Toyota invests half a billion dollars in Uber to save both companies

Japanese car maker Toyota has invested $500 million dollars to expand its collaboration with ride-sharing company Uber in autonomous driving cars.

After putting a brake on its self-driving car tests earlier this year, Uber has entered a new phase of collaborating with car makers as exemplified by this venture. Both companies will contribute their respective auto-driving technologies, as well as Uber’s ridesharing and Toyota’s car making expertise, to a new purpose-built Toyota Sienna Minivan. The new fleet produced out of this collaboration will not be owned by either company. Instead, according to the press releases, “the mass-produced autonomous vehicles will be owned and operated by mutually agreed upon third party autonomous fleet operators.”

This is not the first auto-driving partnership with car makers Uber has entered. Daimler, Volvo and others are also on its roster. It is not even the first time it worked with Toyota, but it is the first time that the collaboration is taking the such a form, so that the venture becomes a supplier to other service providers.

This may not amount to an outright divestiture of the autonomous driving business that Uber investors have been crying for, it nonetheless will help alleviate the financial pressure on the Uber management in the run-up to the planned IPO, without pulling out of one of the most important long-term, strategic areas in the automobile industry.

“The deal is the first of its kind for Uber, and signals our commitment to bringing world-class technologies to the Uber network,” said Dara Khosrowshahi, Uber’s CEO. “Uber’s advanced technology and Toyota’s commitment to safety and its renowned manufacturing prowess make this partnership a natural fit.”

This sentiment is echoed by Toyota. “This agreement and investment marks an important milestone in our transformation to a mobility company as we help provide a path for safe and secure expansion of mobility services like ride-sharing that includes Toyota vehicles and technologies,” said Shigeki Tomoyama, president of Toyota Connected Company, and executive vice president of Toyota Motor Corporation.

This is more than a symbolic move, as neither Uber nor Toyota is leading in autonomous driving. Actually neither of them is leading in either of the two strategic growth areas in the car industries, the other being electric vehicles (EV). While Tesla makes all the headlines in EV, it is the Chinese car makers that are selling far more EV and hybrid cars than anyone else.

When it comes autonomous driving, the disruption actually came from outside the automobile industry, with Waymo (owned by Google’s parent company Alphabet) being the leader (with whom Uber settled a dispute earlier this year). Tesla and Uber are following closely, though the traditional car makers have also heeded the wake-up call.

This kind of disruption from other than the usual suspects is nothing new to those of us who have followed the mobile telecom industry. Smartphones were introduced by companies traditionally associated the computer industry (Apple) and Internet (Google), which ultimately rendered names like SonyEricsson, Motorola, HTC, and Nokia obsolete.

In another interesting development, Finland’s Technical Research Centre (VTT) recently joined forces with Nokia to invest in a driverless “robot car” using the 5G network to be rolled out. It looks the once disrupted mobile telecom company is aiming to bring disruption to the automobile industry. The first targets are reporting weather conditions on the road as well as real-time road maintenance data analytics. Longer term, with a fleet of “robot cars” on the road under a well rolled out 5G network, VTT’s “5G-Safe” project, which “robot car” being part of, will aim to deliver a new use case of 5G to the transport industry.

The road to autonomous driving is quickly getting crowded and noisy.

A ticket to ride is just a Whim away

The subscription based mobile app Whim aims to replace car ownership. It is getting closer to that aim but is not quite there yet.

The app, and the Finnish startup behind it, MaaS Global (standing for “Mobility as a Service”), drew broader attention outside of Finland when Whim won the European Startup Prize for Mobility earlier this year. The concept is to consolidate journey planner, ride booking, and payment of customers’ travels on public transport (bus, metro, tram, and local train), bike hire, car sharing, car rental, and taxi rides, all to one mobile app. When the user selects the starting and ending points and the time of travel, the app will plan the optimum trip combining all means of transport available.

It offers subscribers different payment options. Cautious users may choose the pay per ride option, to test out the app. In Helsinki, a basic tier of €49 per month will give users unlimited access to all local public transport, plus bike hires, at a price level slightly lower than the official monthly travel card (€54.70, without access to bike hires). The user then can choose “pay-as-you-go” if she needs to add taxi rides and other services. An all-inclusive package of €499 will also cover a certain mileage of taxi ride, car rental, and car sharing.

Helsinki set itself a target to rid all cars from the city centre by 2050. Whim is moving in the right direction. In monetary terms, the €499 monthly package is already more economical than the total cost of owning a car, to consider the annual depreciation, insurance, tax, parking, fuel, maintenance, and, unique to countries in the far north, winter and summer tyres. Helsinki also has an advantage to make the app more useful: the buses almost always run on time, to the minute. This will become less of a concern for busier cities with more traffic when connected vehicles supported by IoT come to the streets, especially when 5G becomes more available.

MaaS Global has raised funds from private investors, the biggest being Toyota and the Japanese insurance company Aioi Nissay Dowa, which combined have invested over €10 million. Whim is now operational in Finland’s capital area, the four-city cluster including Helsinki, and has recently expanded to Birmingham, the UK’s second largest city. More cities on its map or been explored include Seoul, Toronto, Antwerp, Vienna, Amsterdam, Vancouver, Miami, etc.

However if a consumer should make the decision to sell his car and sign on services like Whim, monetary savings would not be his only consideration. He should not make too much sacrifice in convenience owning a car would have brought him. It is on this point that Whim still falls short, largely due to two main factors.

One is temporary and easier to fix. Helsinki’s bike-sharing is still dock-based. They will not be easily integrated into Whim planning if there is not a station near a user or along the route she is travelling. Introduction of dockless bikes will alleviate this problem, like the one we have seen in Manchester, supplied by the Chinese venture Mobike.

The other is generic and more difficult to fix: the availability of transport at the right place at the right time. Just imagine 20,000 people coming out of a concert at the O2 Arena after midnight, and the tube has stopped. Hardly any car-sharing apps could help take these people home quick enough.

There are also special cases when owning a car would be easier. For example a group of friends decide to transport their bicycles to the countryside for a ride. They would need a couple of cars fixed with the gear to transport bikes to be available at a specific location at a specific time.

The app, and the concept, is clearly running on consumer trend to move from ownership to access, as demonstrated in streaming music and video overtaking download and disc purchase. But, as was commented in a feature done recently by the BBC’s technology reporter Dave Lee, when subscriptions become the essence of being, we would be left with nothing if we could no longer afford the subscription, or the service we subscribe to ceases to operate. It is the psychological hesitation that may prevent us from giving up ownership entirely, cars or something else.