Uber to buy self-driving cars
Deal with Volvo signals transition to fleet operator
Uber plans to buy up to 24,000 self-driving cars from Volvo, marking the transition of the US company from a ride-hailing app to the owner and operator of a fleet of cars, Reuters reported on November 20.
The non-binding framework deal could offer San Francisco-based Uber a way to overcome setbacks at its autonomous driving division.
Combining Volvo’s cars with Uber’s self-driving system builds on their nearly three-year relationship and comes as Uber’s autonomous driving unit has been hit by a lawsuit over trade secrets and the departure of top talent.
Automakers, ride-hailing companies and technology start-ups have been making alliances to advance self-driving technology and claim a piece of what is expected to be a multi-billion-dollar business.
Geely-owned Volvo said in a statement on November 20 that it would provide Uber with its flagship XC90 sport utility vehicles (SUVs) equipped with autonomous technology as part of a non-exclusive deal from 2019 to 2021. A Volvo spokesman said it covered up to 24,000 cars.
The self-driving system that would be used in the Volvo cars, which have yet to be built, is under development by Uber’s Advanced Technologies Group.
Record order
Should Uber buy all 24,000 cars, it would be Volvo’s largest order and the biggest sale in the autonomous vehicle industry, giving Uber, which is losing more than $600 million each quarter, its first commercial fleet of cars.
The retail price of a new Volvo XC90 typically starts at about $50,000.
Uber has been testing prototype Volvo cars for more than a year, with safety drivers in the front seat to intervene if the self-driving system fails, in Tempe, Arizona and Pittsburgh.
“Our goal was from day one to make investments into a vehicle that could be manufactured at scale,” Jeff Miller, Uber’s head of automotive alliances, said.
The cars, in theory, would be available through the Uber app to pick up passengers without a driver.
“It only becomes a commercial business when you can remove that vehicle operator from the equation,” Miller said.
No financial details were disclosed for the purchase, which would be a massive new investment for Uber and mark a change from its business model where contractor drivers buy or lease and maintain their own cars.
Miller said a small number of cars would be purchased using equity and others would be bought using debt financing.
The deal builds on a $300 million alliance Volvo announced with Uber last year focused on collaborating on the design and financing of cars with selfdriving systems, which require different steering features and sensors.
“We get support developing this car,” Volvo Cars CEO Hakan Samuelsson said in an interview. “It’s also a big commercial deal.”
Lyft rivalry
Volvo, which has been under Chinese ownership since it was bought by Zhejiang Geely Holding Group from Ford in 2010, plans to make the SUVs at its Torslanda plant in western Sweden. Samuelsson said the vehicles would be sold at roughly the same profit margin as Volvo gets through dealers.
Uber’s rival Lyft this year reached a research partnership with Alphabet Inc’s unit Waymo and arranged deals with Ford Motor Co and start-ups Nutonomy and Drive.ai to incorporate self-driving cars into its fleet.
Volvo’s agreement with Uber and Ford’s with Lyft show the pressure on carmakers to avoid becoming obsolete in a world of increased automation, and on ride-services companies to start automating to cut driver costs and turn profits. Volvo is one of Sweden’s biggest manufacturers by revenue, and it has forecast a fourth straight year of record sales in 2017.