The ride-hailing giant Uber has stated that it will spin out its autonomous car business after its unit has successfully managed to raise $1 billion in funding from the likes of Toyota, SoftBank’s Vision Fund and Denso.
This recent development comes on the back of wild speculation about Uber’s self-driving unit since October, and it has the potential to remove an unprofitable business unit from the main company, thus helping Uber to reduce some of its losses which it was suffering for quite some time now. This will also give Uber’s Advanced Technologies Group, which is known as Uber ATG, more freedom and flexibility to strengthen their focus on the tough challenge of introducing self-driving cars to the market.
This deal will now peg Uber ATG’s valuation at $7.25 billion. SoftBank’s Vision Fund will be providing $333 million out of the $1 billion series of funding, while Japanese auto giant Toyota and auto-parts maker Denso will provide the rest $667 million into Uber’s autonomous driving unit.
The deal is also expected to be finalized by the end of the third quarter of 2019, and it gives the investors a new stake on Uber’s preceding initial public offering, which also combines Uber’s ATG business unit. The ride-hailing giant posted a net loss of $1.85 billion for the financial year of 2018, but its research and development into ventures like its autonomous cars and flying vehicles dragged these numbers downwards by accounting for more than $450 million in its expenditure bill. Uber’s move to separate its capital-intensive Research and Development projects into a separate entity will help the company to bring its core numbers down to earth. Yet, clearly Uber has still a lot of work to do in order to reach break-even or even profitability in the future.
These crazy numbers haven’t yet dampened the mood for Uber’s IPO as investors in Wall Street are in a frenzy to get their share of the pie. Uber is still seen as a massively valuable company, and it is expected to raise around $10 billion from its Initial Public Offering, which will enable the company to reach a valuation of around $90 billion to a $100 billion.
The identity of the investors into Uber’s autonomous driving unit does not come as a surprise. The Vision Fund, which is run by its parent company SoftBank, has invested heavily in Uber since January of 2018, while Toyota has invested $500 million into the ride-hailing giant in August of 2018. Both Toyota and Uber are working tirelessly to introduce autonomous ‘Sienna’ vehicles to Uber’s ride-hailing service by the end 2021, while SoftBank and Toyota have entered into a joint partnership to develop mobility services in Japan, where self-driving vehicles will be at the heart of their strategy.
The duo of SoftBank and Toyota have also invested in Grab, which is the biggest player in the Southeast Asian ride-hailing market, and Uber owns around 23 percent into that company. SoftBank has been a big investor since the year of 2014, and Toyota invested $1 billion into Grab, which it stated that it was the highest investment it made in a ride-hailing venture.