Uber acquires Otto, enters trucking and may find better business model

Uber's acquisition of Otto could open the door for self driving trucks and a freight system that could be more profitable over time.

Uber said it will acquire Otto, a startup focused on autonomous trucks, in a move that'll diversify its self-driving vehicle ambitions and potentially bolster its bottom line.

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Otto's co-founder is Anthony Levandowski, a former Google engineer. Levandowski will lead Uber's combined self-driving efforts.

Uber today is focused on being a marketplace for rides via drivers operating in the gig economy. Ultimately, Uber and rival Lyft will provide rides via automated vehicles. GM, Ford and others are hoping to offer their own services and/or supply companies like Uber.

In a blog post, Uber CEO Travis Kalanick said:

We now have one of the strongest autonomous engineering groups in the world; self-driving trucks and cars that are already on the road thanks to Otto and Uber's Advanced Technologies Center in Pittsburgh; the practical experience that comes from running ridesharing and delivery services in hundreds of cities; with the data and intelligence that comes from doing 1.2 billion miles on the road every month.

Now when you ponder the potential profits for Uber the Otto purchase, reportedly as high as $680 million, makes sense. Trucking would provide Uber higher fees, potentially a cut of freight and offer a more predictable revenue stream. Trucks are critical to the economy and there's a real safety argument for more automated rigs.

Also: In test driving driverless public transport, Singapore shouldn't forget the basics

However, Uber's purchase of Otto doesn't guarantee success overnight. For starters, Daimler already has demonstrated automated trucks. And the more immediate future is likely to feature more hybrid systems such as Peloton, which synchronizes trucks via automated systems and saves fuel based on drafting.

Those competitive dynamics are one reason Otto noted that the Uber merger was also about accelerating development. Otto said:

By joining forces with Uber we can fast forward to the future. Together, Otto and Uber can build the backbone of the rapidly-approaching self-driving freight system. We can help make transportation as reliable as running water, everywhere for everyone, whether you're talking people or packages.

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