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Uber Looking to Sell a Minority Stake in its Autonomous Vehicle Unit

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【Summary】Ride-hailing company Uber is preparing to sign a deal to sell a minority stake in its autonomous vehicle unit Uber ATG ahead of next month’s IPO. The deal would allow Uber to retain operational control of ATG while reducing its cash burden.

Eric Walz    Apr 17, 2019 5:14 PM PT
Uber Looking to Sell a Minority Stake in its Autonomous Vehicle Unit

Ride-hailing company Uber is preparing to sign a deal to sell a minority stake in its autonomous vehicle unit Uber ATG ahead of next month's IPO, said a person briefed on the matter. The negotiations were first reported by the Wall Street Journal.

Japan's Softbank, which already owns 16 percent of Uber, automaker Toyota and auto parts supplier Denso are pooling together $1 billion for 14 percent of the unit at a post-investment valuation of $7.25 billion, according to the Wall Street Journal.

Toyota, which invested $500 million in Uber last year, and Denso are expected to invest two-thirds of that figure, with Softbank contributing the remaining $333 million. Toyota's investment would help cover the costs of building commercial self-driving vehicles over the next three years.

The new investments would value Uber's self-driving unit at $7.25 billion, according to two people familiar with the matter. It also sets the unit up for a potential spinoff.

The deal would allow Uber to retain operational control of ATG while reducing its cash burden.

The new board of directors of Uber's autonomous unit will have six seats controlled by Uber and two others controlled by Toyota and Softbank (pending regulatory approval).

Softbank was granted two seats on Uber's board as part of its broader investment in the company, however they have not yet been filled and are under review by the Committee on Foreign Investment in the U.S. to assess any national security risks.

Uber will continue to retrofit Volvo XC90 SUVs for autonomous driving. The Wall Street Journal reported the company will work with Toyota and Denso separately on a self-driving car "kit" for Toyota vehicles.

Selling a minority stake in its ATG unit would help Uber reduce some of its huge losses ahead of its IPO, one of the most anticipated IPO's in recent years. Uber valuation is north of $100 billion, although some estimates say its closer to $70 or 80 billion.

According to documents released by Uber in February, the ride-hailing company lost $1.8 billion in 2018, the first full year under the leadership of its new CEO Dara Khosrowshahi.

Uber's autonomous driving division Uber ATG was reported to be burning though $20 million per month rushing to developing self-driving technology to catch up with competitors, including Google's Waymo, Lyft, and General Motors' Cruise division.

Uber had ambitious plans to have tens of thousands of autonomous vehicles picking up passengers in 13 cities by 2022, according to court documents dated Sept 2017 that were unsealed in March.

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A self-driving Volvo XC90 outfitted by Uber ATG

Uber began testing its self-driving Volvos in San Francisco in Nov 2016. The program received negative publicity and questions about its safety a month later, after one of the Volvo SUVs was captured on a cell phone video running a red light at a pedestrian crossing in the busy downtown area.

Uber was chided by the California DMV for not having the required permit to test autonomous vehicles in the state. Uber stated that its vehicles did not meet the criteria of an "autonomous vehicle" since safety drivers were sitting behind the wheel ready to take over.

The state's DMV disagreed and revoked Uber's vehicle registrations, essentially shutting down the company's California autonomous testing operations.

Uber subsequently moved its fleet to Arizona where it is also testing its autonomous ride-hailing service. However, in March 2018 one of the company's self-driving Volvos fatally struck a pedestrian in Arizona, which led to Uber shutting down its Arizona operations as well. Uber is also testing a limited number of self-driving cars in Pittsburgh and Toronto.

As a transportation provider with no real automotive expertise to build self-driving vehicles at scale, the investment from Toyota might help Uber get its autonomous driving program back on track. Toyota one of the world's biggest automakers and Uber has made little progress on its own.

Softbank already invested in General Motors' Cruise self-driving division at a valuation of $14.6 billion. Cruise is working with GM on a commercial taxi service using autonomous vehicles outfitted by Cruise. Any service launched by Cruise will likely compete with Uber.

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