Weekly Brief: Uber Could be Ditching its AV Dream

Uber could be selling its self-driving car division and appears to have found a potential buyer in rival autonomous vehicle start-up Aurora.

The two have been negotiating the terms of a deal since October, according to anonymous sources reported by TechCrunch. Neither company confirmed the news. Speculating on an unfinished deal is like fishing without a worm on your hook. Good luck. It is worth noting, however, that the deal makes sense on paper. The Uber Advanced Technologies Group and Aurora are both headquartered out of Pittsburgh. Aurora is on the rise thanks to leadership that includes a triumvirate of AV industry luminaries, such as Sterling Anderson, Drew Bagnell and Chris Urmson, all of whom with deep connections to Waymo, Uber and the broader academic and engineering community spearheading the AV revolution.

Since its founding in 2017, the company has grown to a workforce of 600 employees and has pilots underway from California to Texas, Montana and Pittsburgh. When Amazon decided to jump into the AV race last year, it’s no surprise it did so by buying into Aurora. The company used its deep pockets to acquire LiDAR start-up Blackmore in 2019. It’s made no secret of its plans to rapidly scale in the coming decade.

Uber ATG, on the other hand, has been on the decline for years. The unit has lost more than $300M to date in 2020 alone. CEO Dara Khosrowshahi has made it his mission during the pandemic to focus on Uber’s core business of ride-hailing and delivery. He sold off electric bike company Jump to mobility start-up Lime in May 2020 and sold a $500M stake in Uber Freight to private equity firm Greenbriar last month. Uber ATG represents the last big, cash-draining anchor on Uber’s month-to-month operations.

There’s also the notoriety factor. Uber ATG is famous for hitting and killing a pedestrian in Tempe, Arizona, in 2018 – the AV industry’s worst incident to date. Likewise, it was ensnared in a case of cyber theft, which saw ex-Waymo engineer Anthony Levandowski swipe 14,000 trade secrets from Google and dump them into start-up Otto, which Uber turned around and purchased for $680M in 2016. That was the birth of Uber ATG. The company had to pay $245M in shares back to Waymo to settle the resulting legal dispute and Levandowski ended up with an 18-month federal prison sentence.

Now that Uber is publicly traded, Khosrowshahi has sought to make it less controversial and tumultuous for investors. Uber ATG makes sense to shed from that perspective as well. Still, if the Aurora ATG deal comes to pass, it would be a concession on Uber’s part that it has lost a race that it once called the key to its existential survival

Self-driving cars may be expensive to pursue but they also represent the best way for Uber to eliminate its most expensive cost of business: employee payroll. A fleet of self-driving Ubers running on Uber AV technology and whisking passengers around without any driver compensation to worry about, no grievances or gripes, no labor lawsuits or headaches at local, state and federal levels … now that’s the stuff that Uber’s dreams are made of. By the sounds of it, it may soon send those dreams down the river.

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