Comment by tristanj
18 hours ago
Waymo inflates their prices to be above that of Uber/Lyft because they don't have enough vehicles to meet demand. But their operating costs / mile are lower than that of Uber/Lyft. I'd estimate their internal cost per mile is approx. half that of Uber/Lyft. They pocket the rest because they need to recoup decades of expensive R&D.
There is also no reason to compete with Uber/Lyft on price because they are just leaving money on the table. When Waymo first launched, we saw them try to undercut (Waymo was about 20% cheaper than Uber/Lyft) but now it's about 20% more expensive. People are willing to pay extra for Waymo, so why would they charge less?
The margin on each Waymo ride is currently very, very high. I don't expect Waymo to cut prices until real competition arrives.
It's not clear to me if their costs are lower yet. Waymo's vehicles are rather expensive (estimates for their newer Zeekrs are around $75k each), and they need to pay some number of remote monitors for exceptional situations (as noticed during the recent blackout in San Francisco). They also have to collect tons of data to build & maintain high resolution 3D maps of the areas they operate in. And they have to pay engineers to improve the self-driving software.
Waymo passed 200 million driverless miles in February. If we optimistically assume they're up to 300 million miles now, and every mile was paid for at $10 per mile, that's $3 billion in revenue since they launched. In that same time, Waymo has gotten $27 billion in funding. Of course they haven't spent anywhere close to that amount, and they are optimizing for faster rollout rather than profitability, but the finances aren't as gleaming as one might expect.
I'm sure Waymo will figure out ways to reduce their costs over time, but right now I think they're charging pretty close to what they need to break even.
We're looking at different metrics, you're analyzing the average total cost, while I'm analyzing the marginal cost. Waymo has enormous fixed costs like you mentioned, mapping cities and paying engineers are not cheap, which need to be amortized over a massive self-driving fleet. But those are fixed costs which don't increase with fleet size. Waymo currently operates only ~3000 vehicles, which is not enough to amortize those fixed costs into overall profitability.
What matters most are marginal costs (i.e. how much does it cost for Waymo to add 1 more ride). Looking at marginal costs, Waymo takes in more money than it spends on each ride, so projecting outwards when Waymo operates a large enough fleet, Waymo will be profitable.
Uber/Lyft run enormous fleets of ~2 million vehicles in the US, and that's how they are able to maintain profitability. They can spread their engineering and management expenses over millions of rides.
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Doing my own math, the marginal costs for Waymo are:
Revenue: Each Waymo vehicle brings in ~$50/hour
Expenses: Waymo must pay for
* Assume the cost of a vehicle is $100k
* Amortized depreciation of the car (assume vehicles need to be fully replaced after ~250,000 miles, vehicles average 25 miles / hour, vehicles need to be fully replaced after 10,000 hours, cost is $10/hour)
* Maintenance (Assume the total cost of maintenance is an additional 25% of the vehicle price, vehicle price is $100k and vehicle lasts 10,000 hours, cost is $2.5/hour). This is likely an underestimate, I didn't model the cost of a mechanic, so this could be as high as $5-7/hour.
* Support (assume 1 support agent can support 10 vehicles, Philippine support agent costs $10/hour, so amortized $1/hour per vehicle)
* Cleaning (needed daily, costs $1/hour per vehicle)
* Datacenter compute for vehicle coordination ($0.50/hour per vehicle)
* Electricity (Assume $2/hour)
10 + 2.5 + 1 + 1 + 0.5 + 2 = $17/hour to operate a Waymo.
In conclusion, the marginal costs for Waymo is very profitable.
Even when just looking at marginal costs, I doubt Waymo is half that of a human driven vehicle. If we assume a robotaxi lasts 200k miles before being retired, then the cost of the vehicle alone ($75k) is 37.5 cents per mile. If a vehicle drives 200 miles a day, that's $5 of electricity (250Wh/mile x 10 cents/kWh), maybe $15 of labor to clean, and the space to park it near downtown ($3/day). That's another 12 cents per mile for a running total of 50 cents per mile. Then factor in maintenance (tires, brakes, suspension, etc) and you're probably close to $1/mile. Then you also need support staff, remote operators (approximately 1 per 50 vehicles, but paid significantly more than Uber drivers), and plenty of compute and storage for the high resolution maps (which must be constantly updated as the environment changes). And none of that includes the R&D costs to improve the vehicles or the self-driving software. Yes many of these costs decrease as fleet size increases, but it'll be a while before it gets below $1/mile. (Nationwide, Uber's rates are $1-2/mile depending on the area.)
There are other considerations as well. For example, available ride shares can scale up/down with demand, while Waymo & competitors will need lots of spare vehicles to satisfy peak demand.
I'm certain autonomous vehicles will eat up the market currently held by Uber/Lyft/Taxis. It's just going to take longer than a lot of people expect.
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Is it known that Waymo operating costs are lower?
In San Francisco, it has to be. Because of prop 22, Uber/Lyft must compensate drivers a minimum of $22.40/hr, plus $0.36/mile for vehicle expenses. Waymo doesn't have this cost, so it's effectively ~$25/hr cheaper to operate than Uber/Lyft.
I looked up the numbers - the estimated Uber/Lyft cost per mile in SF is ~$4.50/mi, and Waymo is trending around $1.40/mi (estimated 2025 number).
Where is this estimate? I found a wide range of estimates in my web search, from a per-mile cost of revenue of $2 (meaning a loss of $2 per mile excluding capex), to up to $50/mile.
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> Waymo doesn't have this cost, so it's effectively ~$25/hr cheaper to operate than Uber/Lyft.
Waymo has other costs, such as engineering driverless operation.
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> 20% more expensive.
Or less depending on how you tip.