The battle for the future of local transportation is in full swing. Uber’s leadership and execution are massively impressive. Few companies have impacted the world in the way that their team has. That said, if you look closely at their two moats (supply and demand), Uber can still lose someday. Here’s how.

First, The majority of the fully-loaded average cost per mile today in an Uber ride is the human driver + vehicle + fuel + maintenance. With the advent of Level 4 autonomous vehicles, you will be taken from point A to point B without any human interaction, which means the human driver is no longer needed.

Second, the cost of the vehicle itself will dramatically decrease as auto manufacturers redesign for the increased safety of widespread autonomy as well as single-use purposes like commuting. For example, you rarely utilize all of your vehicle’s cargo capacity on your normal commute.

Third, with the advent of fully electric cars, the cost of fuel (assuming solar powered charging stations) approaches zero over time.

Fourth, fully electric cars have no internal combustion engine, dramatically reducing amortized maintenance costs.

On top of that, if you share your ride a la Uber Pool or Tesla Master Plan Part II’s higher volume cars, cost per mile per passenger further decreases.

If all of this comes to fruition, the fully loaded average cost per mile per passenger approaches pennies. Pretty amazing, right? It is this technology/cost inflection point which may shift who is able to own supply AND demand of the transportation market.

One of Uber’s most impressive feats to date has been their ability to aggregate supply, e.g. drivers and vehicles, in hundreds of cities around the world. It has been a herculean effort — and often initially subsidized — to put available cars on the road. That said, as truly autonomous cars enter the market, another company could order a fleet of vehicles and put them online in a major city with just a checkbook, weakening Uber’s supply moat. This is not a new idea, but the cost efficiencies mentioned above become an important prerequisite to put fleets of vehicles on the road in this way, helping to finally turn transportation into a commodity like running water.

So if supply becomes a commodity that is easier to activate in cities around the world, owning consumer demand becomes exceedingly important.

To understand how Uber may lose their consumer demand moat, we need to go back in history. Uber started as a luxury black car service for affluent people. It wasn’t until UberX (which may or may not have been inspired by Lyft?) that growth accelerated. At a higher price point, only a subset of the world could afford the convenience, but it wasn't until supply density drove price lower than existing alternatives, that a global consumer shift occurred. In cities around the world, consumers now use Uber instead of driving and/or buying their own cars.

So if you believe cost is a major driver of future growth and that cost per mile per passenger will approach pennies, the real question is… do you pay for it at all?

Let’s imagine a world of fully autonomous vehicles. When you enter the car, you don’t even have to face forward. Every internal surface is a screen. You can Netflix from the moment you enter the car until you arrive at your destination. If the average commute is 30 minutes, That’s an additional 20 hours/month that companies can fight for your attention.

In a post I wrote in Feb 2014, I said that cars will own and maintain themselves. Maybe that’s a little too far away… but in it I linked to a 2011 Google Patent awarded for “Transportation-aware physical advertising”. Isn’t Google building an autonomous car? Will they buy fleets of vehicles so that Starbucks can buy an ad-unit which pays for my ride if I stop for a coffee on the way to work?

Or will content pay for my commute? Will Amazon Prime members get a free ride if they watch Amazon Video content on the way to work? The founder of the “Netflix of China”, LeEco, recently invested $1B in Faraday Future, a new LA-based automaker. In a recent article he alluded that content would “subsidize the cost of it’s future electric, autonomous cars”. Who else owns a ton of content and is building a car? Apple.