Uber Cuts Bait With Another Money-Losing Distraction

Bookmark

Sometimes giving up is the right move. 

Late Monday, Uber Technologies Inc. announced plans to sell its self-driving unit to startup Aurora Innovation Inc. Under the terms of the deal, Uber will invest $400 million in cash and transfer its team and technology to Aurora in exchange for a 26% stake in the company. The transaction is expected to close in the first quarter of 2021.

Yes, you read that right. Uber is effectively paying Aurora to give the upstart its self-driving business, with the hopes of a return on its investment somewhere down the road. But getting the money-losing distraction off its books so it can focus on its core businesses  — ride-hailing and food delivery — is worth it.

Uber has tried for five years to get autonomous vehicles to work, with little to show for it. Most tragically in 2018, one of its cars struck and killed a pedestrian because of a programming issue related to braking. The division also has been a cash bonfire. According to Bloomberg News, the unit has been losing about $500 million a year. And the prospects for the autonomous driving business do not look any better for well-funded competitors with much larger pocket books – including Alphabet Inc.’s Waymo and Amazon.com Inc.’s Zoox.

This isn’t the first time Uber has offloaded a losing business this year. In May, Uber sold its Jump electric-bicycle business to Lime, similarly investing in the scooter startup in the hopes of a future return. It also closed down its Incubator and AI Labs, laying off about 25% of its workforce in the process. At the time, I wrote the moves to abandon pie-in-the-sky bets were wise, and said exiting autonomous driving would also make sense. So I commend the company for this latest decision. 

Uber management has enough on its plate with its main businesses. First, it needs to make sure the integration of the  $2.65 billion purchase of food-delivery company Postmates Inc. goes well. Second, worker benefits under the gig economy remain a persistent problem even after its recent Proposition 22 victory in California. And its main competitor in food delivery is about to get much stronger. DoorDash Inc., the No. 1 player in the space, will receive a multi-billion dollar infusion of capital when it goes public later this week.

Both Uber and DoorDash have the bigger ambition of becoming the Amazon of local commerce. Uber’s management is right to do whatever it takes to put its focus on this battle.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tae Kim is a Bloomberg Opinion columnist covering technology. He previously covered technology for Barron's, following an earlier career as an equity analyst.

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.