Uber's audacious plan to replace human drivers

Uber CEO Travis Kalanick is putting his faith in autonomous vehicle technology to the test in the streets of Pittsburgh within the next few weeks.

The ride-hailing service, whose $66 billion market value is larger than the economies of Iceland and Estonia combined, will begin offering customers in the Steel City access to specially equipped Volvo XC90 SUVs that will be “supervised” by humans in the driver’s seat. 

San Francisco-based Uber hasn’t released the exact date when the test, which will involve 100 vehicles, begins. A spokesperson for Uber didn’t respond to an email seeking comment for this story.

In an interview with Bloomberg Businessweek, Kalanick indicated that he views driverless cars as more than just a technological curiosity. “We are going commercial,” he told the magazine. “This can’t be just about science.”

However, Uber is a bit late to the game of self-driving cars. Alphabet’s Google (GOOG) has been testing the technology for years. Apple (AAPL) is reportedly interested in self-driving cars and is looking for 800,000 square feet of space to park them, according to Fortune.

In addition, electric-car maker Tesla (TSLA​) and the world’s traditional automakers are investing big bucks in the technology, with Ford recently announcing plans​ to put a fully autonomous vehicle into ride-hailing service by 2021. Tesla’s Autopilot technology, however, has come under fire after the death of a driver in Florida who was using the feature.

Whether Uber can gain an edge against these rivals remains to be seen.

“They have been so nonpublic about the development of this technology thus far,” said Eric Dennis of the Center for Automotive Research. “I would be surprised that they suddenly are comfortable enough with it to allow ‘normal’ people to evaluate it and form opinions. I don’t think it’s any quantum leap as far as I can tell.”

However, the potential impact that driverless cars could have on Uber’s bottom line could be huge if the company no longer had to rely on the estimated 1 million or so human drivers who ferry passengers to their destinations. 

The boost to the world’s automakers could also be significant. Management consulting firm McKinsey estimates that about 15 percent of all vehicles sold by 2030 could be fully autonomous. According to IHS Automotive analyst Jeremy Carlson, self-driving cars could open up new markets for the industry.

​“At this point, an automaker’s customers are more or less those who can afford to and do buy a car,” he said. “Those other services open up transportation to a much wider audience.”

Automakers have even more incentives to back the technology because cars used in ride-hailing and car-sharing services wear out more frequently than they would otherwise. However, fully driverless cars won’t be ready to hit the road for years because the technology still needs to be perfected. The public also needs to get used to the idea.

“We as individuals need to feel comfortable to cede the control of the vehicle to a set of very intelligent processors and sensors and, frankly, underlying software,” said McKinsey’s Hans-Werner Kaas in a recent podcast from the company.

Retired auto industry executive Bob Lutz, who held top positions at General Motors (GM​) and Chrysler (FCAU​), tested early versions of driverless technology several years ago when it was “pretty scary.” In an interview with CBS MoneyWatch earlier this year, Lutz said the technology would continue to improve.

“In just a couple of years’ time, we’re going to see autonomous vehicles that are far less accident-prone and far safer to be in than anything driven by a human driver,” he said.

However, Dennis at the Center for Automotive Research noted that the hoopla surrounding driverless cars might fizzle as it has for other technologies.

“Twenty or 30 years ago, we assumed as a society when we developed video phones tech we would just ditch the telephone,” he said, but that technology proved to be a niche product. “It’s not a society-changing thing.”

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    Jonathan Berr is an award-winning journalist and podcaster based in New Jersey whose main focus is on business and economic issues.