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Three Japanese companies — telecom SoftBank, auto components supplier Denso, and automaker Toyota — have collectively invested $1 billion in Uber’s autonomous vehicle (AV) business unit, according to TechCrunch.
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The investment will value Uber’s self-driving car business at nearly $7.3 billion, and after the investment is completed (likely in Q3 2019), Uber will spin out its AV unit as a separate business segment under its corporate umbrella.
Here’s what it means: The investment gives Uber some much-needed cash for its self-driving technology efforts and adds a potentially valuable partner in Denso.
- The ride-hailing company spends millions of dollars every year on self-driving technologies, and the investment will help stanch some of the bleeding. Uber spent a whopping $457 million on R&D for self-driving technologies and flying cars last year, and said in its S-1 filing that it expects to increase those investments in the near term. Pulling in more outside cash will help alleviate some of the high costs.
- Denso’s investment could open the door for a partnership, which would give Uber some technical expertise on car designs. Denso is a first-time investor in Uber, while SoftBank and Toyota have invested in the past. The company builds and sells a variety of vehicle parts, such as electronics, engine cooling systems, drivetrains, and braking systems. Though Uber and Denso didn’t announce a partnership along with the investment, it’s very possible their relationship could grow to be just that, especially given that other investors — notably Toyota — are working with Uber to co develop autonomous technologies. If the companies took that route, Denso could provide expertise in component design, helping Uber better integrate its self-driving technologies into cars.
The bigger picture: We believe Uber will prioritize building proprietary self-driving software with the cash injection, with a particular focus on recruiting top-notch talent. Uber has not been explicit about how it might commercialize its AV segment, but its recent S-1 filing contains some allusions to building its tech.
In the filing, Uber states that "development of our AV technologies is highly dependent on internally developed software."
Keeping software development in-house will require Uber to build up its talent pool, something which won’t come cheap: A sampling of Glassdoor estimates peg AV software engineers’ salaries between $100,000 and $300,000 per year.
It seems likely that Uber could allocate the funding toward outbidding cash-rich competing firms like Waymo, GM, and Ford for software talent. Uber could also look to poach engineers and executives from these rival AV companies, intensifying an already fierce battle for self-driving tech talent.
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