\n

http:\/\/www.businessinsider.com\/uber-stops-showing-surge-pricing-rates-2016-6<\/p>\n

http:\/\/fortune.com\/2016\/08\/24\/uber-volvo-car-ownership\/<\/p>\n","protected":false},"excerpt":{"rendered":"

Does Uber’s rise mean automakers’ demise? <\/p>\n","protected":false},"author":1254,"featured_media":3191,"comment_status":"open","ping_status":"closed","template":"","categories":[1077,384],"class_list":["post-3190","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-sharing-economy","category-uber"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-digit\/assignment\/digital-winners-losers\/","yoast_head":"\nDetroit In the Rear-view Mirror: How Uber will Commoditize Cars - Digital Innovation and Transformation<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-digit\/submission\/detroit-in-the-rear-view-mirror-how-uber-will-commoditize-cars-2\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Detroit In the Rear-view Mirror: How Uber will Commoditize Cars - 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