Uber: computer drive

Uber’s decision to carve out its self-driving unit and sell a minority stake to investors including SoftBank’s Vision Fund and Toyota suggests the group is teeing up an initial public offering any day now. Why else put a valuation of up to $10bn on robotaxis — one of the costliest segments of the business.

Both investors have an existing interest in Uber. SoftBank bought a 15 per cent stake in the company in 2017, mostly by buying out existing shareholders at a $48bn valuation. Last summer Toyota agreed to invest $500m as part of a deal to work on self-driving cars in a deal that valued Uber at about $70bn.

Uber needs to explain why its disparate businesses are now worth a combined $100bn or more. Rival ride-hailing Lyft’s IPO will act as a jumping-off point. Uber’s own ride-hailing business is larger and more international. Add in stakes in Didi and Grab and Uber can claim its taxi business is worth far more than Lyft’s expected $25bn value.

But the global taxi market alone is not enough. It is competitive and easy to replicate. As it expands beyond the US, Uber is taking a smaller share of gross bookings. This is why it is investing in areas such as bikes, scooters, food delivery and self-driving cars.

Autonomous passenger vehicles have been called a $7tn market but that is a far-off goal. Working on the technology needed to get there is expensive. Uber is thought to be spending $500m or more annually. Alphabet has invested at least $1bn on self-driving subsidiary Waymo. Lyft, which is also developing autonomous vehicles, lost over $900m on $2bn in revenue last year.

Uber is trying to present a sober business model ahead of its IPO Help with funding of autonomous vehicle development plays to that image. So does putting a number on it. Any calculation of Uber’s value that involves multiples of expected revenue are unlikely to include contributions from autonomous cars. Sticking on a price tag now is a neat way to explain their part in the eventual total.