Uber, after years of trying, is handing off its self-driving car project

Uber, which spent hundreds of millions of dollars on a self-driving car project that executives once believed was a key to becoming profitable, is handing the autonomous vehicle effort over to a Silicon Valley startup, the companies said Monday.

Uber will also invest $400 million in the startup, called Aurora, so it is essentially paying the company to take over the autonomous car operation, which had become a financial and legal headache. Uber is likely to license whatever technology Aurora manages to create.

The deal amounts to a fire-sale end to a high-profile but star-crossed effort to replace Uber’s human drivers with machines that could drive on their own. It is also indicative of the challenges facing other autonomous vehicle projects, which have received billions in investments from Silicon Valley and automakers but have not produced the fleets of robotic vehicles some thought would be on the streets by now.

Aurora’s chief executive, Chris Urmson, said Aurora’s first product will not be a robot taxi that could help with Uber’s ride-hailing business. Instead, it will likely be a self-driving truck, which Urmson believes has a better chance of success in the near term because long-haul truck driving on highways is more predictable and does not involve passengers.

In a statement, the Uber chief executive, Dara Khosrowshahi, said he was looking forward to bringing Aurora technology to market “in the years ahead.” Uber declined to comment further on the agreement.

Among self-driving car projects, Uber’s effort, which led to the death of a pedestrian in Arizona; a lawsuit from Waymo, the self-driving car company owned by the same parent company as Google; and a guilty plea from a former Uber executive accused of stealing intellectual property, was particularly fraught.

It began with an ambitious — but in hindsight fanciful — proposition: Uber’s biggest expense was its drivers. If it could replace the drivers with machines, it could eventually reduce expenses and become profitable, ending years and billions of losses.

Uber began its work on autonomous vehicles around 2015 when it announced a partnership with Carnegie Mellon University’s National Robotics Center. Uber poached 40 engineers and scientists from Carnegie Mellon later, establishing the foundation for its autonomous vehicle unit, called the Uber Advanced Technologies Group, or ATG.

In 2016, Uber acquired autonomous trucking startup Otto, led by Anthony Levandowski, a former Google engineer. When Google first tested its self-driving car on public roads a decade ago, Levandowski and Urmson, who played a key role in Google’s original self-driving car project before co-founding Aurora, were two of the project’s engineers. The test was a milestone that eventually led to an investment frenzy.

The acquisition, which valued Otto at $680 million, turned sour when Waymo filed a lawsuit against Uber in early 2017, claiming that Levandowski had stolen trade secrets from Google. Uber fired Levandowski, and though the case went to trial, the companies eventually settled. Uber agreed to give Google a stake in the company valued at $72 million.

Federal prosecutors charged Levandowski with 33 counts of theft and attempted theft of trade secrets from Google. He was sentenced to 18 months in prison earlier this year.

The death of a woman in Tempe, Arizona, in March 2018 — ultimately attributed to driver error and other safety shortcomings — was a grim turning point for Uber and other self-driving car projects. Uber and other companies suspended their road tests. Even after tests resumed, new investments slowed. When Uber finally returned its cars to the road, they continued to fall short of expectations.

In 2018, Uber received a $500 million investment from Toyota to help keep the self-driving unit afloat. The investment marked a shift in Uber’s strategy, signaling that the company no longer wanted to develop its own self-driving car but rather plug its navigation technology into a vehicle made by a traditional manufacturer.

A year later, Toyota added to its investment, partnering with Denso and the SoftBank Vision Fund to pour $1 billion into Uber’s self-driving effort. The deal valued Uber’s ATG at $7.25 billion. The cash infusion bought ATG some time, but its long-term future at Uber remained unclear. The unit was expensive to operate, though Uber maintained it would become profitable by 2021.

In 2019, when a well-known startup sold itself to Apple, the nascent autonomous vehicle industry began to consolidate.

The coronavirus pandemic presented more problems. It curtailed testing because social-distancing rules prevented companies from keeping multiple drivers in cars to guard against accidents. Some industry veterans admitted that success was further away than they had expected.

The pandemic also put financial strain on Uber, which saw its core ride-hailing business decline as people stopped traveling. Investors had long pressured Khosrowshahi to sell the self-driving unit. The demands became more urgent as Uber’s revenue plummeted.

Aurora has its headquarters in Silicon Valley but also runs an office in Pittsburgh, where its chief technology officer, Drew Bagnell, a Carnegie Mellon professor and former Uber employee, works. As well as acquiring Uber’s self-driving technology it is acquiring engineers and support staff, most of whom are based in Pittsburgh.

As part of the agreement between the two companies, Uber is taking a 26% stake in the startup and Khosrowshahi will take a seat on the Aurora board of directors.

“Uber can still have a hand in the game, without putting out the enormous amount of money they were spending with ATG, but still have a path to market when this technology is actually deployable in several years,” said Elliot Katz, co-founder and chief business officer of Phantom Auto, a startup that helps companies remotely control autonomous vehicles.