Now that Uber founder Travis Kalanick has resigned as CEO in the wake of investor pressure, the future of Uber’s biggest and probably most expensive initiative — self driving cars — has to be reexamined, according to auto industry analysts who closely follow the market.
The crux of the issue for the new CEO is this: does Uber need to own its own self-driving technology, as Kalanick believed, or can it licence or strike a partnership for it?
We talked to two automotive industry analysts familiar with Uber’s program who had opposing points of view.
On the pro side, believing that Uber should continue to pursue Kalanick’s self-driving strategy, is Dave Sullivan, a manager of research at automotive market research firm AutoPacific. On the other side, believing that the current program is expensive, unnecessary, and not competitive, is Gartner’s Michael Ramsey.
The pro case
“The world is going to go self-driving and autonomous,” Kalanick told Business Insider’s Biz Carson last year. “If we weren’t part of the autonomy thing? Then the future passes us by.”
Just as important, Kalanick believed the company needed to be “first” to market.
“If we are not tied for first, then the person who is in first, or the entity that’s in first, then rolls out a ride-sharing network that is far cheaper or far higher-quality than Uber’s, then Uber is no longer a thing,” Kalanick told Carson.
Sullivan agrees. He says that the “whole premise of the company” is to offer rides at a low cost. “To do that, they need to eliminate the driver. I don’t think [the change in CEO] changes the plan,” he told Business Insider.
“Uber will be nothing more than an app and a middle man if they don’t come up with it themselves,” he said.
Plus, if Uber licenses it or partners for it, the company winds up at the mercy of someone else’s timeline. And that would be dangerous, Sullivan argued. The company is burning through cash, losing $US2.8 billion on $US20 billion in revenue last year, according to Bloomberg. It needs to get to that low-cost, robotic future as fast as it can.
“If self driving cars don’t come out in next 10 years, can Uber continue to burn billions of dollars until then? You’ve got to be working towards taking the cost out,” he said.
The con case
But Gartner’s Michael Ramsey had the opposite take. Uber’s cash-flow problem means it should gut its self-driving program and licence the technology from another company, he said.
“It’s a legit question whether a new CEO would and should continue to pursue the self-driving car program when there are so many other companies developing the tech,” Ramsey said. “I always found questionable why Uber had to own it; it will become commoditized.”
Uber’s ride-hailing rival Lyft has teamed up with Waymo, a corporate sibling of Google that is focused on developing self-driving cars. That’s a better model than Uber’s, Ramsey said.
Waymo, which is in a legal dispute with Uber over autonomous car technology, isn’t the only serious contender in the market. Delphi, Nutonomy, Zeus are also major players, Ramsey said.
Even if it continued its own self-driving car program, Uber likely wouldn’t build the actual cars, but would likely have to buy them from another manufacturer before installing its autonomous driving software and related sensors on them. If it would have to buy cars anyway, it could just buy ones that are already come with autonomous driving capabilities.
Uber’s self-driving car program has already been costly for the startup. It paid 1% of its equity — about $US680 million at the time — to buy Otto, Reuters reported. It also signed a $US300 million agreement with Volvo for self-driving SUVs. Additionally, it built a technical center in Pittsburgh, including a new building, for its autonomous car research effort. Although Uber hasn’t disclosed how many employees are working on its self-driving, it’s likely in the hundreds, many at pricey Silicon Valley engineer salaries.
The new leadership will have to decide if the ” big expense” is “going to be worth it,” Ramsey says.
For the investment, Uber’s program is believed to be “a disaster,” Sullivan says. “They are far behind. Waymo is far ahead.”
Ramsey agrees. “Uber has had dubious success with rides around Pittsburgh and Waymo laughed at that. They have been doing test rides for years at a higher level of fidelity.”
And that leads to another issue: hiring talent and keeping them from being poached.
“There’s a huge talent scrum in the area of self-driving cars. Uber has already lost multiple people to Ford, and I think, currently, its program is certainly a ripe target for other companies to poach talent,” Ramsey says.
The talent problem is not likely to improve at Uber anytime soon in part because Uber is being sued by Waymo.
Waymo alleges that its former star engineer, Anthony Levandowski, stole Waymo’s intellectual property when he built a self-driving truck startup called Otto. Uber purchased Otto last summer and put Levandowski in charge of Uber’s self-driving car initiative.
Then in May, in the wake of the lawsuit, Uber fired Levandowski.
Meanwhile, Uber had poached the man leading Ford’s self-driving car development, Sherif Marakby, in 2016. But a couple of weeks ago, he went back to Ford.
“There’s a shortage of people that know how to do this. It is very difficult to get people and to recruit the right people under them. They are losing all this brainpower,” says Sullivan.
Without the engineers to build a safe and reliable system, Uber won’t be first.
And yet, if it scraps its internal program altogether, it may lose the biggest, most exciting thing that it is working on, Ramsey says.
That could make it hard to convince engineers to join the company at all, in any capacity, until it proves it has cleaned up its so-called toxic culture.
“They have to explore what it’s going to take to do it themselves. What else are they going to do? They have got to look forward. Self-driving is the future,” Ramsey says.
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