Why Uber sells its division dedicated to autonomous cars to the startup Aurora

by bold-lichterman

While the self-driving car sector is slow to deliver on its promises, the market continues to see some players getting closer. This time, it is Aurora, a startup in the field supported in particular by Amazon and Uber.

Concretely, the leader in VTC sells Advanced Technologies Group (ATG), its division dedicated to the development of autonomous cars, to Aurora in an operation entirely in stock. More than a simple transaction, we can speak of a partnership since following this sale, Uber will invest $ 400 million in the startup. Uber, ATG investors and its employees will own 40% of the new set. Alone, Uber will have a 26% stake. For his part, the CEO of the VTC company, Dara Khosrowshahi, will join the board of directors of Aurora. The operation is expected to value Aurora to the tune of $ 10 billion.

Who is Aurora?

Founded in 2017, Aurora’s entry into the self-driving car market had caused a stir. Already, because of the profile of its co-founders. At the helm of the California-based startup are Chris Urmson, previously head of the group working on Google’s autonomous car project, Sterling Anderson, who led Tesla’s “Autopilot” team and Drew Bagnell, former member of the team dealing with the autonomous technology ofUber.

The ambition of the startup is to develop a powerful technology to make autonomous driving real and to ally with car manufacturers, transport networks or even fleet management companies to disseminate it.

During its existence, it has thus succeeded in raising funds and surrounding itself with solid partners. As early as 2018, it had announced partnerships with manufacturers Hyundai, Byton and Volkswagen, and raised $ 90 million from Greylock Partners and Index Ventures. In February 2019, Amazon invested in the startup following a funding round of $ 530 million. It had made Aurora stronger. The startup notably got its hands in May 2019 on Blackmore and its technology around LiDAR sensors for autonomous cars. In total, with Uber’s latest contribution, the company received around $ 1.1 billion in funding.

But the sector is highly competitive, and since Volkswagen, for example, no longer works with Aurora. In July 2019, the German announced it would invest $ 2.6 billion in Argo AI, a Ford subsidiary specializing in autonomous vehicles.

Why Uber sells its division dedicated to autonomous cars to
The era of ATG’s golden age. Signing of the financing of 1 billion dollars by Toyota, Denso and SoftBank’s Vision Fund. Toyota Credit.

For now, Aurora is prioritizing the development of its autonomous car technology for the heavy-duty sector. However, the start-up, which currently has around 600 employees, will already be able to benefit from additional skills by bringing back into its workforce the 1,200 people of ATG, including many engineers. At the same time, it is approaching the manufacturer Toyota and the industrial and automotive equipment specialist Denso which, in April 2019, had invested $ 1 billion in ATG with SoftBank.

In addition, when Aurora is ready to embark on “robotaxis”, an ambition that she has not given up, she will be able to take advantage of the Uber platform.

What interest in Uber?

But why is Uber separating from its division … without really turning away from it? The leader of VTC must clean up its finances. A need that had already been accentuated by its disappointing entry on the stock market, and further reinforced by the coronavirus crisis which had negative consequences on its VTC activity. However, as we explained to you in a previous article, in 2018 alone, Uber spent $ 457 million to develop its autonomous cars and flying taxis.

In addition, its division dedicated to autonomous cars has had to face many difficulties throughout its history: the death of a pedestrian in Arizona during the test of one of its autonomous cars or the legal proceedings of its competitor Waymo, a subsidiary of Alphabet, the parent company of Google, for theft of industrial secrets. A conflict that was finally settled amicably in February 2018. Uber then had to compensate Waymo to the tune of 245 million dollars. More recently, Anthony Levandowski, the former Google engineer at the center of the case, was sentenced to 18 months in prison by the American courts.

A history punctuated by difficulties which illustrates well those more general of the sector. Through this transaction with Aurora, Uber is therefore distancing itself from this market while remaining close enough to take advantage of it if it ever ends up taking off. But the losses will no longer show up in his accounts.

The American giant is thus following its desire to focus on its two activities that it considers central and the most able to ensure profitability: private cars and the delivery of meals and shopping at home. It is also in this same effort to clean up its finances that Uber sold its micromobility service (electric bikes and self-service scooters) Jump to Lime last June.

The question is therefore to know if these efforts will really allow him to wait for profitability as the specialist in VTC promises it to its investors for several years.