BIG BUY

Uber is buying $1 billion worth of self-driving cars from Volvo

Obsession
Future of Work
Obsession
Future of Work

Five months into Uber’s campaign to improve relations with its drivers, the company has inked a deal with Volvo to buy tens of thousands of autonomous vehicles that could eventually replace them.

The non-exclusive deal is one of the largest commercial orders for self-driving cars yet, building on a $300 million partnership Uber and Volvo struck in August 2016. Under terms announced today (Nov. 20), Volvo will sell Uber around 24,000 “base cars” modeled on its popular XC90, a luxury SUV, from 2019 to 2021. Uber will modify the XC90s with autonomous technology developed by its self-driving division, the Advanced Technologies Group.

The purchase highlights the delicate line Uber has been forced to walk as it pursues driverless technology while also trying to keep its current workforce of more than 2 million drivers happy. The company has spent nearly half of 2017 revising driver earnings and perks to make the job more appealing under a program called “180 Days of Change.” At the same time, driver labor is the biggest cost to Uber’s core ride-hailing service, and the company is banking on self-driving taxis to make the model more viable.

“It only becomes a commercial business when you can remove that vehicle operator from the equation,” Jeff Miller, Uber’s head of automotive alliances, told Reuters.

Retail prices for a standard XC90 typically start around $50,000. Volvo told Reuters it would sell the XC90s to Uber at roughly the same profit margin it sells through dealers, suggesting Uber’s total purchase could top $1 billion. The ride-hailing company, technically valued at $70 billion in its recent deal with SoftBank, has been hemorrhaging more than $600 million a quarter.

Uber wasn’t immediately available to comment, and Volvo deferred questions to Uber.

Uber’s main US competitor, Lyft, also has ambitions to build an autonomous fleet, as do many traditional automakers, who believe shared “mobility” will likely replace car ownership in the future. Financial services firm UBS predicts so-called robotaxis will be common in urban areas by 2030, and that relying on driverless taxis will cost half as much as owning a car.

Uber remains embroiled in a lawsuit with Waymo, the self-driving carmaker spun out from Alphabet, for alleged theft of trade secrets. That case is expected to head to trial in December.

This post was updated to include additional information from Uber.

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