FT – Uber and Volvo and Otto’s driverless road trip

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Uber will start testing the world’s first autonomous taxi fleet in the next few weeks, putting it ahead of Google and Ford in the race to bring self-driving car services to consumers.

The fleet is part of a partnership between Uber and Volvo that will see the companies jointly invest $300m to develop a self-driving vehicle.

Uber customers in Pittsburgh will soon be able to hail the first self-driving test vehicles, which will be Volvo XC90s, from their smartphones. Drivers will remain behind the wheel during the pilot, which will be free for passengers.

At the same time, Uber announced it had made its largest acquisition to date in Otto, a maker of self-driving technology for trucks.

Uber has been investing heavily in driverless technologies, which chief executive Travis Kalanick believes will be a cornerstone of future city transportation networks.

“Uber’s mission — to provide transportation as reliable as running water, everywhere for everyone — is not possible without moving into this kind of technology,” Mr Kalanick told the Financial Times.

The tie-up with Volvo underscores how the advent of self-driving cars is rapidly changing the auto industry, forcing tech start-ups and traditional carmakers to decide whether to work together or compete. The decision of Uber to pick Volvo as its development partner is a coup for the Swedish carmaker best known for its focus on safety.

“We see this as the first step in a long-term industrial partnership,” Hakan Samuelsson, Volvo chief executive, told the Financial Times. He added that smart maps might be another area of co-operation between the two companies.

The acquisition of Otto will heighten Uber’s driverless competition with Google owner Alphabet, at a time when Google’s own head of driverless technology has recently left.

Otto was founded by several prominent ex-Alphabet employees including Anthony Levandowski, who led Alphabet’s driverless car effort and will now be heading Uber’s self-driving research and report directly to Mr Kalanick.

The driverless pilot in Pittsburgh will be free for passengers, and Uber expects that driverless technologies will drive down the cost of rides over time.

Uber’s effort to develop driverless cars began last year, when it poached dozens of researchers from the robotics department of Carnegie Mellon University in Pittsburgh, and set up its own research centre in the city. As part of the Otto acquisition, Uber will operate additional research facilities in Palo Alto and San Francisco.

Otto’s investors will receive an equity stake in Uber of slightly less than 1 per cent, as well as 20 per cent of profits from Uber’s future trucking business.

The deal also marks Uber’s first foray into long-haul trucking. Mr Kalanick said Uber did not have immediate plans to own its own trucking fleet, but did not rule that out in future.

One component of Uber’s driverless car research is developing its own maps and mapping software, and the company is prepared to spend half a billion dollars on mapping efforts around the world. Uber already has mapping vehicles gathering images and data on roads in the US and Mexico.

The founders of Otto said in a blog post that they were combining with Uber to “build the backbone of the rapidly approaching self-driving freight system”. The company has been testing an “interstate autopilot” system that allows drivers to snooze in their cabs.

Over the past six months, Uber has been in talks with multiple carmakers over which one would be its initial partner for developing driverless vehicles. Uber’s first driverless test vehicle, which has been cruising the streets of Pittsburgh, Pennsylvania, since May, is a hybrid-powered Ford Fusion.

For carmakers, partnerships with ride-hailing companies such as Uber and Lyft have become more common as they place a hedge on declining personal car ownership. Toyota and Tata Capital, the financial services arm of India’s Tata Group, have invested in Uber, while GM invested $500m in Lyft this year. Volkswagen bought a $300m stake in Gett, the Israeli ride-sharing app.

Mr Samuelsson said the partnership would reduce Volvo’s development costs for much-needed technology by half, as well as boost volumes through the sale of cars to Uber.

He underlined how autonomous driving and electrification was shaking up the car industry.

“They will really change the business in a way that we have not seen in many years. That is why this partnership is so important to us,” he said. “The technology companies have come to the conclusion that you don’t have to start by building a whole car. You can take the car and build from there.”

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