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7 September 2018

Toyota sinks $500mn into now-$76bn Uber, Tesla not going private

Toyota has invested $500mn into Uber, helping to boost Uber’s valuation after a difficult few months. The pair will combine technologies to create autonomous Toyota vehicles that will be used in Uber’s ride-sharing service. Fellow self-driving firm Tesla is in for some more turbulence, as CEO Musk has drawn the attention of the SEC after the flip-flop on going private. Oh, and Musk also re-accused a cave diver of being a “child rapist.”

Toyota and Uber have come up with a name for their project – the Autono-MaaS, a blend of autonomous and Mobility-as-a-Service. In terms of the actual technologies involved, Toyota will be supplying its Sienna Minivans, equipped with its Guardian automated safety support system and its Mobility Services Platform (MSPF). Uber will be supplying its (somewhat controversial) Autonomous Driving System.

Notably, a third-party will own and operate the fleet, as part of a new business model that the pair plan to implement, but that third-party isn’t being disclosed. It could be a joint venture, it could be someone like Hertz or Avis, or an existing taxi firm in each location – the pair are staying mum on this point. The Autono-MaaS Sienna passenger vans will be a blend of Toyota and Uber software, which will be able to communicate with both companies’ back-end platforms.

Interestingly, Toyota warns that the planned collaboration is still subject to standard regulatory approvals – perhaps a sign that the company is wary of legal repercussions from the infamous Uber crash death, or perhaps concern that the second-largest automaker and the largest ride-sharing platform might draw the ire of competition authorities.

Separately, Toyota has plans to build a 60-acre facility in Michigan, to test driving scenarios that are too dangerous for public roads, and will invest $2.8bn its Toyota Research Institute (TRI) Advanced Development (TRI-AD) wing. Toyota has been heavily involved in Automotive Grade Linux (AGL) too.

“Uber’s automated driving system and Toyota’s Guardian system will independently monitor the vehicle environment and real-time situation, enhancing overall vehicle safety for both the automated driver and the vehicle,” said Dr. Gill Pratt, Toyota Research Institute CEO and TMC Fellow. “We look forward to this partnership accelerating both companies’ development and deployment of automated driving technology.”

Uber’s valuation recovery will be good news for investors. Back in January, at the time of a $9bn investment from SoftBank, Uber’s valuation had slumped 30% to hit $49bn. SoftBank was buying 15% of Uber, in a somewhat complex deal that used two different per-share values – giving that much lower valuation. SoftBank was buying around $1.2bn at a price valuing Uber at $70bn, but then buying $7.7bn at $32.93 in secondary shares, which netted the $49bn figure – a huge discount on the previous working valuation of $70bn.

The SoftBank investment dragged on, but later in May, three investors bought $600m of stock at a valuation of around $40 per share – which jumped the valuation to $62bn. This figure drew a lot of ire – a rather inflated sum, according to many in the financial and investment community, who point to Uber’s continued operating losses.

The Uber-Waymo lawsuit settlement, in February 2018, apparently valued Uber at $72bn, and so Toyota’s investment has now added $4bn to that valuation. Of course, Uber is a private company, and so most of the speculation regarding its valuation is subject to some pretty big caveats – but it now appears that Uber is apparently ‘worth’ $76bn, and has recovered. That is a sign of confidence in the new CEO and his ability to clean things up in the troubled firm.

Toyota and Uber signed a leasing deal in 2016, worth around $300m, which enabled Uber drivers to lease cars from Toyota and pay them off via Uber trips. Later deals saw Uber commit to buying 24,000 Volvo SUVs, due for delivery between 2019 and 2021, as well as an agreement with Daimler to let the automaker operate self-driving cars on Uber’s platform.

Uber is looking for some quiet progress, following the crash. The financial community is quick to suggest selling off the self-driving assets, but doing so could seriously devalue the company as a whole. Similarly, calls for a 2019 IPO seem to be being ignored, as new CFO Nelson Chai has said he was not on board with such plans. Thankfully for Uber, the Waymo lawsuit came to a very abrupt and affordable end, a $245mn settlement, but the decision to exit autonomous trucking (the Otto wing being what caused the Waymo litigation) has hit its cash reserves – to the tune of $925mn.

“The deal is the first of its kind for Uber, and signals our commitment to bringing world-class technologies to the Uber network,” said Uber CEO Dara Khosrowshahi. “Our goal is to deploy the world’s safest self-driving cars on the Uber network, and this agreement is another significant step towards making that a reality. Uber’s advanced technology and Toyota’s commitment to safety and its renowned manufacturing prowess make this partnership a natural fit. I look forward to seeing what our teams accomplish together.”

Meanwhile, the Tesla drama continues, with Buzzfeed journalist Ryan Mac deciding to release an email Musk had sent, in which he returned to his claim that British cave diving expert Vernon Unsworth, involved in the famous rescue operation in Thailand, was a ‘pedo.’ The email to Mac, in which Musk had ‘prefaced the email with “off the record,’ escalated things, now calling Unsworth a ‘child rapist,’ as well as insulting the journalist – who then made the email public, declaring that off the record admissions are a two-party agreement that Mac had not agreed to.

The latest incident comes after Musk changed his mind on plans to take the company private. The SEC is still planning on investigating the legality of the claim that Musk had in fact secured funding to do this, as was claimed – with speculation that Saudi Arabia’s sovereign fund, was not in fact in the running to up its 5% stake.

Ambien has been blamed, and a New York Times article outlined a pretty stressful year for Musk. However, Musk is losing in the court of public opinion, British libel laws are pretty stern (the burden of proof is on Musk to prove what he said is true and therefore not libelous), and the conservative investment community is not happy with his incredibly unprofessional conduct.