“Uber Technologies Inc. sold its self-driving-car unit to a Silicon Valley competitor, Aurora Innovation Inc., in the latest business exit by the ride-hailing company as it aims to deliver on a promise to shareholders to become profitable,” WSJ writes.
The Details: Aurora will take control of Advanced Technologies Group, while Uber makes a $400 million cash investment in Aurora. Upon completing the deal, Uber will own 26% of Aurora, and its CEO, Dara Khosrowshahi, is joining the company’s board of directors.
Why Would Uber Do This? Well, Uber wants to be profitable. And rather than chase pumped-up revenue, it’s “scaling back many of its expensive side businesses — including electric bikes and flying cars — that haven’t gained much traction.”
- So far, Uber has reduced its product incubator, AI lab, left the e-bikes market and sold a chunk of its freight-hauling unit.
- The company promised to be profitable on an adjusted EBITDA basis by the end of 2021.
And ATG was no different. Along with other technology programs, it lost $104 million in Q3 against $25 million in revenue.
- It’s been an endeavor filled with setbacks. In 2018, an Uber self-driving car, with a safety driver aboard, hit and killed a woman in Arizona. Uber paused tests and abandoned the operation in Arizona in response.
The Big Takeaway: The deal values Aurora at $10 billion, a steep rise from slightly over $2.5 billion in 2019.
- The plan is to start rolling out self-driving for heavy-duty trucks, with passenger vehicles following soon after. With Uber in tow, it also gives a clear path to launching the technology with a ride-hailing service.
- ATG also has partnerships with Toyota and Volvo, “using their vehicles to test its autonomous technology.”
Meanwhile, the industry looks poised to grow. Rival Waymo “announced around $3 billion in outside investments to bolster its finances as it races to develop self-driving vehicles,” and said “it was opening its driverless service to the general public in Phoenix.”
Autonomous driving is an existential issue for networks like Uber ($UBER) and Lyft ($LYFT). For example, Tesla ($TSLA) has hinted that they would build an autonomous vehicle ride-sharing network with vehicles owned by Tesla owners.
Because autonomous driving will be much cheaper and more efficient, it has the ability to destroy Uber or Lyft if they come to market early and take market share. It will be critical for Uber and Lyft to automate their network early to remain the dominant networks.
Consolidating their tech with a hyper-focused Aurora and owning a piece of it looks like a wise move by Uber, at least for now. But intermediate strategic moves mean nothing in the end – we shall see who puts self-driving vehicles on the road first.