Uber's Electric Vehicle Fleet
Uber has recently invested in an electric vehicle fleet. This blog explores the reasons behind this shift from Uber's asset light model to a managed fleet model.
Rahul Mathur
Now: Building @Insurance_Dekho Earlier: Founder @VerakInsurance (YC W21; acquired) Hiring for Eng, Marketing, Sales & Ops roles
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Last month, Uber India committed to bring 25,000 electric cars into its fleet in the next 2 years & it inked a ₹1000 crore green loan partnership with SIDBI to finance EVs.
— Rahul Mathur (@Rahul_J_Mathur) June 25, 2023
This month, Uber invested $20M into Everest Cabs for its EV fleet
What's going on here? -
Why is Uber transitioning from its asset light model to this managed fleet model for its Electric rides?
— Rahul Mathur (@Rahul_J_Mathur) June 25, 2023
3 potential reasons:
(1) High capex on EVs isn't affordable for individual drivers 💰
- You've heard stories of CNG vehicle owner-drivers who are driving 12 hours a day etc -
- The cost of buying an EV outright or making a down payment is MUCH more than CNG vehicles; most drivers won't be able to afford this
— Rahul Mathur (@Rahul_J_Mathur) June 25, 2023
🤷Catch-22: Uber needs the EV fleet but its operator partners can't afford to buy them & Uber doesn't want to deploy too much of its own $$. -
Solution: Partner with fleet operators to provide the EVs (and drivers - in most cases) for the Uber marketplace.
— Rahul Mathur (@Rahul_J_Mathur) June 25, 2023
(2) Attacking the Innovator's Dilemma (competition)🤺
- New operators like BluSmart have EV fleets with high NPS. Uber is ceding mind share (and, market share). pic.twitter.com/JQe8AS1R5j -
If you've taken a BluSmart - you'd understand the counter positioning.
— Rahul Mathur (@Rahul_J_Mathur) June 25, 2023
- Since Uber can't shake up its core CNG / Petrol cab business. It needs to take on competition head on via its Electric cab business. -
🤔 Remember: Uber already caters to more geographies within India with a larger fleet but BluSmart is targeting the office & airport loop (highly profitable & predictable).
— Rahul Mathur (@Rahul_J_Mathur) June 25, 2023
Uber most likely will deploy the EV fleet on its new rental & scheduled trips services. -
(3) Total cost of operations decreases with EV fleet operators ⬇
— Rahul Mathur (@Rahul_J_Mathur) June 25, 2023
- Running an EV fleet is all about utilization (2 drivers per car - 16 hours per day run time) & scale (large depots for charging & lower cost of financing) -
- Operators like Everest Fleet would provide a lower cost per trip for an Uber Green ride versus an individual operator (e.g. me buying a Tata EV)
— Rahul Mathur (@Rahul_J_Mathur) June 25, 2023
🧠Cost is the factor in going green - customers want green + lower cost. Therefore, Uber Green needs to do anything to reduce cost. -
⚠️To conclude, Uber going green is great for India. However, some questions still exist like:
— Rahul Mathur (@Rahul_J_Mathur) June 25, 2023
(a) How will Uber Green be adopted since they are a late entrant? (will it be another discount war?) -
(b) Will Uber use these fleet operators as a transition strategy until EV costs drop substantially? Or, is this a long term arrangement?
— Rahul Mathur (@Rahul_J_Mathur) June 25, 2023
(c) How much leverage does Uber <> EV fleet operators have? Will fleet operators extract enough / a lot of margin?
Will be fun to watch this!