Uber has confirmed it will spin out its self-driving car business after the unit closed $1 billion in funding from Toyota, auto-parts maker Denso and SoftBank’s Vision Fund.
The development has been speculated for some time — as far back as October — and it serves to both remove a deeply unprofitable unit from the main Uber business, helping Uber scale back some of its losses, while giving Uber’s Advanced Technologies Group (known as Uber ATG) more freedom to focus on the tough challenge of bringing autonomous vehicles to market.
The deal values Uber ATG at $7.25 billion, the companies announced. In terms of the exact mechanics of the investment, Toyota and Denso are providing $667 million, with the Vision Fund throwing in the remaining $333 million.
The deal is expected to close in Q3, and it gives investors a new take on Uber’s imminent IPO, which comes with Uber ATG. The company posted a $1.85 billion loss for 2018, but R&D efforts on “moonshots” like autonomous cars and flying vehicles dragged the numbers down by accounting for more than $450 million in spending. Moving those particularly capital-intensive R&D plays into a new entity will help bring the core Uber numbers down to earth, but clearly there’s still a lot of work to reach break-even or profitability.
Still, those crazy numbers haven’t dampened the mood. Uber is still seen as a once-in-a-generation company, and it is tipped to raise around $10 billion from the IPO, giving it a reported valuation of $90 billion-$100 billion.
Like the spin-out itself, the identity of the investors is not a surprise.
The Vision Fund (and parent SoftBank) have backed Uber since a January 2018 investment deal closed, while Toyota put $500 million into the ride-hailing firm last August. Toyota and Uber are working to bring autonomous Sienna vehicles to Uber’s service by 2021 while, in further proof of their collaborative relationship, SoftBank and Toyota are jointly developing services in their native Japan, which will be powered by self-driving vehicles.
The duo also backed Grab — the Southeast Asian ride-hailing company in which Uber owns around 23 percent — perhaps more aggressively. SoftBank has been an investor since 2014, and last year Toyota invested $1 billion into Grab, which it said was the highest investment it has made in ride hailing.
“Leveraging the strengths of Uber ATG’s autonomous vehicle technology and service network and the Toyota Group’s vehicle control system technology, mass-production capability, and advanced safety support systems, such as Toyota Guardian, will enable us to commercialize safer, lower cost automated ridesharing vehicles and services,” said Shigeki Tomoyama, the executive VP who leads Toyota’s “connected company” division, said in a statement.
Here’s Uber CEO Dara Khosrowshahi’s shorter take on Twitter: