Uber & Lyft: Outlaws No More

Uber posted its first annual profit in its latest earnings report last week. This week, Lyft projected that it will be cashflow positive in its current fiscal year, after posting financial results that surpassed analyst estimates.

The two renegade transportation network companies, perennially prodding the bounds of regulatory oversight as they carve out and define the grey area we have all come to know as the gig economy, appear to have finally gone legit. They may still assert that their drivers are not employees, but they are at least trying to make commitments to drivers and passengers that are beginning to sound like quality of service guarantees.

At the same time, both companies are shifting toward subscription-based models intended to enhance customer retention. Both companies are also pointing to growing sources of ancillary revenue in the form of advertising in and on their vehicles and in their apps - approaching $1B for Uber and $500M for Lyft.

Both companies also reported record levels of trips, suggesting that successful recovery from the pandemic setbacks has been achieved. Both organizations are also increasingly collaborating with local transportation partners - though some conflicts remain in cities such as New York.

The good news for ride hailing operators arrives just as robotaxis continue to face headwinds in the U.S., even as regions outside the U.S. appear poised to embrace commercial robotaxi operations. Aptiv walked away from its joint venture relationship with Hyundai operating Motional robotaxis in Las Vegas. General Motors' Cruise operation named a new safety officer and is still working toward restarting its operations. And Waymo, reported that two of its robotaxis collided with a towed vehicle in Phoenix touching off a recall.

The turning point for robotaxis, though, lies in Waymo's regulatory battle with state and local authorities in California over the planned initiation of robotaxi service to San Francisco International Airport. If Waymo is successful it will significantly alter the competitive landscape - directly challenging ride hailing operators for whom airport trips are a strategic linchpin.

China, meanwhile, is quietly emerging as a key player on the robotaxi landscape. The top five robotaxi operators in China - AutoX, Baidu, Momenta, Pony.ai, and WeRide - have a combined total of about 2,000 vehicles on the road with plans for thousands more in 2024 and 2025. But that is just the top five - there are many more - something unheard of outside China.

Mobileye has emerged as an important strategic partner for multiple China-based auto makers, including partners working on semi-automated driving and robotaxis in Europe, China, the U.S., and the Middle East. This week, Mobileye announced its collaboration with Project 3 Mobility to bring robotaxis into service in Zagreb in 2026. Mobileye says P3 "has already signed agreements with 9 cities across the E.U., U.K., and GCC to provide its urban autonomous service, and 30 more cities are planned."

Notably, both Waymo and Mobileye are working with Geely's Zeekr. Zeekr uses Mobileye's semi-automated driving technology, while separately developing the M-Vision robotaxi with Waymo. Waymo and Zeekr first talked about their collaboration about two years ago, but the vehicles have yet to take to the road.

What we find is robotaxis inching closer to market acceptance and deployment just as ride hailing operators achieve profitabilility. A lot will have to happen at the level of legislation and regulation to open the door wider to widespread deployment of robotaxis.

With China's manufacturing muscle and Mobileye's technology, the sector may get a renewed boost after losing the support of major auto makers and their suppliers. Perhaps most notable is Mobileye's collaboration with Volkswagen around the ID.buzz following Volkswagen's wind down of its own autonomous vehicle development cooperation with Ford Motor Company.

The key element appears to be investor confidence. While "Western" operators have backed off or shut down multiple autonomous vehicle development activities, China developers appear to remain committed and to be making progress. A more friendly regulatory environment is another likely contributing factor.

It may ultimately come down to patience. No robotaxi operator has yet demonstrated an ability to rapidly scale the technology to multiple cities simultaneously. The last operator to give that a try, GM's Cruise, was undone by a single crash in San Francisco involving a pedestrian, following a series of minor interactions - hitting or blocking first responder vehicles.

Much has been made of the near zero tolerance standard to which robotaxi operators are being held. It remains to be seen whether the industry can overcome those challenges and find a way to scale. Long term, though, it looks like the robotaxis are coming for the ride hailers not this year, not next year, but soon. For now, the Ubers and Lyfts of the world can enjoy their newfound profitability and legitimacy.