Last year, Elon Musk proclaimed that Tesla will be making 500,000 cars a year once the Model 3 gets into production. His prediction calls for that to happen by 2020. Later, Steve Jurvetson, one of the first investors in Tesla Motors, and Uber CEO Travis Kalanik were at a Top 10 Tech Trends dinner, hosted by the Churchill Club. Jurvetson said afterwards that Kalanick would buy 500,000 of those cars himself if they were capable of autonomous operation.
Apparently, Kalanik was serious. Reuters, citing an unnamed industry source, is reporting that Uber has been busy sounding out major carmakers about buying a large quantity of cars. “They wanted autonomous cars, It seemed like they were shopping around,” the source says.
German publication Manager Magazin reported on March 18 that Uber has placed an order for at least 100,000 Mercedes S-Class cars, citing sources at both companies. Neither company has confirmed that report. If true, the order would be worth about $11 billion at current exchange rates. Why Uber would be interested only in Mercedes’ prestigious S Class sedans instead of less expensive models like the E Class or the compact C Class is a mystery.
The other mystery is why Uber would choose Mercedes, whose autonomous cars have only limited capability at present, instead of Tesla, whose self-driving cars are already on the road and accumulating millions of miles of real-world experience every month. Kalanick must know something we don’t. [Editor’s Note: Based on previous Tesla conference calls, my guess is that Tesla is looking into creating its own Uber competitor rather than selling to Uber, and Mercedes is widely considered #2 in autonomous driving.]
Reuters quotes another industry source as saying automakers are skeptical of doing big deals with tech startups that may or may not be around when it comes time to pay up. “We don’t want to end up like Nokia’s handset business, which was once hugely profitable… then disappeared,” the source said about doing a deal with Uber.
Certainly, there it plenty of opportunity for the rumored deal between Uber and Mercedes to fall apart. Uber has yet to earn a dime in profit. Clearly, if it could eliminate paying drivers, it would move a lot closer to operating in the black. But where it will get the money to buy $11 billion worth of cars is a question that has no answer at the moment. The lesson from all this rumor mongering is that if you are an Uber driver, you better have a Plan B in your back pocket.