View all newsletters
Receive our newsletter – data, insights and analysis delivered to you
  1. Comment
December 10, 2020

Uber reacts as COVID-19 batters its income

US ride-hailing giant Uber Technologies has confirmed that it will sell its Advanced Technologies Group (ATG) to autonomous vehicle developer Aurora. The Advanced Technologies Group was responsible for developing self-driving vehicles that could be deployed across Uber’s ride-hailing network but a range of factors led the company to seek a buyer for the division.

By Andy Morton

US ride-hailing giant Uber Technologies has confirmed that it will sell its Advanced Technologies Group (ATG) to autonomous vehicle developer Aurora. The Advanced Technologies Group was responsible for developing self-driving vehicles that could be deployed across Uber’s ride-hailing network but a range of factors led the company to seek a buyer for the division.

Free Report
img

Navigate your business through the ‘new normal’

COVID-19 continues to dominate headlines the world over. It has already affected our lives forever. The way we work, shop, eat, seek medical advice, and socialize will all be different in the future. Quite how different remains to be seen, but all industries must plan for multiple eventualities.  Faced with an explosion of conflicting information on how to plan and implement successful recovery strategies, decision-makers are in dire need of a single, reliable source of intelligence.   GlobalData’s COVID-19 Executive Briefing gives you access to unparalleled data and insights to successfully navigate the uncertain road to recovery across the world’s largest industries. Understand every aspect of this disruptive theme by delving into: 
  •  COVID-19 infection update, with statistics on the spread, testing by country, as well as the latest data on vaccines and therapeutic developments 
  • Economic impact overview, covering stock market indices, GDP, unemployment rates, policy responses & GlobalData’s economic recovery scorecards 
  • Sector developments, with access to sector insight summaries, cross-sector indices and the leaders and laggards in each industry vertical 
Whatever your company’s imminent strategic plans, the long-lasting impact of COVID-19 must not be overlooked. Find out how to futureproof your business operations – download our report today. 
by GlobalData
Enter your details here to receive your free Report.

Aurora is a fast-growing autonomous vehicle startup founded by Chris Urmson and Drew Bagnell, previously of Alphabet’s Waymo and Uber’s ATG respectively.

In addition to offloading the ATG to Aurora, Uber Technologies will invest $400m into the start-up, giving it a 26% stake in Aurora and two seats on its board – one of which is confirmed for Uber CEO Dara Khosrowshahi. The deal will see the value of Aurora jump to around $10bn, with Uber’s ATG accounting for roughly $4bn of that – although that is less than Uber’s valuation for the group in 2019 that valued it at a little more than $7bn. The deal also confirms that, when Aurora’s self-driving vehicles launch, they will be available for use on Uber’s ride-hailing network.

The main driving force behind the sale is the impact of COVID-19. Ride-hailing by definition involves shared spaces where users and drivers could expose themselves to infection. Combined with local lockdowns and a significant jump in the number of people working from home, use of Uber’s ride-hailing network has dropped significantly since the outbreak. The company recorded $13.5bn worth of ride-hail bookings in Q4 2019, but this sank to just $3bn by Q2 2020. Considering the company was yet to achieve a profit prior to COVID-19, this sudden drop in usage has led to a shortage in cashflow. The sale of the ATG had reportedly already been suggested by large Uber investors including Japan’s SoftBank, and should help reduce expenditure and shore up finances at a time when Uber’s main income stream is facing disruption.

While COVID-19 has forced Uber’s hand, the ATG already had a somewhat bumpy existence prior to the outbreak. In March 2018, an autonomous Uber ATG test vehicle struck and killed a pedestrian in Tempe, Arizona – the first ever case of a self-driving car killing a human. While a report by the NTSB determined that the main cause was the fact the human safety driver was distracted and failed to override the car, it also blamed lacklustre safety precautions at the ATG and the group’s decision to deactivate the Volvo test car’s standard collision avoidance system in order to test its own software. The crash impacted public confidence in the company and self-driving cars in general, and saw Uber halt all testing for a time.

The sale also demonstrates another trend at play in the autonomous vehicle space – the consolidation of smaller companies into fewer, large groups. This process reflects movements in the automotive industry as a whole where mergers help groups share R&D resources and achieve greater economies of scale. It is likely that, in the future, only a handful of well-funded self-driving developers will remain as smaller groups become unable to supply the cash necessary to compete, forcing smaller companies to merge or risk bankruptcy. This trend has emerged as the industry has realised that AV development is likely to be much longer and more expensive than initially thought due to the sheer difficulty of the task involved.

The sale is likely to be beneficial to both parties. For Uber, it allows it to sell a division that was costing roughly $500m per year to run with no immediate return on investment likely any time soon. This gives it more financial insulation to ride out the worst effects of the COVID-19 pandemic, while also retaining the guarantee that it will have access to self-driving vehicles for its fleet once Aurora makes them available. For Aurora, the injection of cash, expertise and employees gives it significantly more resources to compete will rivals including Waymo and Cruise as the autonomous vehicle industry faces consolidation.

Free Report
img

Navigate your business through the ‘new normal’

COVID-19 continues to dominate headlines the world over. It has already affected our lives forever. The way we work, shop, eat, seek medical advice, and socialize will all be different in the future. Quite how different remains to be seen, but all industries must plan for multiple eventualities.  Faced with an explosion of conflicting information on how to plan and implement successful recovery strategies, decision-makers are in dire need of a single, reliable source of intelligence.   GlobalData’s COVID-19 Executive Briefing gives you access to unparalleled data and insights to successfully navigate the uncertain road to recovery across the world’s largest industries. Understand every aspect of this disruptive theme by delving into: 
  •  COVID-19 infection update, with statistics on the spread, testing by country, as well as the latest data on vaccines and therapeutic developments 
  • Economic impact overview, covering stock market indices, GDP, unemployment rates, policy responses & GlobalData’s economic recovery scorecards 
  • Sector developments, with access to sector insight summaries, cross-sector indices and the leaders and laggards in each industry vertical 
Whatever your company’s imminent strategic plans, the long-lasting impact of COVID-19 must not be overlooked. Find out how to futureproof your business operations – download our report today. 
by GlobalData
Enter your details here to receive your free Report.

Topics in this article: ,
NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. The top stories of the day delivered to you every weekday. A weekly roundup of the latest news and analysis, sent every Monday. The industry's most comprehensive news and information delivered every quarter.
I consent to GlobalData UK Limited collecting my details provided via this form in accordance with the Privacy Policy
SUBSCRIBED

THANK YOU

Thank you for subscribing to Just Auto