Uber is in discussions to sell its self-driving car unit, Advanced Technologies Group, to Aurora Innovation, The Information reports.
Why It Matters: Uber has spent $2.5 billion on self-driving car development, which hasn’t exactly gone as planned. Autonomous vehicles could be a massive disruptor in the ride-hailing space, which could reshape Uber’s business or deal it a critical blow down the road.
What is Aurora Innovation? A firm developing self-driving vehicle technology. It was co-founded by Chris Urmson, one of the original leaders of Google’s self-driving efforts that later became Waymo.
How The Deal Might Work: Uber would invest hundreds of millions in cash into Aurora, while taking a minority stake with “first dibs on any commercially-ready vehicles Aurora produced.”
- The agreement would buy Aurora more time and capital to develop the technology and pulls a near-half-billion cash burn off of Uber’s balance sheet.
But there are a few issues…
- ATG has a private valuation of $7.25 billion and Toyota, SoftBank and Denso hold minority stakes in the Uber subsidiary. Aurora is only worth roughly $2.5 billion, meaning the deal would significantly slash ATG’s valuation.
- Integration between the two companies could be challenging. Aurora recently pivoted to automating semi-trailer trucks because it was likely a more manageable endeavor and lost manufacturing partners in Volkswagen and Hyundai. ATG deals exclusively in passenger cars.
- Merging software “stacks” from the two firms would require a staff overhaul, which in the short-term means burning more cash.
This is probably for the better for $UBER stock. Uber’s profitability has been weighed down by trying to develop self driving technology, but in reality, Uber is probably not the company to bring that technology to market.
Long-term, self-driving cars present disruption for $UBER, but $UBER’s low valuation for how high its near-to-mid term growth is expected to be makes it attractive as a return-from-home investment for now.