Uber ATG-Aurora Deal is Win-Win for Both

Uber is selling its self-driving division ATG to autonomous vehicle (AV) start-up Aurora. Uber will also take a 26% stake in Aurora and invest $400 million in the start-up. Considering the increasing competition in the self-driving sector and its uncertain future, it makes sense for Uber to sell its AV business unit. It can now focus on its core business. The stake in Aurora will ensure that Uber has continued access to the latest AV technologies, and Aurora gains from Uber’s experience in AVs.

Increasing competition

  • Competition in the global AV industry is increasing with many start-ups like Pony.ai, Zoox and Yandex giving tough competition to established players like Uber and Cruise. Investors are eyeing these start-ups due to their lower valuations and impressive improvements in AV technology. For instance, in the Uber ATG-Aurora deal, Uber ATG’s valuation has declined from $7.2 billion last year to $4 billion, while that of Aurora has increased from $3 billion to $10 billion.

Valuations of Key AV Companies in 2020

Counterpoint: Uber Aurora Deal Analysis

Mounting losses

  • Uber CEO Dara Khosrowshahi expects Uber’s return to profitability by 2021. However, Uber, like other ride-hailing companies, has been adversely affected by the COVID-19 pandemic, with people preferring personal vehicles over cabs. In 2020, the company cut its workforce by 6,700 to curb the losses due to the pandemic.
  • Selling off its unprofitable ATG division will help Uber to focus on its core business of ride-hailing and develop emerging revenue streams like food delivery. AVs have no immediate timeline for maturity. Companies like Ford and Cruise have already delayed their autonomous vehicle

Win-win deal

  • Uber takes a 26% stake in Aurora. This will ensure the company has access to latest AV technologies which could be implemented in its robotaxis in future.
  • Aurora, on the other hand, will get much-needed investment for the development of its autonomous platform. The company will also benefit from Uber’s ATG expertise and experience in developing AV platform. Moreover, Aurora can further build its association with Toyota and Denso (key investors in Uber) and implement its platform in Toyota vehicles.