Toyota invests half a billion dollars in Uber to save both companies

Japanese car maker Toyota has invested $500 million dollars to expand its collaboration with ride-sharing company Uber in autonomous driving cars.

After putting a brake on its self-driving car tests earlier this year, Uber has entered a new phase of collaborating with car makers as exemplified by this venture. Both companies will contribute their respective auto-driving technologies, as well as Uber’s ridesharing and Toyota’s car making expertise, to a new purpose-built Toyota Sienna Minivan. The new fleet produced out of this collaboration will not be owned by either company. Instead, according to the press releases, “the mass-produced autonomous vehicles will be owned and operated by mutually agreed upon third party autonomous fleet operators.”

This is not the first auto-driving partnership with car makers Uber has entered. Daimler, Volvo and others are also on its roster. It is not even the first time it worked with Toyota, but it is the first time that the collaboration is taking the such a form, so that the venture becomes a supplier to other service providers.

This may not amount to an outright divestiture of the autonomous driving business that Uber investors have been crying for, it nonetheless will help alleviate the financial pressure on the Uber management in the run-up to the planned IPO, without pulling out of one of the most important long-term, strategic areas in the automobile industry.

“The deal is the first of its kind for Uber, and signals our commitment to bringing world-class technologies to the Uber network,” said Dara Khosrowshahi, Uber’s CEO. “Uber’s advanced technology and Toyota’s commitment to safety and its renowned manufacturing prowess make this partnership a natural fit.”

This sentiment is echoed by Toyota. “This agreement and investment marks an important milestone in our transformation to a mobility company as we help provide a path for safe and secure expansion of mobility services like ride-sharing that includes Toyota vehicles and technologies,” said Shigeki Tomoyama, president of Toyota Connected Company, and executive vice president of Toyota Motor Corporation.

This is more than a symbolic move, as neither Uber nor Toyota is leading in autonomous driving. Actually neither of them is leading in either of the two strategic growth areas in the car industries, the other being electric vehicles (EV). While Tesla makes all the headlines in EV, it is the Chinese car makers that are selling far more EV and hybrid cars than anyone else.

When it comes autonomous driving, the disruption actually came from outside the automobile industry, with Waymo (owned by Google’s parent company Alphabet) being the leader (with whom Uber settled a dispute earlier this year). Tesla and Uber are following closely, though the traditional car makers have also heeded the wake-up call.

This kind of disruption from other than the usual suspects is nothing new to those of us who have followed the mobile telecom industry. Smartphones were introduced by companies traditionally associated the computer industry (Apple) and Internet (Google), which ultimately rendered names like SonyEricsson, Motorola, HTC, and Nokia obsolete.

In another interesting development, Finland’s Technical Research Centre (VTT) recently joined forces with Nokia to invest in a driverless “robot car” using the 5G network to be rolled out. It looks the once disrupted mobile telecom company is aiming to bring disruption to the automobile industry. The first targets are reporting weather conditions on the road as well as real-time road maintenance data analytics. Longer term, with a fleet of “robot cars” on the road under a well rolled out 5G network, VTT’s “5G-Safe” project, which “robot car” being part of, will aim to deliver a new use case of 5G to the transport industry.

The road to autonomous driving is quickly getting crowded and noisy.