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Volvo has agreed to sell 24,000 SUVs to Uber for a network of self-driving cars

The automaker will sell these base vehicles to Uber starting in 2019.

An Uber self-driving car
Volvo Cars and Uber join forces to develop autonomous driving cars

Uber and Volvo are taking the next step in their self-driving relationship.

Volvo, which first began working with the ride-hail player in August 2016, has agreed to sell 24,000 SUVs to Uber between 2019 and 2021, the automaker announced on Monday.

An Uber spokesperson confirmed that Volvo has agreed to sell the ride-hail player 24,000 cars but said that it is a general framework. The company could buy fewer or more cars from Volvo.

The Volvo XC90s will have the “core” technology — like redundant processors — needed to enable autonomous driving, to which the ride-hail company will add some of its own technology after the fact.

The company eventually plants to integrate Uber’s full self-driving kit into Volvo’s XC90s during production, according to Uber’s head of automotive alliance Jeff Miller. For now, Uber and Volvo work together on some parts of the technology before it’s produced and then Uber adds its own sensor kit.

“Currently, our self-driving software is ‘uploaded’ to the vehicle once the sensor kit has been installed on each vehicle, which we do in house,” Miller said. “As we scale this technology, our processes will evolve and we will likely see more software process integration across Uber and Volvo.”

So far, this is the largest number of cars that any two companies have agreed to develop that will serve in a commercial driverless fleet. Alphabet’s self-driving arm Waymo only recently announced that it would begin testing 600 Chrysler Pacificas on the road.

It’s also unclear if Uber will continue this ownership model wherein the company simply buys cars from an automaker. While self-driving cars will likely increase profitability — given Uber will take home the entire fare instead of divvying up around 75 percent of it to drivers — but the costs of owning and maintaining the cars are lofty. With autonomous vehicles, there’s also a likelihood that these cars will rack up more miles quickly since there’s little reason to stop and have to be replaced sooner.

For a company that is in the middle of cutting its losses as it prepares to go public, having tens of thousands of cars on its balance sheet isn’t exactly ideal. That’s why Uber has also struck a separate relationship with Daimler that is easier on its purse strings. Through that relationship, Daimler will simply plug its own driverless cars into Uber’s network when it’s ready.

While Uber’s U.S. rival Lyft certainly has struck more automaker relationships, Uber’s partnership with Volvo at least appears to have progressed far more.

The $69 billion ride-hail company has also been developing its own autonomous tech at least two years longer than Lyft has. That said, Uber’s self-driving tech has been slow to progress. As of March 2017, the company’s safety drivers had to take over the autonomous system once every .8 miles.

Being first to market with a fleet of fully self-driving cars is increasingly important for a company like Uber. In addition to the financial benefits and competitive advantage over Lyft, being the first with driverless cars operating in an on-demand fleet has significant technological benefits.

But Uber is facing steep competition from Waymo, which just rolled out the first fleet of driverless cars in Phoenix, AZ, and other players like GM’s Cruise.

Uber’s self-driving division is also facing off against Waymo in another arena. Waymo is suing the ride-hail company for allegedly misappropriating self-driving trade secrets and is expected to begin the trial in this lawsuit on December 4.

This is developing ...

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