As far as investments go, they are really heating up in the autonomous driving market.
Just a month ago, Volkswagen (VLKAF) (VLKAY) made a $1.7 billion investment into Ford (F - Get Report) subsidiary Argo, which now has a $4 billion valuation. Keep in mind Ford bought Argo for $1 billion less than two years ago.
Then there were reports earlier this week about Alphabet's (GOOGL - Get Report) (GOOG - Get Report) Waymo -- considered the leader in the autonomous driving movement -- searching for outside investors. Why would Waymo need investors?
For starters, the program costs a lot, with some reports suggesting it costs Alphabet $1 billion a year. Second, Waymo doesn't make cars and finding an automaker (or several) to team up with could be an advantageous strategy down the road.
Now apparently, it's Uber's time. The company's self-driving unit has had a number of snares over the past 12 months. A little more than a year ago, Uber had to settle with Waymo -- and by the way, Alphabet owns an equity stake in Uber -- over a self-driving lawsuit brought on by the latter. Later that year, March 2018, an Uber self-driving car killed a pedestrian and finally, Uber shut down its self-driving truck initiative last summer. That's despite its $680 million acquisition of Otto in August 2016.
So where are we now?
According to reports, Toyota Motors (TM - Get Report) and SoftBank (SFTBY) -- SoftBank is already a large investor in Uber, while Toyota also has a stake -- are looking to lead a $1+ billion investment round in Uber's self-driving car unit. This would reportedly value the unit at $5 billion to $10 billion.
All of these companies seemingly have one key asset, but are lacking in other areas. For instance, General Motors (GM - Get Report) with its Cruise subsidiary or Ford and Volkswagen with Argo, have car manufacturing, but not the best autonomous driving technology. Waymo has the superior technology, but no vehicle production, so it has to purchase tens of thousands of vehicles. Uber has the global taxi network, but no auto production and inferior technology.
A capital infusion for Uber would be important, given that the technology is very expensive to develop and currently generates no revenue. In fact, that's exactly why we've seen so many companies investing in one another's self-driving ambitions, to help curb costs and develop more quickly. Even Waymo, with the well-financed parent company of Alphabet, is looking into selling its lidar sensors to help lower its costs.
For Uber, it's even more important to be mindful of the costs because unlike other automakers and Alphabet, the company is not rolling in the profits. In fact, cash burn still remains pretty high while profitability remains elusive.
Given that the company will go public later this year, it will want to have the strongest financial position possible when it IPOs. And nabbing an investment from Toyota and SoftBank, perhaps to be announced within a month, could help the company improve its foundation.
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