IN BUSI­NESS

In wake of deadly crash, Waymo might over­take Uber in get­ting self-driv­ing cars to mar­ket.

San Francisco Chronicle - - FRONT PAGE - By Carolyn Said

Uber bar­reled into au­ton­o­mous driv­ing out of fear that it could end up as the Mys­pace or Ya­hoo of ride­hail­ing, a com­pany with early gar­gan­tuan suc­cess that stum­bled as times changed. Waymo, the self-driv­ing unit of Google par­ent Al­pha­bet, has pur­sued its am­bi­tions more cau­tiously, ac­cu­mu­lat­ing long years of re­search and test­ing be­fore pur­su­ing a plan to bring its tech­nol­ogy to the pub­lic. Now, as Waymo scales up its self-driv­ing taxi ser­vice, Uber’s fear could be com­ing to pass. As Uber con­tin­ues to reel from a fa­tal self-driv­ing ac­ci­dent in Ari­zona, Waymo has con­fi­dently pushed for­ward — land­ing a deal to build 20,000 self-driv­ing lux­ury sport util­ity ve­hi­cles with Jaguar Land Rover on top of its plan for thou­sands of Chrysler hy­brid mini­vans. Within two years, it plans to have thou­sands of fully au­ton­o­mous taxis — with no backup driv­ers behind the wheel — on the roads, start­ing in Phoenix, where it is al­ready giv­ing test rides. The com­pany pre­dicts it will give 1 mil­lion robot­taxi rides a day by 2020.

Waymo, the in­dus­try pi­o­neer, logged mil­lions of au­ton­o­mous miles as it per­fected self-driv­ing tech­nol­ogy. But over the years, en­gi­neers de­fected out of frus­tra­tion that it was not find­ing com­mer­cial uses for the tech­nol­ogy. Now, with for­mer auto executive John Kraf­cik at the helm, Waymo ap­pears ready to cre­ate a self-driv­ing taxi ser­vice that could con­ceiv­ably dom­i­nate that field, at least early on, the way Uber does now with hu­man-driven cars.

Self-driv­ing cars, sum­moned on de­mand and taking us any­where we need to go, have been a staple of Hol­ly­wood science fic­tion for years, from “Knight Rider” to “I, Ro­bot,” fill­ing the dreams of con­sumers and Sil­i­con Val­ley en­gi­neers. And Waymo “looks to be on the cusp of this im­age we have in our head,” said Karl Brauer, executive publisher of Cox Au­to­mo­tive.

Kraf­cik said as much at a New York auto show last week. In Phoenix, “mem­bers of the pub­lic will be able to take th­ese fully self-driv­ing cars any­where within our ser­vice area — to work, to school, to the gro­cery store — any­where they’d go with a typ­i­cal car,” he said. Even­tu­ally, the com­pany en­vi­sions a self-driv­ing ser­vice for “mil­lions of peo­ple across the coun­try,” he added.

Of course, it’s hardly a two-horse race. Every au­tomaker on the planet, as well as Ap­ple, Lyft and a host of well-funded star­tups, is pur­su­ing sim­i­lar goals. No­tably Gen­eral Mo­tors, whose Cruise divi­sion in San Fran­cisco de­vel­ops driver­less cars, has said it will have fleets of ro­bot taxis by 2019 and has al­ready asked the fed­eral gov­ern­ment to ap­prove au­ton­o­mous mod­els with no steer­ing wheels, brake ped­als or ac­cel­er­a­tor.

“GM is very de­ter­mined,” said Bryant Walker Smith, an assistant law pro­fes­sor at the Univer­sity of South Carolina who stud­ies au­ton­o­mous ve­hi­cles. “It’s clearly thought about the le­gal frame­works and is do­ing ag­gres­sive test­ing un­der dif­fi­cult con­di­tions.”

But Uber and Waymo have been the pub­lic faces of two ap­proaches: tech­nol­ogy-driven (Waymo) ver­sus mar­ket-driven (Uber). Some­times they have worked as part­ners, some­times as arch­en­e­mies. Al­pha­bet — then called Google Inc. — in­vested in Uber in 2013. Uber hoped that the self-driv­ing cars un­der de­vel­op­ment in Google’s labs might soon be hailed with Uber’s app, for­mer CEO Travis Kalan­ick tes­ti­fied in court. But the com­pa­nies had a fallingout, amid a bit­ter trades­e­crets bat­tle that went to trial this year, af­ter Waymo, which was spun out of Google in 2016, ac­cused Uber of steal­ing trade se­crets about its li­dar, a laser tech­nol­ogy akin to radar. At the cen­ter of the bat­tle was An­thony Le­vandowski, a for­mer star Waymo en­gi­neer whose self-driv­ing truck startup was bought by Uber. The case was set­tled, with Uber agree­ing to pay Waymo $245 mil­lion in stock and ex­press­ing “re­gret” for its ac­tions.

Waymo’s progress to­ward get­ting its tech­nol­ogy in the hands of other au­tomak­ers, and users, has at times seemed slow. But Kraf­cik, who joined Waymo in 2015, sped up the re­search-heavy ef­fort. Mean­while, new Uber CEO Dara Khos­row­shahi is faced with rein­ing in a self-driv­ing divi­sion that seems to have rushed cars onto streets, pos­si­bly with­out enough test­ing.

Even be­fore the fa­tal crash on March 18, Uber’s self-driv­ing pro­gram had drawn ire and skep­ti­cism — par­tic­u­larly when it be­gan of­fer­ing rides in self-driv­ing ve­hi­cles (with backup driv­ers) in San Fran­cisco two years ago, only to have res­i­dents re­port prob­lems like run­ning red lights. State of­fi­cials de­manded that Uber cease its test rides be­cause the com­pany re­fused to get the re­quired per­mits, so Uber con­spic­u­ously loaded its cars onto flatbed trucks to go to Ari­zona, where reg­u­la­tion was lighter. The com­pany has now halted its self-driv­ing pro­gram na­tion­wide and de­clared that it will not im­me­di­ately seek an­other per­mit from Cal­i­for­nia to test ro­bot cars.

“Dara is a great CEO, but he in­her­ited a com­pany that needs a com­plete cul­ture ad­just­ment,” said Max Wolff, chief econ­o­mist with the Phoenix Group, a tech ad­vi­sory com­pany.

Kraf­cik’s chal­lenges are dif­fer­ent. “Waymo needs to tell a bet­ter story and be more com­mer­cial,” Wolff said. “Google is way bet­ter at pro­duc­ing prod­ucts than at pro­duc­ing hype around the prod­ucts.”

Uber has more cus­tomers than any other ride-hail­ing com­pany, partly be­cause it was the first to put enough cars on the road — a vi­tal in­gre­di­ent. But writ­ing a com­pe­tent ride-hail­ing app is not rocket science, whereas cre­at­ing a self­driv­ing car is an enor­mous tech­ni­cal feat. There’s more to ride­hail­ing than an app, of course — but Uber’s suc­cess has as much to do with clever re­cruit­ing and man­age­ment of vast num­bers of hu­man driv­ers, an ad­van­tage erased when the driv­ers dis­ap­pear.

And Waymo is a sis­ter com­pany to Google, whose prod­ucts are in­te­gral to most peo­ple’s dig­i­tal life. They in­clude Google Maps and Waze, which could serve as a ba­sis for sum­mon­ing taxis.

“At the end of the day, the Google jug­ger­naut is the Google jug­ger­naut,” Brauer said.

Kalan­ick, the brash co-founder and for­mer CEO of Uber, once said that that self-driv­ing tech­nol­ogy was “ex­is­ten­tial” for his com­pany. But some ar­gue that Uber’s fo­cus on self-driv­ing may be more about in­vestor per­cep­tion than any­thing else.

“Uber loses an in­cred­i­ble amount of money in its core busi­ness and uses fu­ture prom­ises to fund its cur­rent losses,” Smith said. In other words, its driver­less agenda may be to re­as­sure in­vestors that even­tu­ally it will make money, once it doesn’t have to pay driv­ers.

Khos­row­shahi has pledged to take Uber pub­lic in 2019. The Waymo set­tle­ment, paid out in Uber shares, val­ued the com­pany at $72 bil­lion. The Ari­zona crash’s af­ter­math could de­press that val­u­a­tion — or force a de­lay in any pub­lic­mar­ket de­but.

“Uber got to its val­u­a­tion with the no­tion that it will be the dom­i­nant ride-hail­ing leader in all ge­ogra­phies and all tech­nolo­gies,” Wolff said.

That prom­ise is al­ready fad­ing, as the com­pany has ceded mar­kets in China, Rus­sia, and, in March, South­east Asia. It may need to back away from other am­bi­tions as well.

By par­ing down, Uber could stem its losses, mak­ing it more palat­able to Wall Street, Wolff said. “My guess is it will drop other projects, whether fly­ing taxis or be­ing first to self-driv­ing cars. It needs to do less and do it bet­ter.”

Uber may de­cide that it’s bet­ter off part­ner­ing with au­tomak­ers on self-driv­ing cars rather than cre­at­ing its own. It al­ready is work­ing with Daim­ler to op­er­ate the Ger­man com­pany’s self­driv­ing cars on Uber’s ser­vice. It also has part­ner­ships with Toy­ota and Volvo that rely on Uber’s self-driv­ing tech­nol­ogy, the fu­ture of which is now in ques­tion.

What’s cer­tain is that self-driv­ing firms will face a crowded field, at least to start with.

“Com­pa­nies will dif­fer­en­ti­ate them­selves through ser­vice, clean­li­ness and cost,” said Dave Sul­li­van, re­search man­ager at Au­toPa­cific, which does au­to­mo­tive re­search. “Just like air­lines, peo­ple will book what works for them — they don’t say, ‘To­day I want an Air­bus or Boe­ing,’ they say, ‘This is where I want to go.’ ” Carolyn Said is a San Fran­cisco Chron­i­cle staff writer. Email: csaid @sfchron­i­cle.com Twit­ter: @csaid

Paul Chinn / The Chron­i­cle 2017

Vis­i­tors check out a Waymo self-driv­ing car at the Com­puter His­tory Mu­seum in Moun­tain View last year.

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