x Abu Dhabi, UAESaturday 25 November 2017

The cure to Uber’s woes is a merger with Tesla

Partnership could be the beginning of a beautiful friendship – and a mutually beneficial one

A Tesla Model 3 saloon. Uber may find a merger with the electric car maker a very good idea.Courtesy of Tesla Motors via AP
A Tesla Model 3 saloon. Uber may find a merger with the electric car maker a very good idea.Courtesy of Tesla Motors via AP

With scandal after scandal mounting, it seems it could take a miracle of some magnitude to rehabilitate Uber’s image and save the company from itself.

Here’s a simple suggestion: how about a merger with Tesla?

The unlikely idea should have at least a little currency right now, given last week’s news that the two companies are working together through a partnership in Dubai.

The ride-sharing company has launched a new UberONE option in its smartphone app that will let users order a ride in a Tesla Model S or Model X car at a slightly higher fare.

The deal comes via the Dubai Taxi Corporation, which says it will add 200 Tesla vehicles this year and next. Uber already has 50 of Tesla’s electric cars operating, according to the Associated Press.

As the saying goes, the partnership could be the beginning of a beautiful friendship – and a mutually beneficial one at that. Both companies could stand to gain tremendously from closer ties with one another.

Uber, for its part, would benefit from Tesla’s leadership position in autonomous vehicles.

Both companies are investing millions in developing self-driving technology but Tesla – which last week added better automatic braking capabilities through the 2.5 version of its Autopilot software – is among the most advanced players in the field.

Its electric cars have logged more than 1.6 million self-driving kilometres on real roads so far, easily giving it the lead in the technology’s practical application.

Uber has a strong interest in pursuing autonomous cars and thereby eliminating drivers from its service, since recruiting, training and paying all those humans represents its biggest expenditure. Working with Tesla would allow it to get to that goal and cut costs much faster.

Equally important for Uber is a new image. Under the founder Travis Kalanick, the company became the bad boy of Silicon Valley by routinely running afoul of regulators and governments in municipalities around the world. It still isn’t operating in Abu Dhabi.

Media exposés and online missives published by former employees detailing the company’s toxic and sexist work culture haven’t helped. A video of Mr Kalanick berating one of his drivers, which surfaced earlier this year, served as the figurative icing on the cake that led to his ousting by Uber’s board of directors this summer.

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The new chief executive Dara Khosrowshahi says he wants to repair the company’s reputation, but he has already fallen into the habit of making some of the same mistakes.

Uber recently reverted to its trademark defiance after London officials revoked the company’s operating licence, for example, before ultimately striking a more conciliatory tone.

The company also recently threatened to pull out of the Canadian province of Quebec after the government demanded better training for drivers. Uber has since backed down on its threat, but so far it’s looking like the new boss is a lot like the old boss.

Enter Tesla's chief Elon Musk, Silicon Valley’s quintessential golden boy. Talk about the instant image buff Uber would get by installing the do-no-wrong inventor philanthropist in its top job. Mr Musk, the sustainably-fuelled futurist who is seen as reaching for the stars and a better humanity in general, is the veritable ying to Mr Kalanick’s yang.

His company, meanwhile, would also gain from stronger ties with Uber. For one, it would get instant exposure and presence in more countries, especially in the Middle East and Asia.

Tesla currently sells cars in the UAE, North America, Europe, the United Kingdom, China, Hong Kong and Australia. Uber, meanwhile, is active in 84 countries. Getting Uber’s estimated 40 million monthly users into Tesla cars would be a great way to prime new customers – a way of getting them to try before they buy.

But more importantly for Tesla, a tie-up would put it in better position to deal with increasing competition.

With every major traditional auto manufacturer now working on or deploying electric and self-driving vehicles, the fields it has been pioneering are about to get a lot more crowded.

And if it has had trouble so far – both Tesla and Uber are reportedly losing hundreds of millions of dollars per year – it’s only going to get a lot tougher.

Tesla and Uber are close in real and estimated value – a market capitalisation of US$59 billion and a valuation of US$50bn, respectively – and neither is making a profit yet, which makes it difficult to dream up a scenario in which a merger could happen.

But it’s not an outlandish idea, as the tech investor Jason Calacanis – who got on board with Uber early – recently pointed out.

“If those two companies were together, they would beat everybody at transportation,” he said on his Web show This Week in Startups in August. “They're on a collision course for sure.”

If Tesla and Uber don’t smash into each other, it’s only a matter of time before they firmly collide with the rest of the auto industry. And there’s likely to be more wreckage – to the two newcomers – if and when that happens.