One of the most intriguing and potentially disruptive developments of our lifetimes will be the emergence of the autonomous vehicles economy. Yesterday’s news that Toyota will make a new $500 million investment in Uber adds a new twist. The human cost of the threat to the jobs of taxi and truck drivers has perhaps been the most publicised likely fall-out of the latest technology in the world turning transport into an automated service. However, the shock that will be unleashed through the traditional auto manufacturing industry will also be huge and the world’s biggest car makers are in a fight for their future.
Established big tech companies such as Google (Waymo), and newer ride-hailing tech upstarts such as Uber, plus new electric car-focused manufacturer Tesla, are thought to be leading the race to dominate the new market. It is expected that private ownership of cars will drop dramatically over future decades as personal transport becomes a service. While some traditional car manufacturers such as GM, BMW and Daimler Chrysler are fighting back and plan to themselves transition to service companies providing driverless fleets, others are approaching the changing landscape with a different tactic – seeking to becoming the manufacturing partners of tech like Uber managing the customer-facing side of the business.
Toyota appears to be in the latter category but is de-risking the obvious danger of eventually being replaced by in-house manufacturing by taking a major ownership stake in its major consumer-facing tech partner – Uber. The move mirrors the $500 million investment U.S. auto manufacturing giant GM made in Uber-rival Lyft in 2016.
The new investment tie-up is part of a deepening collaboration between the two companies around the development of autonomous vehicles. Uber’s driverless R&D programme suffered a serious set-back after being postponed for 7 months in the wake of a fatal accident involving one of its vehicles back in March. However, the company hopes to be back on the roads testing ‘in the near future’.
The Toyota tie-up is not Uber’s first with a car maker and has previously agreed partnerships with Volvo and Daimler. The former sold vehicles directly to Uber while the latter’s strategy is to provide its own fleet of cars within the Uber ride-hailing service. The Toyota deal is more sophisticated and the companies will both collaborate on driverless technology R&D as well as the Japanese company licensing Uber’s technology to customise autonomous models of its Sienna minivans. Longer term, the investment can be considered part of a hedging strategy with Toyota insuring itself against an inversion of the balance of economic power within the personal transport industry.
The investment values Uber at $72 billion (£56 billion), unchanged since the company’s last big investment and will take the form of preferred stock. Capital markets clearly favour the strategy, sending Toyota’s New York-listed share price up 3% yesterday following the announcement of the deal.