Can Uber Survive the Onslaught of Tesla’s CyberCab and Waymo?
Uber has had an incredible growth run since the depths of the pandemic in 2021. With its revenue consistently rising — $10.7 billion in Q2 2024, for example — the company seems unstoppable on the surface. But, just over the horizon are game-changers like Tesla’s CyberCab and Alphabet’s Waymo, both pioneers in the autonomous vehicle (AV) space.
Now, this got me thinking: do autonomous vehicles even need Uber anymore? If cars can drive themselves, do companies like Tesla and Waymo still need a middleman to connect them with customers? In the short term, Uber’s model still holds value — but the future is far from certain.
The Power of Uber Right Now: Drivers and Demand
Let’s not underestimate Uber. Currently, a significant chunk of its revenue (20–30%) goes toward paying drivers. In theory, this makes autonomous vehicles a goldmine for Uber, as removing the need for drivers would drastically boost its margins (it’s a game of margins, better the margin and scale more $$). Uber is smart enough to realize this. That’s why it has already partnered with Waymo, integrating autonomous cars into its platform in cities like Phoenix and soon Austin and Atlanta .
Uber isn’t just a ride-hailing app — it’s an engine of demand. Waymo and Tesla’s CyberCab can benefit from Uber’s enormous user base, at least in the early stages. Think of Uber as a marketplace for AVs (that’s what Dara called in the investor call), where these companies can plug in their autonomous fleets to meet rider demand without having to build their own infrastructure from scratch. This works well in the short term, but what happens when Tesla and Waymo grow up?
The Long-Term Threat: Tesla and Waymo Don’t Need Uber Forever
In a few years, the relationship between Uber and these AV giants could become very different. Right now, Tesla and Waymo are happy to work with Uber to learn more about fleet management and customer behavior. But what happens when they get enough data and experience? They may decide that they no longer need to give Uber a slice of the pie.
Let’s look at Waymo in San Francisco as an example. It’s already operating its own app there, providing fully autonomous rides directly to consumers without any involvement from Uber . So, why would Waymo continue to partner with Uber elsewhere once it has the confidence to handle its own customer base? Tesla’s CyberCab could follow a similar path. Once these companies master fleet utilization and scale up, it would make perfect sense for them to cut Uber out of the equation altogether.
A Potential Price War: Is Uber Ready?
In this scenario, it’s easy to imagine Tesla and Waymo undercutting Uber’s prices to gain market share. Think back to the early days of ride-hailing when Uber undercut traditional taxis to grow its market share. We could see Tesla and Waymo doing the same thing — lowering prices to attract more customers while Uber struggles to compete with companies that don’t have to share their revenue with a middleman.
If Tesla and Waymo no longer need to give Uber a 10–20% commission, they could pass those savings on to consumers. This could lead to a race to the bottom, where Uber might find itself in the very position it once placed traditional taxi services.
Can Uber Defend Itself?
Uber still has network effects on its side. Millions of people use the app, and it has spent years building out a robust logistics system. It’s not just a ride-hailing company — it’s a mobility platform with delivery services, freight, and even a growing advertising business.
In the short run, Uber will continue to partner with AV companies like Tesla and Waymo to maintain a foothold in the autonomous vehicle space. It’s a smart move that buys Uber time to figure out its next step. Uber might even evolve into something like the “App Store for AVs”, where companies like Tesla and Waymo still use the platform to reach customers — but that model has its limits.
As we’ve seen with Apple and Google’s app stores, companies don’t always want to give up 30% of their revenue. Tesla and Waymo may tolerate Uber’s commissions now, but in the long run, they’re unlikely to stay happy paying Uber if they can build direct relationships with riders. And as Waymo’s app in San Francisco shows, they’re already testing that direct-to-consumer model .
The Hybrid Future: Cooperation and Competition
The next five to ten years will be critical for Uber. I expect to see a hybrid approach from companies like Waymo and Tesla — partnering with Uber in some cities while going head-to-head in others. Uber will likely continue to dominate in areas where AV technology isn’t fully developed, relying on human drivers for the time being. However, as AVs become more capable and widespread, Uber’s traditional model could come under siege.
Ultimately, Uber will have to decide if it wants to remain a middleman or if it will find a new way to compete. Perhaps Uber will evolve into something more — a global transportation platform that manages everything from AVs to delivery services. But one thing is certain: Tesla and Waymo won’t wait around to let Uber take a cut of their profits forever.
Conclusion
Uber is facing a moment of truth. Its partnerships with companies like Waymo and Tesla are smart moves in the short term, but as autonomous vehicles gain momentum, Uber may have to find new ways to stay relevant. Will Uber’s network effects and logistics expertise be enough to fend off Tesla’s CyberCab and Waymo’s direct-to-consumer ambitions? Only time will tell, but one thing is clear — the race is on, and the future of transportation is about to get very interesting.
References:
https://s23.q4cdn.com/407969754/files/doc_financials/2024/q2/uber-q2-24-earnings-call-transcript.pdf
