Conventional wisdom has it that the rise of robotaxis is bad for Uber Technologies Inc. and oh so good for Tesla Inc. But conventional wisdom is the antithesis of disruption, and along comes a deal on Thursday to hammer home the point: Uber’s autonomous vehicle partnership with Lucid Group Inc. and Nuro Inc. Tesla, in particular, should watch out.
The three companies are teaming up to build a fleet of at least 20,000 robotaxis, using Lucid’s Gravity electric SUV fitted with Nuro’s AV system, and owned and operated by Uber or third-party partners. They plan to deploy the first ones next year in an unnamed major US city. As part of the deal, Uber will invest in both companies. For Lucid, the funding is to refit its assembly line to incorporate Nuro’s technology. But along with the sales pipeline, it refits Lucid’s distressed stock: Having fallen by nearly 90% over the past three years, it jumped by more than a third on Thursday morning as an army of shorts got squeezed.
In theory, robotaxis are bad for Uber’s ridesharing business, allowing the likes of Waymo LLC, Alphabet Inc.’s AV unit, Tesla and others to eat into its business. In December, Uber’s stock suffered its single biggest one-day drop in more than two years on news of Waymo’s expansion to Miami.
The reality, however, is that AVs, currently less than 1% of the rideshare market, aren’t suddenly going to displace human drivers. Rather, we are likely to see a hybrid model develop. Like airlines or buses, making AVs profitable relies largely on higher utilization: More butts in seats going places. But we humans travel erratically, so building enough robotaxis to meet peak demand would inevitably mean a lot of empty ones for long stretches of the day, a downside known as ‘deadheading’. In addition, AVs can struggle with some of the most profitable, but complex routes such as picking up and dropping off at the automotive melee known as the airport line (Waymo still doesn’t serve San Francisco’s airport, for example). A better model, at least for the foreseeable future, would involve a baseload of AVs covering a steady diet of rides supplemented by human drivers serving the more lucrative demand surges as well as routes that befuddle the robots.
This gets to a wider point raised by Uber’s deal: No one yet knows what success will look like in autonomy. In this case, Uber is capitalizing on its own success — free cash flow doubled last year to $6.9 billion — and the struggles of Lucid to secure a pipeline of high-end electric robotaxis. But that is just one of several bets it is making. In April, it announced an agreement with Volkswagen AG to deploy the latter’s Buzz electric vans for autonomous rides in Los Angeles, targeting commercial operation in 2026. And rather than outright competitors, Uber and Waymo are more like frenemies, with the latter’s robotaxis operating exclusively through Uber’s app in Atlanta and Austin. Indeed, regarding the latter city, the two just announced they will more than double the area served. Waymo is also not monogamous in terms of vehicles, with its fleet currently centered on modified Jaguar I-Pace EVs but also having just announced a potential partnership with Toyota Motor Corp.
