Uber has abandoned efforts to develop its own self-driving car and will instead swap its operations for a minority stake in Aurora, a driverless vehicle start-up backed by Amazon and Sequoia, at a significantly marked-down valuation.
The deal brings to an end one of the most ambitious attempts to develop a fully autonomous vehicle, in which Uber leapfrogged its rivals in pursuit of getting a fleet of self-driving taxis on the road.
However, its efforts were marred by tragedy when a woman was killed in an accident involving one of the cars in Tempe, Arizona in 2018, and Uber’s investors have pressed the company to focus on getting its core car-booking business to profitability.
Uber will transfer its 1,200-employee self-driving unit to Aurora, which at present has 600 staff, and will invest $400m. Aurora was valued at $2.5bn after a $530m investment in 2019 led by Sequoia; it said the Uber deal would quadruple its valuation to $10bn.
Uber’s self-driving business was a significant cash drain for the company, but was valued at $7.25bn as recently as April 2019, when Toyota and SoftBank took minority stakes in the unit ahead of the group’s initial public offering.
Together, Uber and its partners will emerge with 40 per cent of Aurora. Worth just $4bn at the driverless vehicle group’s new $10bn valuation, that represents a significant mark down on the unit’s April 2019 price tag.
Uber will hold a 26 per cent stake in the start-up and Dara Khosrowshahi, chief executive, will take a board seat at Aurora.
Eric Meyhofer, the head of the self-driving unit, will not be joining Aurora and will leave Uber.
Aurora — founded by a trio of executives who played key roles founding the self-driving programmes at Google, Tesla and Uber — is known for its strong financial backing. But its strategy of working closely with top carmakers has faltered, as early partners Volkswagen, Hyundai and Fiat Chrysler all switched to backing technology from Aurora’s rivals.
The Uber deal means Aurora could eventually supply its driverless technology to the world’s largest ride-hailing fleet. Toyota’s involvement with Uber’s self-driving project could also give Aurora access to an important carmaker as a partner.
“This is a bit of a coup and we are incredibly excited about it,” Chris Urmson, Aurora’s chief executive, told the Financial Times.
In 2016, after Travis Kalanick launched the division, the Uber co-founder called the self-driving challenge “basically existential for us”. The fear was that Google could undermine its entire business with a cheaper, safer ride-hailing business.
Uber acted quickly and in 2016 invested $680m in driverless start-up Otto. It projected it would have 75,000 autonomous vehicles on roads by 2019.
But its early hopes faded and the unit instead became a public-relations nightmare after the accident in Tempe. This year the self-driving unit and “other technology programs” lost more than $300m on an adjusted ebitda basis.
In 2018 the company agreed to give $245m in its stock to Waymo, Google parent Alphabet’s self-driving arm, in order to settle a trade secrets dispute out of court.
During the case, Mr Kalanick took the stand to defend against claims he had conspired with former Google employee Anthony Levandowski to bring confidential documents relating to Google’s self-driving programme to Uber.
Uber has recently moved to sell or close non-core businesses and may move next to sell Elevate, its flying car project. In May the company offloaded its Jump bikes division to Lime as part of a $170m investment in the scooter company.
In a statement Mr Khosrowshahi said the deal would place Uber’s advanced technologies group in “pole position” to deliver on the promise of driverless vehicles.
“Few technologies hold as much promise to improve people’s lives with safe, accessible and environmentally friendly transportation as self-driving vehicles,” he said.