Uber Steering Through AV Uncertainty
Balancing partnerships and risks in the race for driverless rides.
As autonomous vehicle systems promise to drive massive disruption and unlock new growth opportunities across transportation, Uber remains at the center of the conversation about how its current business model will adapt to an industry undergoing structural and competitive change.
Along these lines, Uber is reportedly in discussions with its co-founder and former CEO Travis Kalanick to support a bid to acquire the U.S. subsidiary of the Chinese autonomous vehicle (AV) technology company Pony.ai. The talks are said to be in early stages, with no financial details available and no clear definition of what role, if any, Uber would play.
The potential sale of Pony.ai’s U.S. operations follows a Commerce Department rule introduced earlier this year restricting the use in the United States of connected and autonomous passenger vehicle hardware and software developed, manufactured, or supplied by entities controlled by or connected to China or Russia. This policy is consistent with the notion that the structure of the global robotaxi market will diverge across regions as national security and cybersecurity concerns in both the U.S. and China restrict robotaxi operations to primarily domestic players.
If Uber ends up investing in Pony.ai, it could mark the first step toward reestablishing a more closely aligned autonomous technology effort similar to its former self-driving unit, the Advanced Technologies Group, which was acquired by Aurora in December 2020. Moreover, should Uber become a direct investor in a robotaxi operator, it would arguably signal an acknowledgment that the shift from driver-based to driverless rideshare services will fundamentally reshape industry economics in favor of those who control autonomous vehicle technology.
This context is crucial, as the U.S. robotaxi market is likely to evolve toward an industry dominated by a handful of key technology players given the steep barriers to entry. Since only a few companies are expected to develop autonomous systems that operate safely and reliably across diverse environments, varying conditions, and when encountering unexpected edge cases, the result will be a more concentrated supply structure than today’s driver-based rideshare model. As the utility of Uber’s two-sided marketplace diminishes, economic leverage and profit pools are set to shift toward these core AV technology providers, such as Waymo and Mobileye, who are well positioned to be prime beneficiaries of the transition to vehicle autonomy.
While Uber is pursuing a broad range of partnerships as the AV and robotaxi market evolves, its core rideshare business model remains predicated on today’s dynamics and depends on the industry’s highly fragmented supply structure staying intact, yet that structure is set to change. At the heart of the debate around Uber’s future is whether the supply side of the robotaxi market will consolidate into an oligopoly dominated by a few key players or a more fragmented AV ecosystem.
Even if Mobileye’s open-supplier model gains traction and fosters a broader base of fleet operators, potentially preserving a more meaningful role for platforms like Uber, the market’s underlying structure will still change. Technology enablers that solve the toughest autonomy challenges will be best positioned to capture outsized economic rents, given the industry’s technological and capital barriers to entry.
Uber’s Strategy for the Robotaxi Era
Uber is essentially hedging its bets by pursuing several different partnership models to prepare for and compete in a rideshare market where driverless robotaxi services will account for an increasing share of rides.
In light of these shifting dynamics, Uber’s adoption of a pragmatic and flexible strategy makes sense. The company seems to be pursuing three primary paths to position itself in the evolving robotaxi landscape. First, Uber is partnering with AV technology companies that directly operate robotaxi services on its platform in select cities, such as its existing tie-up with Waymo and its announced partnership with WeRide. Second, Uber is collaborating with partners to deploy robotaxi fleets powered by third-party AV technology suppliers on its marketplace, for example its cooperation with VW to launch a driverless rideshare service in Los Angeles using Mobileye’s autonomous systems. Finally, if Uber moves forward with an investment in an AV technology developer or robotaxi operator, it would mark a third strategic path aimed at addressing the growing competitive threat posed by autonomous vehicle rideshare services.
A direct investment in an autonomous vehicle technology company represents an approach that would offer Uber potential rewards if the AV technology succeeds, but also expose it to technology risk and, depending on the investment structure, create potential conflicts with other partners. Additionally, any significant investment in a more capital intensive robotaxi business could over time represent a departure from Uber’s asset-light business model and expectations that it will return the majority of its free cash flow to shareholders, factors that suggest Uber will proceed cautiously with such a move.
While agreements like Uber’s partnership with Waymo, where it provides fleet management services in Austin and Atlanta, help create stickier relationships with robotaxi operators, they also carry the risk of disintermediation as these partners gain scale and market leverage. Today’s partner could become tomorrow’s competitor. For Waymo, this partnership primarily accelerates its go-to-market strategy by outsourcing fleet management to a third party, while Uber benefits by staying relevant in the robotaxi space. Moreover, this relationship is not exclusive nationwide; Waymo’s separate partnership with Moove for fleet management in Phoenix and Miami illustrates its broader strategy of working with multiple partners across markets to support its rollout to more cities.
In contrast, fleet operators deploying vehicles using third-party AV technology on Uber’s marketplace could offer a more balanced and mutually beneficial relationship—one that is likely to provide Uber with the most favorable long-term opportunity to capture a greater share of the addressable market and benefit from growth driven by robotaxi services. Given the high fixed costs of owning and operating robotaxi fleets, maximizing vehicle utilization will be essential for achieving better unit economics. However, even if companies like Mobileye emerge as successful third-party AV technology suppliers, questions remain about whether the fleet operator landscape will stay fragmented enough for rideshare platforms to maintain a significant role —or whether a more consolidated supply structure will emerge, enabling robotaxi operators to establish direct-to-consumer relationships and reduce their reliance on third-party marketplaces.
Evolving Competitive Landscape
Ultimately, Uber’s future competitive standing and market opportunity in an AV-driven landscape will hinge on two key factors: the industry’s supply structure and the speed of the transition from a supply-constrained robotaxi market to one where falling prices drive positive price elasticity and market expansion.
Early on, robotaxi supply constraints will limit the need for third-party marketplaces, as demonstrated by Waymo’s direct to consumer service in San Francisco. For Uber to offset inevitable market share losses to direct to consumer robotaxi apps, overall market growth and ride volumes will need to expand enough to compensate for declines in both share and, over time, revenue per mile.
However, in the initial phases of robotaxi commercialization, limited vehicle availability will likely keep prices at or above those of Uber and Lyft, curtailing the potential for price-driven market expansion. Without lower prices to stimulate rideshare growth, combined with the novelty of a driverless ride, market share is likely to shift away from Uber and Lyft. This would be bad news for Uber and Lyft’s stocks as concerns mount that, in an autonomous world, they will become net market share losers. Only once fleets scale and increased supply drives prices down will market expansion become large enough to potentially offset rideshare marketplaces’ reduced share and declining per-mile revenue.
Frequent Swings in Sentiment
Investor sentiment on whether robotaxis represent a threat or an opportunity for Uber has repeatedly shifted with developments ranging from changes in Tesla’s robotaxi expectations, Waymo’s successes, optimism around Uber’s partnership announcements, and reports of Waymo gaining meaningful share in markets like San Francisco.
Nonetheless, the competitive implications of expanding robotaxi services continue to cast an intermittent yet persistent overhang on Uber’s stock and valuation, much like how fears of an AI-driven shift in search have pressured Alphabet’s multiple. Should Uber’s mobility gross bookings growth continue to decelerate while Waymo scales and expands to new cities, concerns over Uber’s terminal value will likely intensify.