It’s official. Uber confirmed that its cash-burning self-driving unit will receive a $1 billion investment from auto giant Toyota Motor, Japanese automotive components manufacturer Denso Corp., and the SoftBank Vision Fund.
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As part of that, Uber will spin out the unit into a newly-formed advanced technologies “entity” focused on “the development and commercialization” of automated ride-hailing services. Under the terms of the agreement, Toyota and Denso put in a combined $667 million and SoftBank Vision Fund will invest $333 million, “valuing the new Uber ATG entity at $7.25 billion on a post-money basis,” according to Uber.
Last month, we reported that this deal may occur so its confirmation is not entirely shocking. In particular, Toyota’s role is not surprising considering the automaker already invested $500 million in Uber as part of a deal to jointly develop self-driving car technology last summer. In its latest announcement, Uber said the further investment and expanded partnership “builds upon the progress made to date, deepening the companies’ collaboration in designing and developing next-generation autonomous vehicle hardware.” Toyota will also pony up to an additional $300 million over the next three years to help toward that goal.
As we’ve extensively written, Uber is on the path to going public, having confidentially filed preliminary paperwork last December to list its shares on the open market in an initial public offering (IPO). It also filed an S-1 last week.
But its autonomous vehicle division has been a source of contention with investors. TechCrunch has reported some sobering numbers: The ride-hailing company was spending $20 million a month on developing self-driving technologies, according to court documents unsealed last month. Meanwhile, the Wall Street Journal estimates Uber spent about $750 million on building out self-driving technologies before scaling back its effort in 2018.
The company’s impending IPO puts greater pressure on the money-losing Uber to control costs and lower losses. It posted an operating loss of over $1 billion in the fourth quarter of 2018 alone, for example. Uber can’t afford to fight a price war with global ride-hailing players while also shouldering stiff technology costs relating to self-driving cars alone.
That fact doesn’t diminish its need to keep apace in the self-driving movement going forward; Uber once argued that winning the self-driving race was existential to its business. And now with more money to invest, and a stronger partner set, the company is likely better suited to meet its own expectations.
All the same, if the self-driving group has consumed hundreds of millions of dollars to-date, how long this fresh billion will last is unclear. Perhaps Uber will have to go back to the well before the tech is done. That valuation will then have to be defended.
Illustration: Li-Anne Dias