Volvo Cars disclosed Monday a deal with Uber Technologies Inc. to supply the cab hailing company with a fleet of 24,000 self-driving taxis beginning in 2019, one of the first and biggest commercial orders for such vehicles.
The deal between Volvo, owned by China’s Zhejiang Geely Holding Group Co., and Uber is a framework agreement without financial terms. The order, however, could account for about 4.5 percent of Volvo’s current total sales, based on 2016 figures, and is estimated to be worth just over $1 billion, an expert said.
Monday’s agreement represents one of the most concrete deals between two big players in the field for the production of a large number of real cars, which is making other car manufacturers race to develop their own models of self-driving vehicles. Volvo and Uber had earlier agreed in 2016 to jointly develop more advanced self-driving car systems.
The automobile industry and giant tech firms have promised large scale deployment of robot cars in the near future, but all of the technology, regulation and legal framework needed for the practical use of such vehicles aren’t yet in place. However, industry executives have predicted with more and more confidence that companies could have such cars on the road in a matter of years, not decades.
Volvo has had a long-running partnership with Uber to develop self-driving cars, though it hit a setback earlier this year. Pilot projects around the U.S. were temporarily halted after an early version of a Volvo-Uber-developed vehicle flipped on its side after an accident in Tempe, Arizona. Police said the incident was caused by a human driver of another vehicle not the Uber self-driving car.
Jeff Miller, Uber’s head of auto alliances, said the agreement “puts us on a path towards mass-produced self-driving vehicles at scale.”
Under the agreement, Volvo will supply Uber with what Samuelsson described as a “base car,” based on Volvo’s popular XC90, a luxury sport-utility vehicle that seats up to seven passengers. Delivery of the vehicles is set to begin in 2019, with Uber calling up vehicles each month through 2021.
Volvo Cars Chief Executive Hakan Samuelsson said, “We believe this is a new segment, a new business.”
“The base vehicles incorporate all necessary safety, redundancy, and core autonomous driving technologies that are required for Uber to add its own self-driving technology,” Samuelsson added. “Uber will adapt the software to make it ride-hailing.”
The current version of the XC90, which is available for sale today, already includes advance autonomous features, such as systems to keep the car in its lane and maintain the proper distance to another vehicle traveling ahead. It also features collision avoidance that helps prevent low-speed fender benders in stop-and-go traffic.
The first taxis from the deal will be built in Volvo’s factory in Sweden but the company plans to produce the vehicles in the U.S. China’s Volvo is also building a new factory just outside Charleston, South Carolina.