‘It only becomes a commercial business when you can remove the vehicle operator from the equation,’ says ride-hailing firm battling Lyft and Waymo

This article is more than 2 years old

This article is more than 2 years old

Uber is planning to buy up to 24,000 self-driving cars from Volvo, the company has announced, moving from its current model of ride-sharing using freelance drivers to owning a fleet of autonomous cars.

Following the three-year self-driving partnership with Volvo, the non-binding framework could give Uber a boost in its ambitions to perfect self-driving systems to replace human drivers, following setbacks and lawsuits over trade secrets and talent.

Volvo said Monday it would provide Uber with up to 24,000 of its flagship XC90 SUVs, which retail from around £50,000, equipped with autonomous technology as part of a non-exclusive deal from 2019 to 2021. The Geely-owned car company will provide the vehicles, while Uber will provide the yet-to-be-built self-driving system, which is currently under development by Uber’s Advanced Technologies Group.

The announcement follows the news that Alphabet’s Waymo will launch the world’s first autonomous car service in the next few months in Arizona, where it is legal to operate self-driving cars without humans behind the wheel, unlike the majority of the rest of the US and the world, which requires the safety net of a human driver.

Autonomous vehicles are seen as the logical next step for ride-hailing firms including Uber, which said it perceived the technology as an existential threat. Equally, automakers, ride-hailing firms and tech startups have been forging loose alliances in an effort to advance self-driving technology and claim a piece of what is expected to be a multi-billion-pound business.

Facebook Twitter Pinterest The announcement follows the news that Alphablet’s Waymo will launch the world’s first autonomous car service in the next few months in Arizona. Photograph: Eric Risberg/AP

Should Uber buy all 24,000 cars, it would be Volvo’s largest order by far and the biggest sale in the autonomous vehicle industry to date, giving Uber – losing more than $600m a quarter – its first commercial fleet of cars. The cars would, in theory, be available to order through the Uber app and pick up passengers without a driver.

Jeff Miller, Uber’s head of automotive alliances, said: “Our goal was from day one to make investments into a vehicle that could be manufactured at scale.

“It only becomes a commercial business when you can remove that vehicle operator from the equation.”

Uber has been testing prototype Volvo cars for more than a year in Arizona and Pittsburgh, with safety drivers in the front seat to intervene if the self-driving system fails.

Driving statistics released by analyst firm Edison Investment Research in April showed that Uber’s self-driving technology was 5,000 times worse than Waymo’s, ranking it the worst of six major self-driving car companies testing vehicles.

Edison’s data showed that Uber’s self-driving cars forced a human to take over once every mile driven, while Waymo’s technology only once every 5,128 miles driven, with more than half a million miles driven in the last 12 months.

No financial details were disclosed for the purchase, but Miller said that a small number of the XC90s would be bought using equity, with more acquired using debt financing.

The deal builds on a $300m Volvo-Uber alliance announced last year, which is focused on collaborating on the design and financing of cars with self-driving systems and will require different steering and braking features and sensors.

Uber’s North American-only rival Lyft struck a research partnership with Alphabet Inc’s unit Waymo this year and secured deals with Ford and startups Nutonomy and Drive.ai to incorporate self-driving cars into its fleet.

Volvo’s agreement with Uber and Ford’s with Lyft show the pressure on automakers to avoid becoming obsolete in a world of increased automation, and on ride-hailing companies to start automating to cut driver costs and turn profits.