Economy First Look

Uber-Daimler partnership: A business model for the autonomous age?

The ride-hailing giant has signed a deal with the German automaker to incorporate its self-driving Mercedes-Benz into Uber's growing fleet of autonomous vehicles.

A group of self-driving Uber vehicles position themselves to take journalists on rides during a media preview at Uber's Advanced Technologies Center in Pittsburgh in September 2016.
Gene J. Puskar/AP/File
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The partnership between Uber and Daimler may represent a new business model for ride-hailing services and automakers as they look toward an autonomous future.

On Tuesday, ride-hailing giant Uber announced a deal with Daimler AG, the German automaker responsible for brands like Mercedes-Benz. In the coming years, Uber will make Daimler’s self-driving Mercedes Benz part of its fleet of autonomous vehicles. Daimler will take charge of all aspects of car research, development and production – including the autonomous technology – while Uber will be responsible for connecting customers with rides.

The auto landscape is changing rapidly, with autonomous vehicles already being tested in pilot programs across the country. In the future, fewer people may buy their own cars – and this partnership may allow both companies to monetize their existing expertise under those conditions.

“Each company will benefit from the other’s industry-leading capabilities in research and development of autonomous driving and network operations,” Daimler said in a press release.

Cars are most prized for their convenience and value for money, observed the Financial Times’ John Gapper in December. Once cars are autonomous, few people are likely to own their own cars, since rides will show up quickly and the cost of owning a car will no longer be less than constantly using taxis. According to a Ford estimate, autonomous rides will cost $1 per mile, compared with Uber’s current $2.50 average.

With fewer privately-owned cars on the roads, ride-hailing services will likely need to have their own fleets of cars. That’s something Uber has been working on, creating pilot fleets in Pennsylvania and Arizona. They created these fleets as part of a $300 million deal with Volvo: Volvo provided the cars and Uber equipped them with self-driving technology.

Working with auto manufacturers is vital to the future of these services.

"Auto manufacturers like Daimler are crucial to our strategy because Uber has no experience making cars – and in fact, making cars is really hard," Travis Kalanick, chief executive of Uber, said in a blog post.

Manufacturers’ future may likewise hinge on these partnerships. If private individuals are buying fewer cars, then manufacturers who want to stay in business will need to find another way to monetize their cars.

With that in mind, some automakers have decided to take on Uber, starting their own ride-hailing services. In December, Volkswagen created a new brand, MOIA, to provide transport services. Its electric vans will be used as commuter shuttles, starting in Germany.

Elon Musk, the CEO of Tesla, also has dreams of a ride-sharing future for his company. Over the summer, he discussed his vision of a Tesla shared fleet, where owners can use the Tesla app to add their car to the fleet “and have it generate income for you while you’re at work or on vacation.” New Teslas, which are equipped with the technology to someday make them fully autonomous, come with a contract that prevents the owner from using them for ridesharing outside the Tesla Network, details of which are expected to be released this year.

But the advantage of the Uber-Daimler partnership lies in its simplicity. Both companies can focus on areas where they already have expertise – and capitalize on existing brand loyalty.

That expertise was certainly a consideration for Dieter Zetsche, chairman of the board of management of Daimler AG and head of Mercedes-Benz Cars. 

“Mobility service providers offer an ideal platform for autonomous driving technology and Uber is a leading mobility platform company,” he said in the company’s press release.

“By combining Daimler’s and Uber’s technological strengths, more people can get access to reliable transportation at the push of a button,” said Mr. Kalanick.

[Editor's note: The story has been edited to clarify the brands for which Daimler AG is responsible.]

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