Uber to sell self-driving car business to automated vehicle startup Aurora

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Uber lays off 3,700 employees due to coronavirus pandemic related losses.
Image: Uber

Uber recently announced plans to sell its Advanced Technologies Group (ATG), which features its self-driving car assets, to Aurora Innovation. The ride-hailing giant is also investing $400 million in the burgeoning automated vehicle startup. That will give it a 26 percent stake in the company.

The transaction pegs ATG’s worth at $4 billion, a downgrade from its April 2019 valuation of $7.25 billion.

The San Francisco-based technology corporation expects its latest deal to conclude in the first quarter of 2021.

Why Uber is Selling Off ATG

Uber likely divested its once essential self-driving unit to ensure its long-term success.

In 2016, co-founder and ex-CEO Travis Kalanick said autonomous vehicle technology would be the future of Uber. The executive believed the innovation would revolutionize personal transportation worldwide. However, Kalanick exited the firm late last year, and its current chief executive Dara Khosrowshahi has very different priorities.

Since assuming control, Khosrowshahi has made Uber a smaller but more profit-oriented enterprise.

In the early months of the coronavirus pandemic, the CEO slashed the firm’s workforce by 14 percent and shuttered 180 of its driver support hubs. While not an easy decision, Khosrowshahi helped the corporation endure a massive COVID-19 prompted downturn in its core business. The company’s new leader also made the call to spend $2.65 billion to acquire food delivery service Postmates.

As Uber’s Eats segment has grown significantly by servicing homebound diners, the leader’s move will pay long-term dividends.

At one point, market watchers perceived ATG as having a similarly important role in Uber’s future. If the unit developed a viable autonomous vehicle platform, it would save the company billions of dollars in annual labor costs. But the self-driving car division, despite receiving massive outside cash injections, has not fulfilled its mandate.

Even worse, one of ATG’s smart cars was involved in a fatal accident in 2018, which greatly tarnished its reputation.

By acquiring a large stake in Aurora, Uber can keep a finger in the autonomous vehicle sector. The ride-hailing corporation will have dibs on game-changing technology if the startup solves the autonomy program. But its restructuring will keep it from losing money on a long-term bet that might never pay off every quarter.

How Aurora Benefits from Acquiring ATG

Aurora probably will not make a massive technological breakthrough by adding ATG’s assets to its portfolio. However, the firm will receive several other benefits from dealing with Uber, not the least of which is raising its valuation to $10 billion.

For one thing, the startup will secure a $400 million capital infusion due to its new partnership.

The company’s purchase agreement will also give ATG’s backers a 14 percent stake in the business. That is good news for the Mountain View, California-based firm as its new subsidiary previously received support from Softbank and Hyundai. In the future, it could look to those relationships when it kicks off another fundraising round.

In addition, Khosrowshahi will be joining Aurora’s board of directors as part of the startup’s takeover of ATG. Ideally, the CEO will utilize his expertise to make the self-driving car company stronger and more efficient.

All in all, Uber selling ATG to Aurora seems to be a positive development for both parties.

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