Sometimes giving up is the right move.
Late on Monday, Uber Technologies announced plans to sell its self-driving unit to start-up Aurora Innovation. In the terms of the deal, Uber will invest $US400-million in cash and transfer its team and technology to Aurora in exchange for a 26% stake in the company. The transaction is expected to close in the first quarter of 2021.
Yes, you read that right. Uber is effectively paying Aurora to give the upstart its self-driving business, with the hopes of a return on its investment somewhere down the road. But getting the money-losing distraction off its books so it can focus on its core businesses — ride-hailing and food delivery — is worth it.
Uber has tried for five years to get autonomous vehicles to work, with little to show for it. Most tragically in 2018, one of its cars struck and killed a pedestrian because of a programming issue related to braking. The division also has been a cash bonfire. The unit has been losing about $500-million/year. And the prospects for the autonomous driving business do not look any better for well-funded competitors with much larger pocket books – including Alphabet’s Waymo and Amazon.com’s Zoox.
This isn’t the first time Uber has offloaded a losing business this year. In May, Uber sold its Jump electric-bicycle business to Lime, similarly investing in the scooter start-up in the hopes of a future return. It also closed down its Incubator and AI Labs, laying off about 25% of its workforce in the process.
Uber management has enough on its plate with its main businesses. First, it needs to make sure the integration of the $2.65-billion purchase of food-delivery company Postmates goes well. Second, worker benefits under the gig economy remain a persistent problem even after its recent Proposition 22 victory in California. And its main competitor in food delivery is about to get much stronger. DoorDash, the number one player in the space, will receive a multibillion-dollar infusion of capital when it goes public later this week.
Both Uber and DoorDash have the bigger ambition of becoming the Amazon of local commerce. Uber’s management is right to do whatever it takes to put its focus on this battle. — By Tae Kim, (c) 2020 Bloomberg LP