September 7, 2016

A revolution or a job killer?

Xiasen Wang

Ride sourcing services, such as Uber and Lyft, are always willing to reduce the amount they pay to drivers. This hope could soon be achieved to an even greater degree by Uber: Uber announced last month that it would be bringing autonomous Volvo XC90 SUVs to Pittsburgh. In order to supply self-driving services in main cities in the future, Uber and Volvo announced a $300 million partnership to deploy the technology. However, for now, the autonomous vehicles still need drivers to sit behind the wheels to supervise them.

Different from Tesla’s Autopilot system, which requires human involvement, and is meant to assist, not replace, the driver, this vehicle from Volvo is intended to fully drive itself. A Volvo claims that for now, the vehicles are manufactured by Volvo and sold to Uber. But this is the first step in a joint venture to develop fully self-driving vehicles by the two companies. Uber states that the semi-autonomous vehicles will be given out to users at random and the trips will be free at present.

In late 2015, Uber had 327,000 drivers in the U.S., and reportedly now has 600,000 in the U.S. and 1.5 million worldwide. If autonomous vehicles are widely applied by Uber in the future, does it mean all the Uber drivers will lose their jobs? In addition, because the autonomous vehicles will reduce the cost of drivers, they will allow fares to be reduced, and other drivers such as taxis will be affected and may lose their jobs. Moreover, other related business such as car washing may also be influenced. Some people may be concerned that it will change the life of people and many people will lose their jobs.

This worry may be legitimate in the future, but in the near term, Uber and Volvo have a long way to go to replace all the human drivers of their vehicles. First, Uber is a ride sourcing company, which doesn’t own any vehicles. All they need to do is to receive travel requests from users and dispatch them to their drivers. If they intend to replace all the human drivers, they need to own these autonomous Volvo XC90 SUVs with a relatively higher price. Assuming a price of at least $50,000 per vehicle, purchasing 200,000 units would be more than a $10 billion investment – that’s real money, even for a company as well funded as Uber.