The Controversial Story of Uber's Self-Driving Car Program: Can AVs Be the Path to Profitability?
Sun, April 18, 2021

The Controversial Story of Uber's Self-Driving Car Program: Can AVs Be the Path to Profitability?

Uber first started out as a service that was both appealing to potential drivers and urban passengers who are sick and tired of cabs, wrote Leif Johnson and Michelle Fitzsimmons of Tech Radar, an online publication on technology / Photo by: Stock Catalog via Flickr

 

Uber first started out as a service that was both appealing to potential drivers and urban passengers who are sick and tired of cabs, wrote Leif Johnson and Michelle Fitzsimmons of Tech Radar, an online publication on technology. By having some spare time in their hands, potential drivers could earn money by ferrying passengers to their destination using their own car.  

However, Uber is setting its sights on replacing human drivers through its self-driving vehicle program. There are a few firms that have embraced a similar initiative with as much enthusiasm and resources. Interestingly, Uber had deployed self-driving cars on public streets before some of its competitors. Let’s learn about the fascinating history of the San Francisco-based company’s self-driving car program.

The Genesis of Uber’s Self-Driving Car Program

Uber announced its intentions to amass a fleet of AVs on February 15, months after rumors about Uber’s vocal support for automation spread. Google also announced its intention in venturing into the AV industry the same week as Uber’s announcement. Then, Arizona Governor Doug Ducey invited Uber to test its AVs in the state. At first, the project took place in Pittsburgh, Pennsylvania, where the company hired researchers from Carnegie Mellon University. The researchers then helped revitalize Pittsburgh’s Strip district with the opening of Uber’s Advanced Technologies Center.  

The firm’s initial fleet included 20 Ford Fusions. 20 vehicles sounded like a whole armada when AVs still felt like a science fiction concept. The cars were equipped with around 20 cameras, seven lasers, a GPS, radar and lidar— which refers to a technology that measures the distance reached by outgoing lasers to enable the vehicles to “see” and interpret action around them. Uber showcased its cars to reporters on trips throughout Pittsburgh. However, the cars had a “safety driver” on board that would take over the wheel if things did not go well.

Uber announced its intentions to amass a fleet of AVs on February 15, months after rumors about Uber’s vocal support for automation spread / Photo by: Dllu via Wikimedia Commons

 

Uber’s Self-Driving Car Tests and Controversies

The Volvo XC90 became Uber’s vehicle of choice for automation in one of the firm’s first rides in Pittsburgh after experiments were conducted with the Ford Fusions. At first, Pittsburgh mayor Bill Peduto welcomed Uber and its fleet of 100 Volvos with open arms. He claimed that it was necessary to “roll out the red carpet rather than red tape” in order for Pittsburgh to become a 21st-century laboratory for technology. Uber leveraged this relative freedom to test at the said location at full strength. The company even established a fake city called Almono outside town to test its cars before deploying them in the Steel City.

But the early months of testing involved light collisions and traffic violations. Hence, the relationship between Uber and Pittsburgh deteriorated quickly. Cecilia Kang of New York City-based newspaper The New York Times reported that Peduto didn’t get any written agreement from Uber. Uber charged fees for AV rides even though Peduto thought that the rides would be free. The firm withdrew support for a $50 million grant to revitalize Pittsburgh’s transportation. Uber did not create new jobs, which did not align with Peduto’s initial level of expectation.

In December 2016, Uber tested 16 automated cars in San Francisco. However, the California Department of Motor Vehicles revoked the registration for the cars due to Uber’s refusal to secure a special permit that would register them as test vehicles, said Megan Geuss of ArsTechnica, a tech news and opinions website. In the same month, the firm also started to conduct tests in Tempe, Arizona.

One of Uber’s automated vehicle was involved in a crash in Tempe in March 2017, though the human of another car was blamed due to them not yielding the right of way. Uber then suspended its fleet to investigate the incident. Uber’s automated tests returned to San Francisco in May 2017. Uber also tested its two automated cars in Toronto, Canada.

On the night of March 2018, an Uber self-driving vehicle struck a pedestrian walking outside of a crosswalk in Tempe. Sadly, the pedestrian died from her injuries. The vehicle was in autonomous mode and while there was an operator in the driver’s seat, they were not in control of the car at the time of the accident. Uber suspended its public self-driving tests in Tempe, San Francisco, Pittsburgh, and Toronto.

Are AVs the Road to Profitability?

In 2019, Uber had a private valuation of $76 billion ahead of its IPO in May, quoted Annie Paler of business and real-time financial news channel CNBC. Its valuation dropped and its stock price dwindled. Uber currently has a market cap of roughly $49 billion. As for its IPO, the company closed down 4.3% to $29.15, falling behind its previous low of $30.29 on September 27. Its shares hit an all-time low of $28.65.

And Uber has been struggling since then, noted Sameepa Shetty of CNBC. The firm’s co-founder and ousted CEO Travis Kalanick sold his stocks and left Uber’s board late last year. It also sold its much food-delivery Eats division in India and public markets voted to send the stocks steadily down considering that Uber’s investors have questioned its path to profitability. Uber CEO Dara Khosroshahi said her goal is to get the firm to profitability in 2021.

But the key to achieving this goal is through Uber’s self-driving unit, Advanced Technologies Group (ATG), which has an estimated valuation of more than $7 billion and represents over 10% of the company’s current market cap of about $61 billion. Why AVs? Cost. In non-autonomous ride-sharing, the driver comprises 80% of the total per mile cost, per the estimate of research firm Frost & Sullivan, cited Shetty. By removing the driver, the cost of a ride will be drastically reduced and its addressable market will boost. In line with that, Uber intends to make the cost of rides so low to the point that vehicle ownership becomes obsolete.

In 2019, Uber had a private valuation of $76 billion ahead of its IPO in May / Photo by: Diablanco via Wikimedia Commons

 

If done right, Uber is looking at a “sizable slice” of a huge pie. Investment firm ARK posited that the 10-year net present value of autonomous ride-hailing exceeds $1 trillion today and should reach $5 trillion by 2024 and $9 trillion by 2029. Eric Meyhofer, the head of ATG at Uber said, “ATG is a growth play for Uber.

ATG is not planning to address every self-driving problem anywhere and all the time. Instead, it plans to introduce self-driving vehicles to new markets when it’s “technologically feasible, safe, and cost effective.” Meyhofer emphasized, “The goal is to create a cheaper, better and safer automated option for consumers using Uber’s ride-hailing service.”

Safety is the most important goal for ATG as it could make or break Uber’s self-driving endeavors. Regulators could also slow down the deployment of AVs due to safety concerns. Overall, investors could only hope that Uber’s AV ambitions could slash its costs to make it even more profitable.

Uber started out as a ride-hailing service, but it soon branched out to self-driving cars. Uber tested out its AVs in the US and Canada. Not everything was picture perfect as the company was under fire for killing a pedestrian in Tempe. Its IPO was at an all-time low in 2019, making investors question Uber’s profitability. The company now expresses its desire to profit from AVs— will it work out in the end?