Uber May Offload Self-Driving Unit as Costs Mount

Stephen Lawson

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16th August 2018

Uber may trade its autonomous vehicles division to a partner to cut costs as it prepares for an initial public offering next year, according to a published report.

With costs of between $125M and $200M per quarter, AV development has been responsible for 15% to 30% of Uber’s ongoing losses, tech news site The Information reported on Wednesday, Aug. 15. As a result, some investors are pressuring Uber to make a deal that might remove that division, called Uber Advanced Technology Group, the site said, citing unnamed sources.

Uber might transfer ATG to another company in exchange for an agreement to make that company’s driverless cars available on Uber’s ride-hailing network, The Information said.

On Wednesday, the company reported a net loss of $891M for the second quarter ended June 30. That was narrower than the loss a year earlier but Uber’s red ink could pose a problem if it wants to go public. The company lost more than $4Bn in the 12 months ended March 31, not counting proceeds from the sale of businesses.

The bind Uber finds itself in highlights the enormous costs of AV development, which most automotive companies and many tech giants are aggressively investing in without any clear path to profit. For Uber, that pursuit is coming up against the desire to raise capital through an IPO next year, which might be hard to pull off if huge losses continue. Uber says its program is still moving forward and its cars, which were sidelined after a fatal crash in Arizona in March, will return to public roads in self-driving mode in the coming months. The company declined to comment on The Information‘s report.

It’s high time Uber got out of the AV development business, where it lags behind other big players, according to Navigant Research analyst Sam Abuelsamid. “I have long advocated that Uber should probably just shut down the whole program,” Abuelsamid said.

Under founder Travis Kalanick, Uber considered self-driving technology essential to its future and launched an all-out program to develop its own robo-taxis. The idea was that AVs could cut out the cost and complication of employing drivers. Yet developing its own technology and building or buying vehicles might cost more than paying drivers, at least for the forseeable future, Abuelsamid said. “The numbers don’t really pencil out,” he said.

Uber’s core logistics technology is its strength and the company can use that to get into driverless cars through a partnership, Abuelsamid said. The logistics assets include its growing Uber Eats delivery service and Uber Freight shipping operation as well as the ride-hailing business. Current CEO Dara Khosrowshahi has said the company has talked with Alphabet’s Waymo and General Motors’ Cruise subsidiary about potentially operating their cars on Uber’s network. The company has already announced deals with Daimler and Toyota to run vehicles on Uber’s platform.

Waymo, for one, might be able to build a big ride-hailing business, said Mike Ramsey, a Gartner analyst but, even if it did as the biggest network operator, Uber would have plenty of potential partners to choose from. “The differentiator is the users on both sides – the drivers and the consumers,” Ramsey said. “GM can’t just build that.”

— Stephen Lawson is a freelance writer based in San Francisco. Follow him on Twitter @sdlawsonmedia.