Enlarge /. Chris Urmson, CEO of Aurora, in front of an Aurora truck.
Aurora, one of the country's leading self-driving startups, will become the new owner of Uber's self-driving division, Aurora announced on Monday. In addition to handing over Uber's self-driving division, known as the Uber Advanced Technology Group (ATG), Uber will also pump $ 400 million into Aurora.
In return, Uber will receive a minority stake in Aurora and Dara Khosrowshahi, CEO of Uber, will receive a seat on Aurora's board of directors.
The deal allows Uber to unload a self-driving division that has struggled to regain a foothold since impacting and killing a pedestrian by an Uber ATG in March 2018, and the program has faced continued public skepticism since then. It's not clear if the deal will result in layoffs at Uber ATG.
The deal allows Aurora to hedge its bets
Aurora CEO Chris Urmson co-founded Aurora in 2016 after retiring from his role as head of Google's self-driving project. He put together a "dream team" with former executives on Tesla and Uber's self-driving projects. The trio built a company that is widely recognized for its technical accuracy – though the company hasn't released much information about the performance of its self-driving technology.
Aurora's original business model was to license its self-driving technology to automakers. However, in recent years, more and more OEMs have become involved in other self-driving companies, leaving Aurora with few potential partners in the auto industry. Aurora suffered a setback last year when Volkswagen ended a partnership aimed at deploying Aurora technology in Volkswagen vehicles.
Later in 2019, Aurora moved to long-distance transportation as the first application for its self-driving technology. That business model could allow Aurora to thrive without getting big deals with automakers. But it's risky as no one knows when self-driving technology will be ready for use on high-speed highways.
The Uber deal gives Aurora a boost on several fronts. The deal involves $ 400 million in cash, which will expand Aurora's "runway" for profitability. Uber's involvement in Aurora also increases the likelihood that Uber will be willing to raise more cash in the future if Aurora needs it.
The deal also allows Aurora to hedge its long haul bet. Uber ATG's focus was on driverless taxis. In a blog post, Aurora CEO Chris Urmson wrote that the deal "provides Aurora with an unprecedented opportunity to lead the industry in both trucks and passengers." Not only does the Uber ATG team bring valuable expertise in the taxi market, but Uber will be a valuable partner when Aurora is finally ready to deploy driverless taxis across the country and around the world.
A few years ago, Uber was accused – and one lawsuit – of stealing lidar technology from Waymo. Aurora took over lidar startup Blackmore last year, so Aurora can now supply the lidar technology for the previous Uber project.
Uber doesn't need to own self-driving technology
A key sub-text of the deal is the realization that self-driving technology ownership probably isn't the strategic imperative for Uber that it appeared to be a few years ago.
When Uber launched its self-drive program in 2015, CEO Travis Kalanick saw it as a matter of survival for his company.
"If we're not tied first, then the person who's in first, or the entity who's in first, then builds a ride-sharing network that is far cheaper or of far higher quality than Uber's, then Uber isn't a thing more, "Kalanick told Business Insider in a 2016 interview.
At that time, the self-driving technology hype was nearing its peak. Google had unveiled its self-driving technology a few years earlier, and many industry watchers expected the self-driving technology to be widespread in the early 2020s. So Uber spent millions of dollars catching up with Google.
Uber's efforts were so swift that adequate safety precautions were not in place, resulting in a fatal crash in 2018 that killed pedestrian Elaine Herzberg. And in hindsight, it's not clear that Uber's self-driving project made so much progress in the first two years. While Uber covered many test miles prior to March 2018 – second only to Waymo in the US – the driving behavior of the cars was sometimes erratic.
"Every second day in February"
"A car was damaged almost every other day in February," wrote an Uber employee in a damning internal email in February 2018 shortly before Herzberg's death. "We shouldn't hit things every 15,000 miles."
The 2018 accident happened in part because Uber disabled some of the vehicles' emergency braking systems. Apparently the systems were in operation too often, causing uncomfortable journeys. Instead, the company relied on safety drivers to intervene when the car went wrong.
The resulting crash forced Uber to suspend all testing on the road for a few months before resuming testing on a much smaller scale. The program never regained the momentum it had before the crash.
At the time of the crash, I asked Uber to sell the division – maybe to a major automaker. I argued that giving the project a new parent company that has a reputation for coloring within the lines could help restore public confidence. And I noticed that Uber was far from making a profit and didn't have unlimited money on R&D projects.
Most of all, I argued that Uber's survival doesn't depend on owning self-driving technology. I noticed that even after Waymo or others invented a fully self-driving car, it would be slow and expensive for them to build a global hail network from scratch. So Uber would have a lot to offer to companies looking to deploy their self-driving technology on a large scale.
Two and a half years later, I think this analysis works well. Self-driving cars have taken longer to get to market than optimists predicted. It will likely be many years before technology becomes ubiquitous. As a minority stakeholder in Aurora, Uber offers a potential driverless technology partner – without forcing Uber to bear the full R&D costs of developing self-driving technologies.