August 22, 2016

Uber acquires self-driving trucking firm Otto

$680 million deal accelerates pursuit of autonomous vehicles.

By Ben Ames

Ride-hailing pioneer Uber Technologies Inc. has accelerated its entry into the self-driving vehicle sector by acquiring autonomous trucking startup Otto for a reported $680 million and announcing a deal with Volvo Car Group to build the technology into sedans and SUVs.

Formed in 2016 by four veterans of Google's self-driving car project, San Francsico-based Otto's combination of hardware and software retrofits existing trucks with autonomous driving abilities by adding sensors to the roof.

Following the merger, Otto Co-Founder Anthony Levandowski will take over Uber's self-driving efforts for applications in personal transportation, delivery, and trucking, Uber CEO and Co-Founder Travis Kalanick said in a blog post on Thursday. Levandowski will be responsible for merging Otto's existing test programs of self-driving trucks and cars with Uber's Advanced Technologies Center in Pittsburgh, as well as additional Uber offices in San Francisco and Palo Alto, Calif.

Uber paid about 1 percent of its own estimated $68 billion valuation for the deal, making privately held Otto worth $680 million, according to Reuters. Uber did not respond to requests for comment.

The deal allows Uber to extend its software-based digital ride-sharing platform into larger sectors of the real world, such as package delivery and trucking. "In order to provide digital services in the physical world, we must build sophisticated logistics, artificial intelligence, and robotics systems," Kalanick said in the blog.

Uber plans to leverage the Otto acquisition by applying the technology to passenger cars.

Also Thursday, Uber unveiled its deal with Volvo that would see the two companies invest a combined $300 million to combine base vehicles manufactured by Volvo with autonomous driving systems supplied by Uber. Both companies will use the base vehicle to develop independent versions of self-driving capabilities, "up to and including fully autonomous driverless cars," Volvo said.

"By combining Uber's self-driving technology with Volvo's state-of-the art vehicles and safety technology, we'll get to the future faster than going it alone," Kalanick said.

Despite the combination of advanced technologies, regulatory challenges will probably ensure that American drivers won't see self-driving trucks on the roads until 2025 at the earliest, according to Wallace Lau, mobility team lead at consulting firm Frost & Sullivan.

"The technology to build an autonomous truck is available today, as we have seen from Daimler and from Otto as well," Lau said in an email. "However, the biggest hurdle is the regulatory environment and societal acceptance of autonomous driving on public roads. Extensive testing is under way to prove that autonomous driving can be viable in all weather and traffic conditions."

Trucking companies will likely beat consumer automotive providers to clearing those hurdles, thanks to economic pressures such as the worsening driver shortage in North America, deteriorating road safety, and difficult lifestyle of truck drivers, Lau said.

"The biggest question will be if carriers are willing to pay for the autonomous technology while still having to pay the drivers wages," Lau said. "An autonomous truck will be a worthwhile investment if the autonomous truck can answer all challenges above while increasing carrier productivity, safety, efficiency, and provide a reasonable ROI."

About the Author

Ben Ames
Senior Editor
Ben Ames has spent 20 years as a journalist since starting out as a daily newspaper reporter in Pennsylvania in 1995. From 1999 forward, he has focused on business and technology reporting for a number of trade journals, beginning when he joined Design News and Modern Materials Handling magazines. Ames is author of the trail guide "Hiking Massachusetts" and is a graduate of the Columbia School of Journalism.

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