Op-Ed: Will Uber disrupt manufacturing?

PUBLISHED: Mon, 13 Mar 2017 18:32:33 GMT

Most people think of Uber as disrupting the taxi industry, but I don’t think this is the case at all. In fact, it’s manufacturing that stands to be most disrupted. And the question is: are we ready for this?

Here’s why. Who are the users of Uber? I’m one occasionally but I don’t use it all that much because I already have a car of my own. Theoretically speaking, on the road, with my car, I’m not competing with taxis. Hold that thought because it’s an important one in understanding how this works. When I’m off to the office in the morning, I hop in my car and I drive – I don’t have to call anyone, stand outside, or wait. My car is clean (well, generally!) and I know it’s pretty consistent. Every day I’m going to be using the same car. I don’t wake up in the morning and wonder if my car is going to make me late or if I’m going to have a driver that doesn’t know the roads and the blocks and the shortcuts on the way to my work.

But a taxi is generally a shotgun approach. You keep your fingers crossed, hoping that you’re going to have a pleasurable ride this time. This is one of the reasons why Uber competes with your car, not the taxi. It emulates a similar experience to using your car — the driver asks you what music you want, he makes sure it’s quiet when you take a call and will keep the conversation on the down-low when you’re not in the mood for any talk. He doesn’t even need to ask you for directions, he just follows the shortest route as instructed by his GPS.

Taxi drivers often think that since Uber is in the market it means more people are using taxis. No. It just means more people are using fewer cars. And this is why ultimately Uber will disrupt the manufacturing industry and not the taxi industry.

Travis Kalanick, co-founder of Uber, hit on this last year February in a TED talk about Uber’s plan to get more people into fewer cars. He starts off by speaking about a service in Los Angeles in 1914 called the “jitney”. It was actually a very similar idea to Uber. People were basically hiring out their cars as a lifting service for a ‘jitney’ (slang for a nickel). The idea became so popular that by 1915 there were 150,000 jitney rides per day in Los Angeles. Uber only hit 157,000 rides per day in L.A. last year. Think about that for a second.

So what happened to it? The existing transportation industry got in a huff and starting shutting it down through getting certain regulations put in place. But 1919, the whole thing was no more.

Uber still likes this idea, however. So here’s where it’s going next. Kalanick explains that in 2010 when Uber started they didn’t have grand ambitions for it – they just wanted to push a button and get a ride. “But,” he continues, “it just turned out that lots of people wanted to push a button and get a ride, and ultimately what we started to see was a lot of duplicate rides. We saw a lot of people pushing the same button at the same time going essentially to the same place. And so we started thinking about, well, how do we make those two trips and turn them into one. Because if we did, that ride would be a lot cheaper — up to 50 percent cheaper — and of course for the city you’ve got a lot more people and a lot fewer cars.”

In other words, Uber started noticing that you and I stay in the same area and leave around the same time for work, which is also in the same area. So what if we carpooled? Hence Uber launched its UberPOOL service, which connects you and me together on the same ride. The result? Since launching the service in Los Angeles late 2015, Uber has created 100,000 new carpools every week and taken 7.9 million miles off the roads, the result being 1.4 thousand metric tons of CO2 out of the air. They didn’t expect that their small idea would result in less pollution. Watch what’s happening in China: 15 million uberPOOL trips per month, which amount to 500,000 per day. This will only grow.

And here’s the clincher: more people carpooling with Uber means fewer cars on the road. Fewer cars on the road mean fewer cars are being sold. Fewer cars sold means fewer cars are being manufactured. See who is most affected by this?

When you think about it, cars are very resource-heavy products. They need parking space, idle half the time, create pollution, create noise, and so on. Carpooling or using the original Uber service means fewer cars, less traffic, more productivity or more rest (as we get to work in less time) as more people use the service. If this is a viable alternative to using my own car, especially if the costs are halved via carpooling, wouldn’t you use it? Of course, you would. It’s not like in Africa that there usually much choice when it comes to public transportation or alternatives to having your own car.

So we see as this becomes more viable to the masses it’s manufacturing – not the taxi industry – which suffers the most. The problem with this, however, is manufacturing is one of the big pillars of the African economy (certainly the South African economy). Even China and America will face the same problem. Trump’s “America first” policy is all about boosting (or in many cases, rebooting) the car manufacturing industry in America. One of his main constituencies has been those towns and States where car manufacturing was a booming industry — middle-class towns that have collapsed under the “new economy” and silicon valley innovations.

Even the financing side of things will be affected by this. So the big question, again, is are we ready for this?

In my view, manufacturing (broadly) have to do three things: (1) They must realise this is happening or is about to happen. This needs to be taken seriously. (2) They must find a way to partner with Uber — not just focusing on manufacturing cars but also getting those cars to Uber drivers, providing training, and creating a new service industry on their side. Then, (3) manufacturing, along with financing, need to create the right kinds of protection and regulation. Uber has been quite open to the fact that it sees the need for regulation — it just speaks of having the right kind. Rather than work against the innovation, an innovation that clearly has other positives for us all (less pollution, congestion etc.), there needs to be a new way forward.

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