General Motors, Lyft team up for self-driving car partnership
GM investing $500m in Uber rival to develop network of self-driving car network
A driver with the ride-sharing service Lyft waits for a customer on a street in Santa Monica
The biggest single Detroit-Silicon Valley crossover deal to date comes as automakers work out how to respond to the rush of technology companies such as Apple, Alphabet and Uber - Lyft’s biggest rival - to control cars of the future and likely reshape the global auto industry.
The carmaker’s investment accounts for half of Lyft’s latest $1 billion fundraising round. It is one of GM’s biggest investments in another company and the largest single cash injection to date by a traditional automaker into a young technology firm.
The two companies said the partnership was based on the shared view that self-driving cars will first reach consumers as part of a ride-sharing service, rather than vehicles owned by drivers.
“We think our business and personal mobility will change more in the next five years than the last 50,” GM president Dan Ammann said in an interview with Reuters.
The partnership will tap into GM’s work on driverless cars and Lyft’s software that matches drivers and passengers and calculates routes, to create a network of cars that would operate themselves and be available on demand.
The two companies did not set out a timeline to get the on-demand network up and running, but said they would immediately offer Lyft drivers short-term rentals of GM cars.
Toyota and Ford, two of the world’s biggest automakers, invited rival car companies to join them to counter the push by Apple, Alphabet, Tesla Motors and others into self-driving cars, or what the industry calls autonomous vehicles.
Major carmakers are trying to prevent Silicon Valley from dominating the future of self-driving cars and ride-sharing, and are also investing as a way to see whether Lyft and Uber are on the way to making money, said Matthew Stover, automotive analyst with Susquehanna Financial Group.
“The only way to understand the implications and viability of this business model (Lyft and Uber) is to become an investor,” said Mr Stover.
Last month, Ford chief executive Mark Fields said the second largest US carmaker would explore the ride-hailing business with a fleet of specially designed Transit vans at its Dearborn, Michigan campus.
GM chief executive Mary Barra recently said that while Apple and Google - now called Alphabet - are pushing to dominate dashboard displays with their software, automakers still control “the platform” of the vehicle itself.
GM’s Ammann, who will join Lyft’s board as a part of the deal, said both companies had a “really common view of the future.” Lyft president John Zimmer said the “culture and vision are very alike” in both GM and Lyft.
The deal heralds a wave of alliances of varying forms between automakers and Silicon Valley companies as both try to capture new business as transportation evolves, said Xavier Mosquet, the US mtor practice leader at Boston Consulting Group in Detroit.
“In the next 10 to 20 years, (transportation) will be one of the biggest areas for electronic and software investments,” Mr Mosquet said. He expects ride-sharing driverless vehicles to develop first in big cities such as Singapore, London and New York, probably between 2022 and 2025.
Lyft said the latest $1 billion fundraising round included Kingdom Holding, the investment firm of Saudi billionaire Prince Alwaleed bin Talal, which put in $100 million.
Kingdom and Alwaleed are major investors in US tech companies. Together they own more than 5 per cent of Twitter .
Lyft said the latest funding round valued it at $5.5 billion, cementing its status as one of Silicon Valley’s much-prized ‘unicorns,’ or companies worth more than $1 billion without going public. Lyft does not publicly disclose its financial performance, but media reports have suggested it is not profitable, like many tech startups.
Lyft is locked in a fundraising race with rival ride-hailing app Uber. Lyft said it has raised a total of $2 billion since August 2013. Uber is reportedly in the midst of a $2.1 billion funding round that would value it as high as $64.6 billion.