Top player in unmanned delivery start-ups and L4 autonomous driving star unicorn, Nuro, is also facing difficulties. They have announced a large-scale layoff and stopped the production and commercialization of unmanned vehicles. This is the second time they have laid off employees recently, and now they only have around 800 employees left.
Nuro, a driverless car company founded by Fudan University’s outstanding alumnus and Waymo veteran, Jiajun Zhu, was once widely recognized for its low-speed unmanned delivery model. Google, SoftBank, and Toyota have invested a total of 2.13 billion US dollars in the company, with a post-investment valuation of 8.6 billion US dollars, making it an undisputed unicorn company.
However, now Nuro has to make such a decision just to survive for another three years.
Furthermore, the reality is that unmanned delivery vehicles are in a state of retreat in both China and the United States. Alibaba’s DAMO Academy has recently undergone major adjustments in its autonomous driving business.
Stopping Deployment and Cutting 30% of the Workforce
According to the latest news, Nuro is currently undergoing commercial restructuring. This will be accompanied by layoffs and a shift of resources from commercial operations to research and development.
This round of layoffs will affect about 340 people, accounting for 30% of the total workforce. Laid-off employees will receive 12 weeks of severance pay, with an additional 2 weeks of severance pay for those who have worked for more than 2 years. Some employees have already expressed their feelings about being laid off on LinkedIn.
It is worth mentioning that this is Nuro’s second round of layoffs in less than a year. In November of last year, Nuro announced a layoff of about 300 people, accounting for 20% of its total workforce.
By this calculation, Nuro now has just over 800 employees, which is almost half of the 1,500 employees it had before the layoffs at the end of last year.
Not only that, in order to reduce costs and expenses, Nuro will also temporarily suspend the commercial landing process.
Specifically, this manifests as reducing the scale of commercial trials, exploring more effective business models with partners, and delaying the production of the third-generation autonomous delivery vehicle R3.
Next, Nuro has indicated that it will focus more on autonomous driving research and development:
“The recent advancements in AI have increased our confidence, and we have invested heavily in AI and machine learning from day one. Going forward, our focus is on making our autonomous driving stack more data-driven, so that our self-driving vehicles can expand to a larger operating range more quickly.”
The reason for the above decision was explained clearly by Nuro founders Dave Ferguson and Jiajun Zhu in their statement:
“We have indeed attracted a large amount of investment in the past, but the capital market has greatly declined in the past year and a half. In addition, recent bank failures and comments about the recession in the US economy suggest that this situation will not improve soon. Considering that we have entered a new capital environment, we need to improve the efficiency of our balance sheet.”
They also emphasized that they have invested heavily in previous business deployments and operations, and they believe that a more cautious approach at this stage is to think about what a startup can do.
So the reasons can be summarized as difficulties in financing and significant investment in business operations.
Through this reform, Nuro believes that the operating time can be extended from the original 1.5 years to 3.5 years without raising more funds.
Obviously, the series of “contractions” above reflect that Nuro has reached the stage of not making ends meet. The previous steps were too big, and no significant results were seen. Now they need to adjust their direction and positioning.
Who is Nuro?
Nuro is derived from Google’s unmanned vehicle.
In August 2016, it was founded by Zhu Jiajun, former chief software engineer of Google’s self-driving car team, and Dave Ferguson, Google’s computer vision and machine learning leader and chief engineer.
Moreover, many core members of Google’s self-driving car team also joined Nuro. Among them, Jiajun Zhu is one of the earliest members of Google’s self-driving car team and also one of the earliest Chinese faces in the team.
He graduated from the Computer Science major at Fudan University in 2005 and obtained a master’s degree from the University of Virginia in the United States two years later. During this period, he interned at Google Street View team and came up with a new idea of “click-to-go”, which was patented.
In 2008, Zhu Jiajun officially joined Google and later joined the Google self-driving car team. He became the head of the software department and led a team that later built the “Firefly” self-driving car, which has been recorded in the history of self-driving car development.
Aside from talent and team, the most talked-about aspect of Nuro before was its landing mode for autonomous driving.
From day one, Nuro has had a clear focus: a robot company specializing in autonomous driving for the transportation of goods. Its main service is providing autonomous driving capabilities, specifically for same-city fresh food delivery.
Previously, Nuro partnered with US retail giants Kroger, Domino’s Pizza, CVS Pharmacy, and 7-Eleven to handle point-to-point delivery orders.
In September last year, Nuro also reached a 10-year partnership with Uber, which will use unmanned delivery vehicles to transport food and other items.
At present, Nuro’s unmanned delivery vehicle service has covered three places in California, Texas, and Arizona in the United States. At this stage, a single order costs $5-6, which is considered affordable in North America and replaces expensive human delivery services.
Its first unmanned delivery vehicle R1 was launched as early as 2018. It weighs 680 kilograms, is 1.8 meters high, and is about half the width of a car, and can carry a load of about 110 kilograms.
Then, in February 2020, Nuro started testing the second-generation autonomous vehicle R2. Compared to the previous generation, the R2 has an increased payload capacity of about 420 pounds (about 191 kilograms) and can handle more complex road conditions.
They launched the third-generation unmanned vehicle R3 in January last year, with a load capacity of up to 500 pounds (about 227 kilograms). The unmanned vehicle has different compartments inside to keep food warm. R3 was originally planned to be manufactured by BYD and assembled at Nuro’s factory in California.
Aside from its products, Nuro’s overall logic and business model have also been widely recognized in the United States.
Since its inception, Nuro has cumulatively raised a total of $2.13 billion. Its shareholders include venture capital firms such as SoftBank, Baillie Gifford, and GGV Capital, as well as industry capital from companies such as Google, Toyota, and Kroger, which is also a customer partner.
After raising $600 million in funding in November 2021, Nuro’s valuation reached $8.6 billion.
The reason why Nuro is so highly regarded is not only because of its technological capabilities, but also because it has obtained licenses from the US Department of Transportation (DOT) and the National Highway Traffic Safety Administration (NHTSA), allowing its unmanned delivery vehicles to legally operate on the road.
However, external optimism and capital may just be short-lived. Whether it was last year’s layoff to weather the winter or the current new round of major changes, they reflect the most pressing issue:
Can Nuro’s revenue from unmanned delivery cover the hard costs of vehicle commercial operations?
In the short term to form a promising business prospect, Nuro needs to balance costs including hardware costs of vehicle production and manufacturing, fleet operation and management costs, depreciation, and inevitable accident compensation costs. For long-term costs aimed at profitability, research and development investment since its establishment must also be taken into account.
The answer is clearly no. The Nuro founder also confirmed this in the letter, saying they have invested heavily in commercial service deployment…So fundamentally, the daunting challenge facing them – the problem of controlling operating costs – has not been solved.
So the question arises, why is the low-speed unmanned delivery track, which looks very impressive technically, actually becoming more and more difficult to implement on the ground?