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Why Uber is Out of the Autonomous Car Race

Written By Alexandra Perry

Posted February 28, 2017

It is not an exaggeration to say that the future may belong to the unicorns — companies that have risen from garages to dominate their respective fields.

And no unicorn has wooed the public quite like Uber. Since its launch in 2009, Uber has disrupted the ground transportation market and inspired a legion of copycat startups. And for Uber CEO Travis Kalanick, that was just the beginning.

Kalanick’s long-term goal is to remove drivers from the business model by producing fleets of self-driving cars. This goal — albeit ambitious and far off — positioned Uber to be the next Apple.

That is, until 2017.

Uber’s Steady Fall

For Uber, 2017 has been crippling. During President Trump’s Muslim ban, Uber removed surge pricing on trips to JFK airport — a move that convinced consumers Uber was trying to capitalize while taxis boycotted. In response, Twitter users waged war against Uber, championing the hashtag #DeleteUber.

The campaign was wildly successful, forcing Kalanick to severe ties with the Trump administration in a desperate attempt to win back customer favor. It didn’t work. The hashtag cost the company 200,000 customers.

And this scandal was immediately followed by two more. A former employee accused Uber of turning a blind eye to sexual harassment — an allegation that quickly pushed Uber’s SVP to resign. And just last week, mega-company Google accused Uber of stealing blueprints for an autonomous car. Now Google has dragged Uber into court.

It would seem that America’s golden boy — the fastest-growing startup in history — is on a downward spiral.

But Uber’s lethal mistake is a lot worse than the failure to connect with its socially conscious consumers or maintain a moral high ground. Those are just symptoms of the larger issue — an issue that could affect any unicorn company.

The honest truth is that, in Uber, Kalanick has not built a sustainable business model. And in failing to do so, he has failed at his long-term goals. The company has become a tragic example of what happens when a founder can’t focus on his target goal. Now, even if Uber can soothe its enraged customers, it is not going to be the first company to incorporate the autonomous car.

At This Point, Another Company Will Get There First

While Uber is busy managing its media circus, other major players have entered the autonomous car race. It is a sprint to the finish line.

Ford committed to the autonomous vehicle with the acquisition of artificial intelligence startup Argo AI in early February. Other car manufacturers are following suit. On Monday, Nissan tested its self-driving car in Europe, marking the first autonomous test on European soil.

And it is not just the car companies Uber has to contend with, either. Apple, for one, is rumored to be in the race. The tech giant has been quietly poaching top talent from the auto industry, including staff from electric car battery maker A123. And even though Apple publicly dismisses rumors of its car project, Elon Musk calls the project an “open secret.”

After all, why would Apple hire a thousand engineers to do a job that doesn’t “exist”?

Meanwhile Uber is bleeding money. And it is no closer to its goals.

In 2016, riders only covered 40% of costs, leaving venture capitalists to foot 60% of the bill. Uber has lost 1.27 billion in the first half of 2017. That is a faster loss than any tech company to date.

The company has tried to mitigate the loss by reducing driver wages — a move that has backfired, causing both public and employee uproar. Kalanick has been forced to funnel money into lawsuits. He is paying claims to drivers and appeasing an angry public.

Instead of focusing on building a sustainable business model in its existing field, Uber has tried to grow too fast, becoming nothing more than the scatterbrained dream of a brilliant but erratic founder.

At this point, it seems like the only way Uber can stop hemorrhaging money is to eliminate drivers from the equation — a move it is nowhere near ready for. Uber continues to be elusive with investors on long-term goals to actually start generating revenue.

It looks like it is time for Uber to scale back, drop out of the autonomous car race, and focus on building a sustainable business model for its drivers and company.