Next Step: Uber and Volvo Teaming to Build Thousands of Driverless Cars

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Volvo and Uber will undertake a massive expansion of their partnership involving automated vehicles over the next three years. After spending the past 15 months building prototypes that were subsequently deployed in select cities around the United States with human safety drivers behind the wheel, the two companies signed an agreement announced Monday that calls for Uber to purchase approximately 24,000 XC90 SUVs from the Swedish carmaker.

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Intended for fully driverless operations, the vehicles are slated to arrive in Uber’s hands between 2019 and 2021. Based on current plans of competitors racing toward autonomous deployments, a self-driving fleet of that size would constitute the largest in the world.

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Once Uber obtains the base vehicles, which are built on Volvo’s modular Scalable Product Architecture, the ride-hailing company will outfit them with its own self-driving software and sensors. Ostensibly, Uber’s plans would include deploying them in commercial operations shortly thereafter, but those plans are still being formed.

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“This deal puts us on the path toward mass produced self-driving vehicles at scale,” said Jeff Miller, Uber’s head of automotive alliances. “And it’ll allow us to roll out autonomous vehicles at scale and provides us sufficient flexibility to begin scaling production when our tech is ready.”

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Although the Volvo deal adds general guidance on that time frame, there are still questions regarding the mettle of Uber’s autonomous technology. A March 2017 report from analysts at Navigant Research ranked Uber’s self-driving program 16^th on a leaderboard containing the major companies working on autonomous technology. Since then, Uber’s path toward developing its own technology has only grown more complicated. Waymo, a top competitor, has filed a lawsuit claiming one of Uber’s top engineers stole trade secrets related to lidar, a sensor that helps self-driving systems detect the road and obstacles. That trial is scheduled to begin December 4.

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Uber and Volvo first joined together in August 2016, when the two companies announced a $ 300 million agreement that covered production of 100 of the base XC90s for Uber’s use in pilot projects in Pittsburgh, San Francisco, and metro Phoenix. To date, Volvo has supplied more than 200 vehicles, according to Miller. But that’s about to be dwarfed.

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The arrival of 24,000 autonomous vehicles—a number that an Uber spokesperson says is a general framework but not etched into the contract—would mark a milestone for driverless vehicles, but the new deal is significant for another reason. In its current business model, Uber operates its ride-hailing service without owning its own vehicles. But its agreement with Volvo signals a shift in which Uber actually will own the driverless cars in its network.

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That’s an expensive proposition. Terms of Monday’s agreement were not disclosed, but Financial Times calculations indicate it may have cost Uber in the neighborhood of $ 1.4 billion. Consider that approximately 37,000 ride-hailing-network drivers are operating in San Francisco alone, and the cost of owning a global fleet becomes more apparent and daunting.

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• Uber And Volvo Partner on Autonomous XC90s and Plan Pittsburgh Project

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• Operating in Autonomous Mode, Uber Self-Driving Car Involved in Crash

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• Meet the First Family Getting Keys to Volvo’s Self-Driving XC90

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The new deal between Uber and Volvo is nonexclusive, meaning both companies remain free to pursue similar arrangements with other businesses. Volvo intends to equip the same base XC90 vehicles with its proprietary self-driving tech and launch its own fully autonomous cars in 2021. In that sense, the deal is indicative of a new reality, one in which traditional carmakers may both supply and compete with ride-hailing and car-sharing networks.

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“The automotive industry is being disrupted by technology, and Volvo Cars chooses to be an active part of that disruption,” said Håkan Samuelsson, president and chief executive officer of Volvo. “Our aim is to be the supplier of choice for autonomous-driving ride-sharing service providers globally. Today’s agreement with Uber is a primary example of that strategic direction.”

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