Brandon Donnelly

Daily insights for city builders, delivered every morning at 6 AM ET. I’m Brandon Donnelly — a Toronto-based real estate developer and founder of Globizen. I’ve been writing here since 2013.

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Tag: ridesharing

  • San Francisco now has autonomous vehicle taxis

    These are two short videos of autonomous Cruise vehicles driving around San Francisco. Cruise, which is owned by General Motors, received a permit from the state of California to operate autonomous vehicles — without a safety driver — in September of last year. In November 2021, one of the cofounders of Cruise took the first ever driverless taxi ride in the company’s history. And on February 1, 2022, Cruise announced that it was opening up to the public.

    If you read the comments on Twitter you’ll see that some people have found these vehicles to be hyper reactive to traffic lights and to do oddly long pauses at stop signs. So I guess they’re not perfect. But oddly long pauses are certainly better than not stopping at all. Either way, this is a big deal. I’m not sure if these are the first unsupervised autonomous vehicles out in the wild, but they are easily some of the first.

    There has been a lot of discussion over the last few years about autonomy being a hugely tricky technical problem to solve. One that is perhaps more difficult than a lot of people thought it would be at the outset. I’m assuming that this is at least one of the reasons why ridesharing companies like Uber and Lyft ended up selling off their AV divisions while searching for profitability.

    But the market never gave up and it’s pretty exciting to see this coming to fruition. Oliver Cameron is VP, Product at Cruise and the former CEO of Voyage (which was acquired by Cruise last year). If his tweets (above) are any indication, San Francisco is going to be seeing many more autonomous vehicles in the coming months.

    This is going to have a profound impact on the unit economics for ride sharing companies like Uber, but more importantly it is likely to have a profound impact on our cities. Mobility innovations have a way of doing that. Some of the impacts might be negative, but I believe that many of the impacts can and will be positive.

    As most of you will know, I am a believer in dense and walkable cities. I do not believe in planning cities around cars. And so that is not what I am advocating for here. My view is simply that I think autonomy grants us the ability to rethink our definition of a “vehicle.” And maybe it becomes something that more closely resembles public transit. That could be a positive thing for our cities and something that draws people away from private vehicle ownership.

    So I remain both optimistic and excited about what’s to come.

    Have any of you had a chance to ride in an autonomous vehicle? If so, leave a comment below or on Twitter.

  • The enduring allure of private vehicles

    Uber’s recent investor day presentation (link here) is interesting if you’re an investor or thinking about becoming an investor, but it’s also interesting from an urbanism standpoint. Part of the promise of Uber was that it was going to help lure people away from owning cars. Looking at the data though (see below), ridesharing penetration is still pretty low in even Uber’s largest markets: 3.9% for the US and 3.3% for Canada. Brazil is a leader here, which you might think is because of a lower cost per mile, but Australia isn’t far behind.

    At the end of the day, the vast majority of mobility trips are still being done through personal vehicles. This is certainly the case in the US with 6.6 billion weekly trips in personal vehicles versus 191 million on public transit and 22.6 million with UberX (all 2019 data). And for those taking Ubers, about 90% of riders are using some form of UberX — that being a solo, on-demand, point-to-point trip with a 4-door car. So sharing a car with strangers and using different/multiple modes of transport hasn’t really caught on here.

  • To invest or not invest

    We used Uber to get pretty much everywhere when we were in Rio de Janeiro. For reasons of convenience, cost, and safety, it just made the most sense. I can tell you that it felt a lot more valuable in place where you don’t speak the language and you’re acutely aware of being in the wrong place at the wrong time.

    And since Uber is going public later this year (along with Lyft), it got me thinking about whether or not it is a stock that I would want to own. Are they destined for monopoly profits? Do they have a defensible business model? How powerful are their network effects? Having first-mover advantage doesn’t guarantee anything.

    My initial thoughts are that the network effects for their core offering – single rides – don’t feel that strong. Sure you need a critical mass of drivers so you’re not waiting around too long, but at a certain point the response time is likely good enough. Rides are a commodity.

    This arguably changes as you get into services like Uber Pool and Uber Commute, because more users on the network in close proximity to you can mean lower costs and higher service levels. But is there any sort of lock-in effect?

    Many passengers and drivers seem to “multi-tenant.” In other words, many (or maybe most) people have multiple ridesharing apps installed on their phone and they will switch back and forth when it makes sense to do so. I do that when prices are surging. And drivers appear to be doing the same based on the Uber and Lyft emblems in their cars.

    For a long time, Uber was the only show in town here in Toronto. Hailo only lasted about two years or so. But as soon as Lyft entered the market, both companies moved to aggressively discount their rates, and that is still going on to this day. This suggests certain things to me.

    Among other things, it is a reminder that the demand for (commoditized) transportation services is highly elastic. We are price sensitive. We will use whatever is cheaper. So one way to win is to obviously create a cost structure advantage. Hence the current autonomous vehicles “arms race.” 

    Lyft is also trying to establish itself as a multimodal transportation solution. (When are scooters coming to Toronto?) Perhaps that will make them less of a commodity. But again, how defensible is that approach? I suppose the market will tell us what it thinks later this year.

  • Should you buy a car or just take Uber?

    Urban dawn by Raymond on 500px.com

    https://500px.com/embed.js

    My friend Evgeny published a great blog post today called, On Car Ownership And The Future Of Transportation. 

    And in it he made the argument that instead of buying a car and an expensive downtown Toronto parking spot (average price: $40,000 – 60,000), most of us urbanites would be better of just taking a taxi or Uber.

    This got me thinking: At what point does it really make sense to completely forgo owning a car? (Full disclosure: I own both a car and a downtown parking spot.) So I decided to dig into the numbers a bit more and compare 4 mobility options:

    • Owning a car ($25,000 upfront) + downtown parking spot ($40,000 upfront) and driving yourself everywhere
    • Taking a regular taxi exclusively ($3.25 base + $1.75 per km)
    • Taking an UberX exclusively ($2.50 base + $1 per km)
    • Or, taking a futuristic driverless car everywhere (here I assumed $1.50 base + $0.25 per km)

    With the above numbers, I then assumed 15,000 km traveled per year and an average trip length of 15 km (so 1,000 trips per year). The trip length and number of trips per year matter because of the “base fare” that is charged when you take a taxi or Uber.

    I also assumed that the cost of owning a car is $0.60 per km (estimated from this Globe and Mail article) and that there is an opportunity cost to NOT renting out your downtown parking spot ($200/month). That is, every month that you spend driving yourself around and parking your car, you are forfeiting parking revenue.

    Finally, I looked at a 10 year time horizon and then “discounted” all the costs back to today’s dollars so that I could compare each mobility option.

    So what did I find?

    image

    What this says is that if you’re driving 15,000 km per year (average trip length 15km), then you’re better off taking UberX everywhere, as opposed to going out, buying a car and parking spot, and driving yourself around.

    But does this hold true at different travel distances?

    Based on my model, once you hit around 18,000 km per year, then you’re better of with option 1 (owning a car). That’s because the per km savings associated with driving yourself around are enough to offset the upfront costs of the car and parking spot.

    On the flip side, when you drop below 7,500 km traveled per year, even a regular taxi starts to make sense. That’s because you’re simply not traveling enough to reap the benefits of owning a car/parking spot. Again, high upfront costs; lower per km operating costs.

    Of course, there are a number of things I didn’t consider in my model. For one, most people finance their car and parking spot (it is bundled into their home mortgage). So I’m sure there are ways that you could change the above outcomes using leverage.

    At the same time, I didn’t account for the fact that when you’re being driven around (as opposed to driving around) you have the flexibility of doing work, responding to emails, and so on. If you want to attach a value to your time, then the scale would tip back in favor of taxis and Uber.

    But all of this was really just to make one point: look how cheap it could be to ride around in a driverless car. When that becomes the reality in our cities, which it will, it’s going to completely transform our current beliefs around cars, parking, and many other things.

    I guess that’s why General Motors just invested $500 million in the peer-to-peer ridesharing company, Lyft. They know the shit is coming.

  • Ridesharing could help solve the last mile problem

    X by Keith Mokris on 500px.com

    https://500px.com/embed.js

    A few months ago I wrote a post about Uber’s new “Smart Routes” feature and ended by saying that it’s not just taxis who need to be thinking about platforms like Uber, it’s also public transit authorities.

    I said that because I think that multi-modal is already the new reality in terms of how we get around cities and because the line between different modalities is becoming greyer all the time.

    That’s why I was interested when I stumbled upon this NextCity article talking about how Lyft is starting – it’s still early days – to collaborate with transit authorities in order to make it easier for people to switch between public transit and its peer-to-peer ridesharing marketplace.

    Why might this matter? Here’s an excerpt from the article:

    “According to the company’s data, 25 percent of Lyft riders say they use the service to connect to public transit. In Boston, 33 percent of those rides start or end near a T station. And transit hubs like Chicago’s Union Station, D.C.‘s Union Station and Boston’s South Station are among the most popular destinations for its users, Lyft finds. So riders already see on-demand rides as a solution to the first mile/last mile problem. Lyft thinks it can do more.”

    These last 2 sentences are interesting. Public transit can often suffer from what is known as the first mile/last mile problem. This is a problem where riders find it difficult to get to the nearest transit route from their departing point or to their ultimate destination once they exit transit.

    Bikesharing can be used to solve this. But, clearly, so can ridesharing.

    The other important aspect of this emerging collaboration is that ridesharing apps can offer a lot of incredibly valuable data to transit authorities. If 25% of users are indeed using it to connect to public transit, then all of a sudden cities are getting a more complete picture of point A to B travel. (Among many other things.)

    But the question in my mind is now, who is going to and who should act as the overall steward in this multi-modal urban mobility network? 

    There are lots of different players involved. Some are public and some are private. But they all play a role in how we are going to continue moving around our cities.

  • Marginal cost = 0

    Earlier this week I wrote a post called: The pull from services to products. And in it I made mention of the fact that part of what’s driving this pull towards products is that the marginal cost of servicing additional users or customers is almost nothing in a world of internet services and products.

    Well the reality is that this phenomenon is driving a hell of a lot more. It could – and probably will – fundamentally change almost all aspects of the economy.

    I know that sounds like a pretty audacious statement, but if you watch the following 10 minute talk by Albert Wenger (Union Square Ventures) you might start to feel the same way. He outlines 5 changes being driven by the fact that in the digital world, marginal cost = 0. The impacts go well beyond tech, capturing sectors such as transportation and industrial real estate.

    [youtube https://www.youtube.com/watch?v=sVEtTzlqsoE?rel=0]

    If you can’t see the video, click here.