Volvo's deal to supply ride-hailing company Uber with XC90 SUVs that can be become fully autonomous gives the automaker an early leader in the robotaxi sector. It will benefit Volvo on many levels, CEO Hakan Samuelsson says. He explained why to Automotive News Europe Managing Editor Douglas A. Bolduc.
Why did Uber pick Volvo?
Volvo's position in safety was probably a factor. Speed was another a factor, meaning how fast we could develop this into a commercial product that we could ship. A third factor was the suitability of the technology. You must have a car that can be completely controlled by wire.
How did this deal come together?
It really started a couple of years ago when we met Uber and discussed this. They became interested in Volvo and the XC90. Then we co-developed the necessary redundancies in the car. We did this together with Uber so we could divide the cost, making it advantageous for both of us. Now we enter into the commercial phase of the agreement where they say, “OK, now we want to use Volvos as the prime car for our future services.”
How has the deal been structured?
We have a framework agreement on deliveries, pricing and servicing. That framework agreement covers 2019, 2020 and 2021. It covers volume that we anticipate growing to about 20,000 during that period. Therefore, it is a significant commercial contract, but the firm orders will be done on a month-by-month basis.
Why make this deal?
It is interesting to us for multiple reasons: No. 1, 20,000 cars sold in one deal doesn't happen that often. It must be one of the bigger car deals in the history of the industry and definitely is the biggest for us. No. 2, the robotaxi is a new market and we are the first one with a commercial product for this segment. No. 3, we are open to supplying this type of car to other ride-hailing companies.
There were rumors that Mercedes-Benz would get this deal but Volvo won? Is this segment going to become a hot new battleground for automakers?
We see this as a key market sector that is opening up. Not everyone will enter this market. You mentioned one. We are there and we are the first one to sign a commercial contract. I think it's very important for us. This deal is also a sign to everyone that we are ready to start shipping this type of car. With our SPA [scalable product architecture], we have an advantage because we are not limited to XC90s, we can deliver this technology to other vehicles on the SPA platform.
Will these cars need to be built on a special line or require anything different?
They will be built in our normal plants on the normal assembly lines but there will be some extra adjustments. We will start by building them at our plant in Gothenburg, Sweden. In the next generation, we will also be able to build them in Charleston [at Volvo's U.S plant in South Carolina].
Many big fleet deals like this require an automaker to heavily discount the vehicles. Did Volvo have to do this and if so how will you make money from this?
The big difference is that an automated ride-hailing car that you can operate 24 hours a day, seven days a week can carry a lot of cost and still be profitable. The second factor is that we are not building these as a special offer [one-off] car for Uber. We are adapting an existing XC90, which makes this very attractive for us. This would not be possible if it was a special vehicle.
Will these be Level 5 autonomous cars?
The cars will have the redundancy required for Level 4 and Level 5.
In what ways will the XC90 you deliver to Uber need to be further adapted?
Uber will further develop their cars by adding more sensors and more computing power. You need more sensors if you drive in the cities because there are more objects to detect. You also need more computing power because there are more predictions that the car has to make. Volvo will use the same car to develop it own Level 4 car that can drive itself on highways. If you drive on the highway there are not that many objects to keep track of. However, whether it is on the highway or in the city, the cars will be fully automated so they will need to handle everything that occurs. There is no driver who can jump in as a backup. The driver can only be reactivated in a matter of a couple of minutes in the Level 4 system.
Will deals like this become a golden ticket for automakers in the future?
There are a lot of people involved in ride-hailing. They will realize more and more it is better to use a car that you don't have to develop from scratch. Then they would look to see which companies can deliver such cars. We have demonstrated that we are willing and able to do that.
Are you automatically in the lead in this sector?
We are the first automaker to sign a deal with a ride-hailing company to provide commercial delivery of such a product.
How else will Volvo benefit from the deal?
The big thing is that we now have a larger base for the car, which is something we need. Also, working together with the Uber engineers is very beneficial for our engineers because there is a lot that you can learn. I think it will also help us develop our Level 4 car.