Listen to this article
This is an experimental feature. Give us your feedback. Thank you for your feedback.
What do you think?
Uber has entered an agreement to buy thousands of cars from Volvo to prepare a fleet of fully driverless on-demand vehicles, in a significant acceleration of the ride-hailing company’s ambitions in the area.
The US company already has about 200 Volvo sport utility vehicles fitted with its self-driving systems taking part in tests in Pittsburgh, San Francisco and Tempe, Arizona.
The new deal will see Uber purchase up to 24,000 XC90 vehicles between 2019 and 2021 in a deal worth potentially $1.4bn for the Chinese-owned carmaker, according to Financial Times calculations.
Uber will buy the specialised vehicles from Volvo, then add its own sensor array to the roof of the car and operate them — potentially without the need for a human behind the wheel — as part of the Uber network.
The announcement comes just two weeks after Waymo, the self-driving unit of Google’s parent Alphabet, declared it was launching fully driverless cars in a pilot in Phoenix, Arizona — a milestone no one else has passed in the industry.
Uber and Volvo committed last year to invest $300m to develop an autonomous ready vehicle, an agreement that included joint engineering work to develop the systems that would make Volvo’s cars ready for self-driving.
The flagship XC90 SUVs already being used for the technology group’s self-driving tests in the US cannot be driven without a human safety driver because they do not have redundant braking and steering systems, Uber said. The new vehicles will be designed with specialised back-up systems that will allow them to operate without a human.
“In a self-driving world there is no human, so you need redundant steering and braking and actuation systems, such that is there is an electrical or mechanical failure, the back-up system can kick in,” said Jeff Miller, Uber’s head of automotive partnerships.
He added that the figure of 24,000 was a “best guess” of how many cars Uber would need initially, with a “lot of variability” given regulations and the growth of Uber’s business.
A key question facing Uber is whether it would own and operate autonomous cars, which would mean high capital costs and upend its asset-light business model, or third parties would manage the autonomous cars through the Uber app.
The company is currently testing both business models, and has a partnership with Germany’s Daimler that will see autonomous cars owned by the automaker available through the Uber app.
The latest Volvo agreement opens a wholly new revenue stream for the carmaker as it positions itself to become a supplier to the robo ride-hailing industry as well as a traditional automaker.
“Our aim is to be the supplier of choice for autonomous drive, ride-sharing service providers globally,” said Håkan Samuelsson, Volvo Cars chief executive.
Several manufacturers have struck deals with ride-hailing services in the hopes of securing future business and working together to develop self-driving technology. General Motors and Jaguar Land Rover have both invested in Uber’s US rival Lyft, while Volkswagen has backed European rival Gett.
Uber’s agreement with Volvo is non-exclusive, meaning it is free to choose other carmakers to supply vehicles and Volvo is allowed to sell its vehicles to other ride-hailing providers.
At least one other deal is being pursued by the Swedish carmaker, according to one person familiar with the matter.