Waymo’s Progress May Be Good for Uber, Too
This is going to become tedious. Shares of Uber and Lyft dropped 10% today on word that Alphabet’s Waymo, our favorite self-driving taxi service, is opening for business in Miami. Just a few weeks ago, the ride-hailing firms’ stocks rose about 10% as investors decided Tesla’s self-driving–car event the day before had been a dud—implying that it posed less of a threat to Uber and Lyft.
Seriously, folks? Every time there’s any new data point on self-driving cars, Uber and Lyft shares bounce up or down 10%? Does that make any sense? We’re in the early innings of what’s sure to be a yearslong shift to self-driving cars. Waymo, for instance, doesn’t plan to offer commercial service in Miami until 2026. It’s a little early to be making day-by-day judgments on what one tiny bit of news means for Uber and Lyft.
What makes today’s sell-off particularly silly is that both ride-hailing firms are positioning themselves to participate in self-driving cars. Uber, for instance, is partnering with Waymo (and other self-driving–car firms) in several markets. Since last year, Uber customers in Phoenix have been able to get a Waymo when they order a car on the Uber app, and a similar arrangement will unroll next year in Austin, Texas, as well as Atlanta. (Uber Eats customers can also order meals via Waymos in Phoenix.)
In Austin and Atlanta, moreover, Uber will manage Waymo’s fleet, doing the humdrum work of keeping the cars clean and dealing with repairs, as well as arranging the charging of the electric vehicles. When Waymo launches in Miami, that job will be handled by Moove, a company Uber partly owns. You can see the possibility that Uber might one day extend its partnership with Waymo to Miami. It’s not surprising, then, that Uber CEO Dara Khosrowshahi, talking about the company’s Waymo partnership on its last earnings call, said, “We’re pretty optimistic where we sit.”
It makes sense for Uber and Waymo to collaborate, given how well penetrated Uber is in the ride-hailing business and how advanced Waymo’s technology is. In other words, what’s good for Waymo can be good for Uber. Of course, things could change over time, as we wrote here. But investors might want to have a less knee-jerk reaction to the daily news.
The Budget Delivery Wars
Temu is winning over low- and middle-income shoppers in the U.S. by offering ultracheap prices that don’t require people to visit a bargain bin in a bricks-and-mortar store. That’s rankled Amazon, but it’s done much more damage to budget-focused traditional retailers like Dollar General and Dollar Tree. Shares of both companies have fallen more than 40% this year, due in part to Temu making inroads with penny-pinchers.
Dollar General is striking back. On Thursday, CEO Todd Vasos told analysts the retailer was testing same-day delivery out of 75 of its stores for customers who order through its website and app, with plans to eventually expand the service to thousands of locations. That comes in addition to a deal Dollar General has had since 2021 to offer deliveries through DoorDash.
You can see the logic for doubling down on deliveries: Temu has shown that even the most budget-conscious shoppers like having stuff delivered, and it makes sense for a dollar store to try to grab a piece of that pie. Even better for Dollar General, Temu hasn’t yet figured out how to offer same-day delivery, since it still ships many of its packages from China on airplanes.
But it’s hard to see the economics making sense for Dollar General. Paying people to go into physical stores to grab items off shelves and drive them to shoppers’ homes is woefully inefficient compared to dispatching deliveries en masse from warehouses.
And Temu has a knack for squeezing savings out of every part of the supply chain, including last-mile deliveries, as we’ve reported. To avoid losing money on deliveries, Dollar General will likely have to pass costs on to consumers through fees, which would wipe out its budget appeal.