Autonomous delivery startup Nuro is ready for a comeback

The California Department of Motor Vehicles this week gave Nuro approval to test its third-generation R3 autonomous delivery vehicle in four Bay Area cities, giving the AV startup a positive boost after facing some setbacks and financial struggles.

This approval gives Nuro the ability to test its driverless delivery vehicle in Mountain View, Palo Alto, Los Altos and Menlo Park. Nuro’s vehicles, which have no seats, windows, steering wheels or pedals, are not designed to carry passengers, but only goods. Despite the fact that they operate on public streets, they look like large sidewalk delivery robots, with temperature-controlled storage units to hold food.

Co-founder Dave Ferguson told TechCrunch that the advanced geographic region would represent the third-largest — if not the second-largest — deployment of fully driverless vehicles in the United States after Waymo, adding that Cruise would have experienced a larger deployment period before rolling out its fleet late last year.

Nuro also has a 10-year commercial agreement with Uber Eats, which it is testing with third-party vehicles.

Nuro has been building buzz for its R3 for a few years, but last year it decided to pause a planned manufacturing campaign in which it was going to make thousands of the vehicles in partnership with Chinese electric carmaker BYD. The startup — which was once the darling of the AV industry after raising more than $2 billion from high-profile investors — was burning through cash at a rapid pace. After two layoffs in the past two years, Nuro restructured its team to focus on getting the autonomy part right. That meant putting vehicle manufacturing and commercial operations on the backburner.

Ferguson told TechCrunch that Nuro still has no immediate plans to resume large-scale manufacturing or heavy commercial operations. The company is highly focused on testing and validating its new AI architecture, and Ferguson says this approach is starting to pay dividends.

“We’ve really dramatically accelerated our autonomy progress and even the timeline around the autonomy side,” Ferguson said. “So it’s the software, obviously, as well as the hardware, the sensing, the compute that’s tied to the autonomy software [Level 4] setting.”

SAE Level 4 defines autonomy as being able to drive a vehicle on its own without human intervention under certain circumstances.

Ferguson said Nuro has been testing and validating the R3’s new hardware and software stack on a fleet of retrofitted Toyota Prius (about 100 according to someone familiar with the matter), and has even continued to make some deliveries with those test vehicles for Uber Eats. In 2022, Uber Eats and Nuro begin a 10-year business partnership.

Despite holding off on a manufacturing deal with BYD, Nuro managed to acquire a few dozen R3s from the EV-maker. Over the next few months, Nuro will roll out the fleet in the Bay Area as well as its other market of Houston.

An Uber spokesperson told TechCrunch that the ride-hail and delivery giant hopes to begin using R3 for deliveries this fall.

“One of the advantages that the R3 offers over the R2 is that it can be significantly expanded [operational design domain]”R2 only goes 25 mph,” Ferguson said. “R3 will technically be able to go 45 mph. We won’t deploy it at that speed on day one, but this enables us to do full L4 driverless testing, deployment, even commercialization over a much broader area, basically everything except freeways.”

Improvements in AI at both the company and industry level have helped Nuro move in this direction. Ferguson said that over the years, Nuro’s approach has evolved from one to using two very large baseline AI models that perform multiple tasks — such as mapping, localization, perception, prediction and planning — in one place, leading to better performance and efficiency. Nuro then combines this with a more traditional system, where all those tasks are performed on its own AI model, to validate its AI in real time.

Not only does this mean that Nuro’s R3 car can travel quickly across large parts of the Bay Area and Houston, but it also lays the groundwork for Nuro to expand its capabilities when it’s ready to do so.

That won’t happen this year, and when it does, Nuro may need to find a new manufacturing partner since anything made by BYD is likely to be subject to hefty tariffs. Ferguson said tariffs are a potential concern, but he’s overall happy with BYD as a manufacturing partner.

In the meantime, Nuro will continue to keep its head down and work on making sure the technology is right and that it’s getting the most out of its Uber Eats deliveries. Ferguson also said that Nuro is looking for a way to market outside of autonomous delivery, but declined to share more details.