Why Toyota’s investment in Uber matters2 min read . Updated: 29 Aug 2018, 04:01 PM IST
In monetary terms, Toyota's investment of $500 million in Uber might not be big, but it's an important step for both the Japanese carmaker and cab-hailing startup
Japanese carmaker Toyota Motor Corp. planned investment of $500 million Uber Technologies Inc. for autonomous cars isn’t its first in the cab-hailing startup. Two years ago, Toyota invested an undisclosed amount in Uber while forming a strategic partnership that involved leasing its cars to Uber drivers. This is not the biggest investment that Uber has received, either. Saudi Arabia’s Public Investment Fund put in $3.5 billion In June 2016 and SoftBank Group Corp. pumped in about $9 billion in December 2017.
However, Toyota’s investment is significant because the two companies will work on self-driving cars. Right now, for different reasons, neither Toyota nor Uber is at the forefront of this technology. That credit goes to Waymo, Alphabet Inc.’s autonomous-vehicle arm which is literally miles ahead in tests (in addition to over 5 billion miles clocked in simulations).
Toyota started testing some features of autonomous driving—such as self-parking—in 1999, and has been making progress with great caution and patience. The head of Toyota Research Institute was quoted as saying, “We will get there, but I can’t tell you when."
For Uber, self-driving cars might turn out to be the only way to sustain profits. A bulk of its gross revenue goes to drivers as earnings and bonuses. In Q4 of 2017, it recorded $11 billion as gross revenue, and paid $8 billion as driver earnings and bonuses. Thus, while the company has grown exponentially, it’s still running in loss.
It is not surprising, then, that Uber had in fact taken some significant steps in self-driving cars. In fact, it announced its entry into self-driving cars at around the same time as Google (now, Alphabet’s Waymo), and eventually started doing test drives in a few cities, including Pittsburg and San Francisco in California and Tempe, Arizona, and Canada’s Toronto.
In March 2018, one of its cars fatally hit a pedestrian. Following this, Uber pulled its self-driving cars off the road, and closed its self-driving hub in Arizona. Its venture into self-driving cars was also marked by the brashness that observers associate with Uber’s culture.
The big question now is whether the partnership between the two will give the right balance.
In a 2016 BCG survey, respondents cited “wouldn’t feel safe", “want to be in control at all times" and “don’t want cars to make mistake", as top reasons for their reluctance to use self-driving cars. But the Uber Arizona accident highlights a bigger source of resistance: from others on the road. In an Advocates for Highways and Safety survey, released earlier this year, 64% of US respondents expressed concern about sharing the road with driverless cars.