Robotaxi rumblings: Uber’s deal with Cruise could just be the beginning of AV partnerships

Uber Technologies (NYSE:UBER) was up almost 1% on Friday afternoon as investors digested news that the company would partner with General Motors’ (NYSE:GM) Cruise to deploy autonomous vehicles on the company’s platform in 2025. Details on the arrangement are limited, and Uber (UBER) may only use the autonomous Chevrolet Bolts in one city at the beginning of the initiative.

Cruise has a fleet of about 1,200 vehicles and has previously operated in San Francisco, Austin, Dallas, Houston, and Phoenix. Notably, Cruise has resumed supervised autonomous driving in Phoenix, Houston, Dallas, and is testing in Dubai. For its part, Uber (UBER) has an existing autonomous vehicle partnership with Waymo. Analyst Justin Post said the addition of Cruise reinforces the concept that fleet operators will want to leverage Uber’s (UBER) demand aggregation to increase asset utilization. “We have highlighted that AV competition is good for potential long-term Uber partnership economics, and Tesla and Amazon’s AV investment could be a long-term net positive,” highlighted Post. The BofA analysts team does not Tesla (TSLA) to partner with Uber, but think growing competition between Amazon’s (AMZN) Zoox, Cruise, Waymo (GOOG), Tesla (TSLA), and others could drive more interest in partnerships.

Deutsche Bank analyst Ben Black said the Uber-Cruise partnership is encouraging and reinforces the idea that autonomous vehicles are unlikely to result in a winner-take-all market, but are likely to be commoditized. “This would favor the demand aggregators who can facilitate higher asset utilization,” he noted.

Evercore ISI analyst Mark Mahaney thinks there is a “significant” chance that the Cruise partnership will be extended to other areas. Mahaney and his team suggested that Cruise could just be the first of what could be several AV partners for Uber (UBER).

Lyft (NASDAQ:LYFT) was up 2% in Friday afternoon trading. Beyond the robotaxi rumblings, Lyft (LYFT) was upgraded by Nomura to Hold from Reduce and the tech sector as a whole was higher.