Cash-Hemorrhaging Uber Announces Plans To Drop $1 Billion On Driverless Volvos
Earlier this summer we noted Uber’s staggering 2Q cash burn of $600 million which equates to roughly $7 million in net cash outflows every single day. The staggering, and consistently growing, cash burn figures resulted in several mutual funds announcing they would slash their valuations of the struggling rideshare company by up to 15%.
Of course, if cash burn was a concern before for Uber investors before then they should probably take note of the company’s newly announced decision to drop roughly $1 billion on driverless Volvos. According to Bloomberg, Uber has just penned a deal to pick up 24,000 brand new Volvo XC90’s in their push to flood the U.S. market with self-driving taxis.
Uber Technologies Inc. agreed to buy 24,000 sport utility vehicles from Sweden’s Volvo Cars to form a fleet of driverless autos, Bloomberg News reports.
The XC90s, priced from $46,900 at U.S. dealers, will be delivered between 2019 and 2021 in the first commercial purchase by a ride-hailing provider, Volvo said in a statement Monday. San Francisco-based Uber will add its own sensors and software to permit pilot-less driving.
“This new agreement puts us on a path toward mass-produced, self-driving vehicles at scale,” Jeff Miller, Uber’s head of auto alliances, told Bloomberg News. “The more people working on the problem, we’ll get there faster and with better, safer, more reliable systems.”
“The automotive industry is being disrupted by technology and Volvo Cars chooses to be an active part of that disruption,” Chief Executive Officer Hakan Samuelsson said. “It’s a new market that’s emerging and we’re the first to be delivering into that segment.”
Of course, as we’ve pointed out multiple times before, to the extent the technology works consistently, avoiding the nasty consequences of death and mayhem in the event of failure, autonomous vehicles are worth big money to Uber and consumers…though not so much for the automotive OEMs (see “Ford Announces Plans To Self-Destruct Starting In 2021“). As we’ve pointed out, the cost of paying drivers is a substantial portion of the roughly $1.00 per mile charge paid by Uber riders. To the extent that cost can be removed from the equation then fares charged by companies like Uber will decline materially.
Unfortunately, for the auto OEMs the story is the exact opposite. In theory, truly autonomous cars could result in substantial increases in passenger car utilization rates and, therefore, declines in annual car sales. But apparently, Volvo CEO Hakan Samuelsson isn’t worried (yes, we can sense the pure optimism in the quote below):
“That could be seen as a threat,” says Volvo Cars CEO Hakan Samuelsson. “We see it as an opportunity.”
But still, even if the technology works, the question remains how quickly consumers will adopt it, if at all. Certainly there certainly has been no shortage of videos hitting Youtube lately of driverless cars plowing through red lights and getting into accidents…which seems less than ideal.