Uber Technologies is getting out of the self-driving truck business. The company said it will halt development of its self-driving tractor-trailer system to focus all of its autonomous-vehicle research and development efforts on cars.
It's a significant shift -- one that suggests the company is feeling growing pressure to deliver self-driving taxis before it falls too far behind fast-moving rivals.
Here's what we know.
A $680 million self-driving truck effort, now shut down
Trucks weren't originally part of Uber's business plan. But the company made a big splash when it acquired self-driving truck start-up Otto in 2016 for a reported $680 million, adding Otto's talent to its Pittsburgh-based self-driving research team.
The publicity continued later in 2016 when Otto partnered with Anheuser-Busch InBev's Budweiser brand, in what was billed as the world's first commercial shipment by self-driving truck. A self-driving Otto semi successfully took a trailer loaded with Budweiser beer from an Anheuser-Busch facility in Fort Collins, Colorado, to Colorado Springs -- a distance of about 120 miles.
At the time, it looked like self-driving trucks were only a few years away. Uber seemed well-positioned to emerge as a leader in what could be a very lucrative space. Earlier this year, Uber said that it was planning to begin integrating self-driving trucks into its Uber Freight offering, using the automated trucks on longer trips to reduce costs.
But Uber's priorities -- and its leadership -- have gone through some big changes since that much-talked-about beer delivery.
Uber has a bigger priority than trucks right now
Many things have changed at Uber since it purchased Otto, starting with its CEO: Founder Travis Kalanick departed last year after a series of scandals. His replacement, Dara Khosrowshahi, has revamped Uber's culture and refocused Uber on its core ride-hailing business.
Now, though, Uber and Khosrowshahi are coming under considerable pressure. It's widely believed that Uber won't be profitable until its human ride-hailing drivers are replaced by robots, in the form of self-driving vehicles. The investment case for Uber assumes that it will use its existing business to establish itself as a major player in the coming world of automated urban mobility.
The problem: Uber is now at risk of being beaten to market by subsidiaries of not just one, but two big, well-funded rivals. Alphabet's (NASDAQ:GOOG) (NASDAQ:GOOGL) Waymo and General Motors' (NYSE:GM) GM Cruise have both announced plans to begin launching self-driving taxis at scale between now and the end of next year.
I'm sure that Uber's investors haven't been shy about sharing their concerns about the competition with Khosrowshahi and other Uber executives. Those concerns almost certainly ratcheted up the pressure on Uber's Advanced Technologies Group, which is charged with developing the company's self-driving system.
This is probably part of Uber's response to that fatal accident
That perceived competitive pressure may have been a factor in a fatal accident in March, in which a prototype self-driving Uber vehicle hit and killed a pedestrian -- exactly the kind of accident that self-driving vehicles are supposed to be able to avoid. Did the pressure lead Uber to rush to put a system on public roads before it was ready to operate safely?
Khosrowshahi has clearly been rethinking Uber's self-driving effort since that fatal accident. It now appears that he has decided to continue the internal effort to develop a self-driving vehicle system for ride-hailing -- and he's adding the truck folks to the effort.
Will it be enough to get self-driving Ubers deployed before GM and Waymo expand to dominate the U.S. market? We'll find out.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Rosevear owns shares of General Motors. The Motley Fool owns shares of and recommends Alphabet (A shares) and Alphabet (C shares). The Motley Fool has a disclosure policy.