The competition in the autonomous driving space is heating up, especially with Tesla’s (TSLA) Robotaxi Day just around the corner in October. 

Uber (UBER) is making moves to stay ahead as the go-to company for ride-hailing. With its extensive network of users and drivers, Uber is a natural partner for companies looking to deploy and monetize their autonomous vehicle (AV) fleets.

One significant development is Uber’s recent partnership with General Motors’ (GM) Cruise. 

Announced in August, the deal will see Cruise’s autonomous vehicles join Uber’s platform starting in 2025. 

Although the specifics of this collaboration are still under wraps, it’s expected that the company will initially deploy Cruise’s self-driving Chevrolet Bolts in a single city. 

Cruise already operates a fleet of about 1,200 vehicles across several major cities, including San Francisco, Austin, and Phoenix.

Uber is serious about integrating autonomous vehicles into its services, which could be a game-changer for the company in the long run. 

The company has already dipped its toes into AVs by partnering with Waymo, Google’s self-driving car project. Now, with Cruise on board, Uber is expanding its reach and potentially securing a stronger foothold in the market for self-driving cars.

The company’s strategy of forming partnerships with multiple AV companies is a smart way to stay ahead in a market that’s unlikely to be dominated by any single player.

Increased competition among AV developers like Tesla, Amazon’s (AMZN) Zoox, and Waymo could actually be good for Uber. 

As more companies invest in autonomous technology, the demand for a reliable platform to deploy these vehicles will grow, and Uber is well-positioned to be that platform.

The AV market isn’t likely to have a single winner. Instead, autonomous vehicles are expected to become more of a commodity, which could benefit the company by aggregating demand and helping it boost the utilization of these high-tech assets.

The Cruise deal is just the beginning. Uber could strike similar deals with other AV companies, making it the go-to platform for multiple autonomous vehicle operators. 

If this happens, the company could carve out a crucial role in the AV ecosystem, offering a platform that allows various companies to reach a wide customer base through its established network.

While the immediate impact of the Cruise partnership on Uber’s earnings may be limited, the long-term growth opportunities it presents could be substantial. 

By securing contracts and establishing itself as a key player in the autonomous vehicle market, Uber is laying the groundwork for future growth, which could ultimately push its valuations higher.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Strategist &
Director of Research
at Valens Research

This analysis of Uber (UBER)’s credit outlook is the same type of analysis that powers our macro research detailed in the member-exclusive FA Alpha Pulse.