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Toyota raises bet on self-driving cars by lifting Uber stake

It is transforming into a mobility-services provider, with CEO warning that the paradigm shift has become a life-or-death battle for traditional automakers

By BLOOMBERG

TOKYO • Toyota Motor Corp is investing US$500 million (RM2.04 billion) more in Uber Technologies Inc, underscoring the Japanese automaker’s efforts to catch up on self-driving technology as General Motors Co (GM) and Alphabet Inc’s Waymo lead the race to upend the industry.

As part of the accord announced late on Monday, Toyota plans to manufacture Sienna minivans loaded with Uber’s software, with testing slated to begin on Uber’s ride-sharing network in 2021. Toyota’s stake is set to value the ride-hailing company at US$72 billion, according to a person familiar with the matter, who asked not to be identified because the details are private.

The 81-year-old manufacturer is accelerating a push to transform into a mobility-services provider, with CEO Akio Toyoda warning that a once-a-century paradigm shift in the industry has become a life-or-death battle for traditional automakers.

Uber isn’t Toyota’s only investment in a ride-sharing company — it poured US$1 billion into South-East Asia’s Grab earlier this year and has a partnership with China’s Didi Chuxing Inc. Toyota is also a backer of Japan Taxi, an Uber rival run by the chairman of Tokyo’s biggest taxi operator.

Carmakers and technology companies alike are working toward a future where autonomous robo-taxis will lessen the need for individual car ownership. The Toyota Citybased company, which initially bought a small stake in Uber in 2016, is spreading its bets far and wide for a shot at these nascent technologies.

Toyoda has said there are “no nautical charts for us to follow” in plotting the course to future mobility.

Uber and Didi are also partnering Toyota in the carmaker’s vision for a fleet of autonomous, modular boxes on wheels that can be customised to transport anything from people to pizza. CEO Toyoda unveiled the concept, dubbed e-Palette, at Consumer Electronics Show in Las Vegas in January. Amazon.com Inc and Pizza Hut also signed on.

Toyota’s expanded foray aligns it with Japanese Internet giant SoftBank Group Corp, which is already among the biggest backers of the main ride-hailing companies: Uber, Didi and Grab.

SoftBank founder Masayoshi Son has sunk as much as US$9.5 billion into Didi, led investments worth US$9.3 billion in Uber and US$4 billion in Grab, and owns a stake in India’s Ola. SoftBank’s Vision Fund is also an investor in GM’s Cruise autonomous-car unit and Manbang Group, China’s Uber-like truckrental company.

Need Partners
“Since 2015, we’ve been working to bring safe, reliable self-driving technology to the Uber network,” Eric Meyhofer, head of Uber’s Advanced Technologies Group, wrote in a blog post on Monday afternoon. “We knew we couldn’t do it alone, which is why we continue to partner with worldclass vehicle manufacturers to make our vision a reality.”

Uber and Toyota expect the mass-produced autonomous vehicles will be owned and operated by a third-party company they mutually agree on, according to the carmaker.

The deal with Toyota raises Uber’s valuation and matches the value of shares given to Waymo after Uber settled a lawsuit over self-driving cars. A group of investors had valued Uber at US$62 billion earlier this year.

Giving Incentives
Toyota’s relationship with Uber stretches back to at least 2013, when Uber drivers started to get discounted financing on Toyota cars.

As with traditional rental companies like Avis Budget Group Inc, Toyota is trying to sell Uber fleet-management services based on the rapidly expanding volume of data it’s collecting from connected cars. These services include being able to monitor whether a car is being properly maintained or driven too aggressively.

“Nobody knows what kind of business opportunities the sharing economy will create, so for now Toyota feels like it needs to just get that know-how,” said Koji Endo, an auto analyst at SBI Securities Co in Tokyo.

“They don’t know what kind of return the company can expect on its US$1 billion investment in Grab. It’s like they’re groping in the dark.”

Safety Net
In the current venture, Toyota’s own autonomous driving system, which uses banks of sensors to anticipate what other vehicles and pedestrians are doing in a wide space around the vehicle, will function as a safety net alongside Uber’s self-driving software.

Uber has developed a three pronged self-driving strategy. For one, Uber purchased Volvos, retrofitted the cars with its self-driving technology and operates the fleet on its own. In another, Daimler AG will own and operate its own self-driving cars on Uber’s network. And the deal with Toyota becomes a third pillar, where Uber licenses its technology.