Uber's self-driving car race to get Toyota's half-a-billion dollar push

Toyota Motor Corp will invest $500 million in Uber to jointly work on developing self-driving cars, a source familiar with the matter said on Monday, a bid by both companies to catch up to rivals in the hotly competitive autonomous driving business.

Toyota, one of the world's largest carmakers, and Uber Technologies Inc, the leading ride-hailing service, are widely seen as lagging the competition in developing self-driving cars. The partnership deepens an existing relationship and reflects CEO Dara Khosrowshahi's strategy of Uber developing autonomous vehicles through partnerships, rather than on its own.

The deal also breathes new life into Uber's self-driving business. Since a self-driving Uber SUV killed a pedestrian in Tempe, Arizona, in March, Uber has removed its self-driving cars from the road, laid off hundreds of test drivers and shuttered operations in Arizona, its autonomous testing hub.

The investment values Uber at $72 billion, matching the valuation Uber received in a deal with Alphabet Inc self-driving unit Waymo this year.

Uber will combine its autonomous driving system with Toyota's Guardian technology, which offers automated safety features such as lane-keeping but does not enable a vehicle to drive completely autonomously. The combined technology will be built into Toyota's Sienna minivans, to be deployed on Uber's ride-hailing network starting in 2021, the source said.

An unidentified third party will own and operate the fleet, the source said. Both companies aim to solve the enormously challenging problem of how to mass produce self-driving cars.

Toyota was not immediately available for comment. Uber declined to comment.

Toyota has been less aggressive than some rivals on moving towards full-fledged autonomous driving. It has expressed caution about the technology and focussed on partial autonomous systems like Guardian. But the company has invested in research and said it plans to begin testing self-driving electric cars around 2020.

Uber has admitted its technology lags Waymo, and the crash in Arizona was a further setback in development and testing.

Since the crash, Khosrowshahi, whom employees consider a more pragmatic leader than his predecessor, has explored options that include more partnerships as well as a potential sale of the self-driving business, separate sources have told Reuters. The self-driving unit is a significant contributor to Uber's losses, which in the second quarter were $891 million.

At a July conference in Aspen, Colorado, Khosrowshahi said Uber was "totally open for business ... and we are having active discussions with other partners."

Uber has a deal to purchase cars from Volvo and outfit them with Uber's technology, and with Daimler AG, in which the carmaker proposes to put its own self-driving cars in Uber's ride-hailing network.

Khosrowshahi's partnership strategy is a shift. Uber co-founder and former CEO Travis Kalanick had insisted on developing a proprietary self-driving system and called autonomous cars "existential" to Uber.

Previously, Uber and Toyota partnered on an electric mobility project. Two years ago, Toyota invested an undisclosed sum in Uber and the two companies partnered on a car-leasing programme for Uber drivers. Uber has since shuttered its U.S. leasing business.