Uber re-focuses on self-driving initiative
Uber’s deal to buy up to 24,000 Volvo XC90s is a major step for the ride-hailing giant to commercialize autonomous vehicles.
Until last week, Uber has been mum about its self-driving efforts while it adjusts to new leadership and a public image makeover.
With a newly announced Volvo fleet, the ride-hailing giant showed it still is charging ahead on the path to deploy autonomous vehicles.
Uber announced a three-year agreement with Volvo Cars on Nov. 20 to buy up to 24,000 XC90 crossovers, capable of integrating Uber’s self-driving technology, between 2019 and 2021. The deal, which is the largest of its kind to date, is a major step for the tech company to commercialize autonomous vehicles.
“Uber has been planning for a while and is investing in doing this at scale. Part of doing this at scale is making sure that you have a clear path toward a series-production, safety-certified autonomous vehicle,” Jeff Miller, Uber’s head of automotive alliances, told Automotive News Europe.
This year, Uber has dealt with one public relations blow after another. Just last week, news emerged that the company covered up the fact that hackers stole information on 57 million customers. Another misstep involved a trade secrets lawsuit brought by Google’s self-driving unit, Waymo, that at one point threatened to halt Uber’s autonomous vehicle development entirely.
The company’s primary ride-hailing competitor, Lyft, has jumped on Uber’s plummeting reputation, investing heavily in marketing and partnerships to lure customers. Some investors estimate Lyft has the potential to grow to one-third of the ride-hailing market by the end of the year.
Now, under the leadership of new CEO Dara Khosrowshahi, Uber is making a major upfront investment to return to the forefront of the self-driving car conversation.
“This is hugely significant,” said Mike Ramsey, a technology analyst at consultancy Gartner Research. “It implies that they’re closer to commercialized, fully autonomous vehicles than some anticipate.”
The Uber-Volvo deal follows Waymo’s announcement this month that it would deploy vehicles without a human in the driver’s seat in its ride-hailing pilot in Arizona in the next few months. The deal with Volvo is much larger than Waymo’s agreement with Fiat Chrysler Automobiles, which has supplied 100 Chrysler Pacifica Hybrid minivans retrofitted with Waymo’s self-driving technology, with 500 more in the works.
Khosrowshahi: New investment
Laying the groundwork
Uber and Volvo already have built 200 self-driving prototype XC90s for testing as part of a previous $300 million agreement, but the latest deal is intended to lay the groundwork for the production of autonomous vehicles at scale — a key capability for gaining a foothold in a future mobility market, according to Evan Hirsch, an adviser to executives in the automotive industry at Strategy&, a strategy consulting group within PwC consultancy.
“You need scale to make these investments; you need longtime, huge investments,” Hirsch said. “If you don’t get in in the beginning, it’s going to be hard to catch up later.”
With as many as 24,000 robotaxis added between 2019 and 2021, Uber’s fleet would be on the path to competing with traditional taxi and ride-hailing services, which employed 305,100 full-time drivers in the U.S. in 2016, according to the U.S. Bureau of Labor Statistics.
If Uber is able to deploy these vehicles within the next four years, it could be one of the first movers in the trend toward shared autonomous vehicle fleets as personal-car ownership continues to become more expensive.
“We’re heading toward a lot more on-demand services,” said Kristin Schondorf, executive director of automotive and transportation mobility at EY.
The companies did not disclose the financial terms of the deal, but analysts estimate that at a cost of about $100,000 per vehicle, it could be worth up to $2.4 billion. While Volvo must invest to develop vehicles capable of integration with Uber’s software, it already has invested in its own autonomous driving system as part of its Zenuity joint venture with supplier Autoliv.
Uber has yet to turn a profit and recorded a $645 million loss in the second quarter of 2017.
“The downside is much bigger for Uber,” Ramsey said. “You need to come up with a lot of money to buy these vehicles, and there are a lot of other expenses related to operating them. To get a return on investment over time, it requires a very different operation than they’re used to.”
Specifically, Uber will need to efficiently handle fleet maintenance and operations to see the type of revenue driverless taxis promise, he said. “They’re becoming a fleet management company, period.
Automotive News Europe Managing Editor Douglas A. Bolduc contributed to this report.