Uber ditches self-driving division amid larger financial woes

The downfall of Uber’s self-driving experiment illustrates the difficulties that the industry must overcome before such technology can reach the market.

Ride-hailing service provider Uber Technologies, Inc. has announced that it is selling off its self-driving car division to startup company Aurora.

In the roughly US$4 billion deal, Uber will sell off its Advanced Technologies Group (ATG) that spearheaded the company’s self-driving car project, to Aurora, an American startup that focuses on autonomous vehicle technology. In return, Uber will receive a stake in Aurora and Uber chief executive officer Dara Khosrowshahi will get a place on its board.

Uber’s vision of driverless cars hit a few bumps on the road since its initial launch in 2015. In 2018, an Uber self-driving car hit and killed a pedestrian in Arizona, despite a human operator being present in the vehicle.

The human driver was charged with negligent homicide in September as a result of the crash.

Uber is not the only company that has invested heavily in autonomous driving technology. Uber’s main rival, Lyft, Inc., is developing a self-driving program of its own, with testing resuming this July in California.

Waymo LLC, a subsidiary of Google’s parent company, Alphabet Inc, is another noted player in the autonomous driving field, in addition to Amazon.com, Inc. and Apple Inc.

Uber’s sell-off shows that the technology hailed by its CEO, Khosrowshahi, as holding “much promise to improve people’s lives" is nonetheless incredibly costly, difficult, and time-consuming to develop. This is especially true for a company whose main line of business has already suffered billions of dollars in losses this year.

Future promise

Founded in 2015, Uber’s ATG division was the ride-hailing provider’s first entrance into the burgeoning autonomous vehicle market.

This was no small venture either. Uber immediately succeeded in luring some 40 roboticists from the well-renowned National Robotics Engineering Center at Carnegie Mellon to work for ATG and, prior to its sale, the ATG team had grown to a workforce of some 1,200 employees.

Yet, despite its promise, Uber’s self-driving group hit a number of obstacles.

In 2018, Uber was sued by Alphabet subsidiary and autonomous vehicle rival Waymo, which alleged that following Uber’s acquisition of another self-driving vehicle developer Otto, Uber had stolen Waymo’s technology.

The suit was settled, with Uber promising to stay away from Waymo’s technology, a setback given Waymo’s expertise in the industry, with Uber self-driving head Anthony Levandowski later charged by federal prosecutors for his role in the theft and handed an 18-month prison sentence.

Then, in 2018, an Uber self-driving car traveling at 39 miles per hour struck and killed a pedestrian in Arizona, even though a safety driver was present in the vehicle.

Following an investigation by the United States National Transportation Safety Board (NTSB), which found that the backup driver had spent most of the time in the vehicle on their phone and watching television, the driver was charged in September with negligent homicide.

The NTSB also ruled that Uber’s “inadequate safety risk assessment procedures” and “ineffective oversight of vehicle operators” were contributing factors to the incident.

Though the board ruled that human error was largely at fault for the incident, the investigation also showed that the vehicle’s automatic systems failed to identify the pedestrian as an imminent collision danger as it was designed to do.

An employee at Uber’s self-driving project had also previously raised concerns days before the crash to superiors about the accident-prone vehicles and the inadequate training provided to operators.

End of the road

From January to September 2020, ATG lost US$303 million, with the division spending more than US$1 billion in its five-year life span.

At a time of general economic difficulty, Uber’s ATG has stuck out like a sore thumb. This year alone, Uber has sold off a number of its assets and divisions in an effort to streamline its business and reach profitability.

Micro-mobility unit Jump and trucking logistics business Uber Freight were two notable sell-offs by Uber this summer, but Uber investors had been continually pressuring CEO Dara Khosrowshahi to sell off the ailing self-driving unit.

Self-driving startups, in general, are noted for soaking up significant funding. On average, autonomous vehicle startups spend some US$1.6 million a month on average, a figure four times the rate at which financial tech or health care companies spend.

With Uber’s main business already losing billions due to the pandemic, ATG’s eventual sell-off was inevitable.

Uber has also faced a consolidated market against bigger competitors. Some notable Uber competitors in the self-driving industry include Alphabet’s Waymo, Apple Inc.’s Drive.ai and Amazon subsidiary Zoox Inc., which recently unveiled its own autonomous vehicle that it describes as a driverless “carriage” or “robotaxi.”

Under the terms of the sale, autonomous vehicle technology developer Aurora will acquire ATG for US$4 billion. In return, Uber will invest US$400 million in Aurora for a minority stake of 26%, with Khosrowshahi joining Aurora’s board.

Aurora head Chris Urmson hailed ATG’s acquisition in a blog post as valuable because of the group’s “exceptional safety work” and its “powerful, thoughtfully-designed hardware.”

While its own efforts may have ended, this does not necessarily represent an end to Uber’s presence in self-driving technology.

According to Elliot Katz, co-founder and chief business officer of the autonomous vehicle technology startup Phantom Auto, “Uber can still have a hand in the game, without putting out the enormous amount of money they were spending with A.T.G., but still have a path to market when this technology is actually deployable in several years.”

But the downfall of Uber’s self-driving experiment illustrates the difficulties that the industry must overcome before such technology can reach the market.

Self-driving cars have been teased as being just around the corner for years, but issues of safety and reliability have remained difficult hurdles to overcome.

Significant funds are also needed to compete in an industry that is increasingly consolidated into ventures owned by big tech companies, such as Amazon, Google, Apple, and others.

For Uber, though, the sale of ATG is the latest in an ongoing trend that has seen the company streamline its business model into two core areas, ride-hailing and food delivery.

But whether 2021 will see the company achieve profitability after years of billion dollar losses is yet to be seen.

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