Uber Technologies’ big ideas for global expansion appear to
be matched only by the size of its financial losses, as the ride-hailing leader
last month took a step toward self-driving technology while reportedly burning
through billions in cash.
The San Francisco-based company is about to start testing
self-driving vehicles for its customers in Pittsburgh after reaching agreements
with both Volvo and self-driving technology company Otto.
The test vehicles will have both a safety driver in the
driver’s seat ready to take over the vehicle when necessary as well as an
engineer in the passenger’s seat. The vehicle models will be the Volvo XC90 SUV
and the Ford Focus.
Uber is starting the program after acquiring Otto, a
technology company active in the development of autonomous-driving systems for
Otto co-founder Anthony Levandowski will head Uber’s
self-driving technology efforts.
Uber also said it reached a partnership with Swedish automaker
Volvo involving the further development of self-driving vehicles.
Uber did not disclose specifics on how much it paid for Otto
or the value of its agreement with Volvo, which is owned by the China-based
Zhejiang Geely Holding Group, though the Wall Street Journal reported that the
agreement is worth $300 million. The Journal also said the Pittsburgh program
could involve as many as 100 vehicles.
“By combining Uber’s self-driving technology with Volvo’s
state-of-the art vehicles and safety technology, we’ll get to the future faster
than going it alone, ” Uber CEO Travis Kalanick wrote in a blog post last
Such technology is likely a key to Uber’s future
profitability, as autonomous or semi-autonomous vehicles would enable Uber to
reduce costs by using fewer (or eventually no) drivers. That prospect has
helped Uber raise as much $15 billion since its 2009 founding and has pushed
its valuation to more than $60 billion despite never making a profit.
How Uber drivers will respond to the prospect of such
efforts remains to be seen. Uber drivers earlier this year staged protests in
New York, San Francisco and other cities after the company reduced fares by
In the meantime, profitability may be a long way off. During
the first half of the year, Uber took a $1.27 billion loss, according to
Bloomberg News, which cited people familiar with a recent presentation by the
company’s executives. Through June, Uber generated about $2 billion in revenue
on about $8.8 billion in global bookings.
Uber didn’t respond to requests for comment last week.
The company could also face an additional threat from
Google. The Wall Street Journal reported that the online search
giant is piloting its own ride-sharing project based on Waze, the
vehicle-navigation company it acquired for $1.1 billion in 2013.
underway in the San Francisco Bay area is a program that enables employees of
Google, Adobe and Wal-Mart to use Waze to hail nearby drivers who are headed to
a rider’s location. Under the program, the riders pay the drivers about 54
cents a mile, which would effectively undercut ride-hailing companies such as
Uber and its smaller competitor Lyft, the Journal reported.
Google representatives did not respond to a request for
“Uber has probably broken just about every record for
fundraising,” said Douglas Quinby, vice president of research at travel research company Phocuswright.
“The question is, how long are investors willing to accept short-term losses to
fund Uber’s aggressive investments in growth and innovation?”
As for self-driving technology, Uber could be ready for it
before its passengers are, said Los Angeles-based Uber driver Noe Gomez. “I
asked one of my passengers about it last week, and he said, ‘Do you think I’m
ever going in this [self-driving] car with my kids?’,” Gomez said.
He said he makes about $1,000 a week working full-time for
“But these millionaires, they want to make more money, and
if they’re investing millions of dollars in that, it’s got to be serious,” he