Quick Thoughts: Daimler and Uber Join Forces

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Quick Thoughts: Daimler and Uber Join Forces

–     Daimler plans to operate fleets of its own self-driving vehicles as part of Uber’s global ride sharing network, with the revenues shared between the companies.

–     Uber avoids the massive cost of owning and maintaining its own fleets, while retaining the primary customer relationship. Daimler locks in a captive customer for its cars, hedging against a decline in private vehicle ownership.

–     We believe Uber’s development program is closer to full autonomy than Daimler’s. The agreement does not suggest a combination of development efforts or indicate which company’s SW will be used.

–     This deal could spur other car makers to seek their own similar deals. GOOGL’s Waymo and BIDU, far ahead in the development of full autonomy, would be the obvious choices as partners.

Uber and Daimler have announced a partnership by which the car maker would build and operate fleets of autonomous vehicles to be booked via Uber’s consumer network. At first glance, the deal seems to have much to offer both partners. For Uber, it would avoid the massive capital costs of buying fleets of autonomous vehicles and the operating expenses of maintaining them, while remaining at the vanguard of on-demand driverless transportation. For Daimler, it links with the biggest ride sharing network operator, assuring a strong uptake for its vehicles in the emerging “robo-cab” segment – a long-term hedge against a shift away from private vehicle ownership. A partnership between a carmaker synonymous with quality and the eponymous brand name for calling an “Uber” seems a natural fit that could jumpstart consumer adoption of the self-driving fleet model.

Both companies have been investing heavily in self-driving AI. Last year, Uber poached the 40-person robotics team from Carnegie Mellon University that had been working on self-driving technology for more than a decade, winning the DARPA Urban challenge in 2007. It has already begun trials of full autonomy (with an emergency human backup) for live commercial riders in Pittsburgh. Uber briefly deployed its self-driving vehicles in San Francisco before rousing the ire of California regulators after failing to register for an autonomous vehicle testing permit. Rather than operate its test fleet in California, which mandates the reporting of autonomous testing data, Uber relocated its west coast autonomous test fleet to Arizona where it will offer on demand autonomous ride hailing services this year.  Daimler has been working on its own self-driving technology for both cars and trucks, and leads in offering automated driver assistance systems to its luxury cars. In 2016, Daimler CEO Dieter Zetsche made a well-publicized tour of Silicon Valley, expressing surprise at the progress made by many US firms toward full autonomy. This may have played a role in this new partnership.

While Daimler will clearly design, build, own and maintain the vehicles, the deal does not specify the role each company will play in the development of the AI systems needed to operate them. The press release notes that “each company will benefit from the other’s industry-leading capabilities in research and development of autonomous driving and network operations.” If so, we expect Uber to take the lead. The deal is not exclusive, but if both partners commit wholeheartedly to it, we expect it to progress quickly and fruitfully.

With a prestige brand like Daimler and the world-leading ride-share network (and top 3 autonomous driving technology developer) Uber paired up, other interested parties could be looking for their own partners. While car makers like BMW, VW, Toyota, Ford and GM all talk up their own autonomous vehicle developments, we see them as all well behind Google’s Waymo and Baidu. Waymo, with more than 3 million miles of driving data, proprietary sensor designs and industry best performance in public testing, would seem the belle of the ball. We have previously surmised that Waymo’s preferred mode would be to provide the self-driving tech and operational logistics for a fleet built, owned and operated by someone else – a role similar to what we expect to be filled by Uber in its partnership. We suspect that Waymo CEO John Krafcik has already fielded many calls from auto industry CEOs, and after today’s Daimler announcement, he’ll be fielding another round, perhaps, from suitors with a greater degree of desperation.

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