General Motors Co (GM) on Monday said it would invest US$500 million in Lyft Inc and laid out plans to develop an on-demand network of self-driving cars with the ride-sharing service.
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 Inc, Alphabet Inc and Uber Technologies Inc — Lyft’s biggest rival — to control cars of the future and likely reshape the global auto industry.
The No. 1 US automaker’s investment accounts for half of Lyft’s latest US$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.
Photo: AFP
The two companies said the partnership was based on the shared view that self-driving cars would 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.
The partnership is to 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.
The announcement came as Toyota Motor Corp and Ford Motor Co said they would adopt the same software to link smartphone apps to vehicle dashboard screens.
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 Inc and others into self-driving cars, or what the industry calls autonomous vehicles.
Major automakers 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, Susquehanna Financial Group automotive analyst Matthew Stover said.
“The only way to understand the implications and viability of this business model [Lyft and Uber] is to become an investor,” Stover said.
Last month, Ford CEO Mark Fields said the No. 2 US automaker would explore the ride-hailing business with a fleet of specially designed Transit vans at its Dearborn, Michigan, campus.
GM CEO Mary Barra last fall said that while Apple and Google — under its new umbrella company Alphabet — are pushing to dominate dashboard displays with their software, automakers still control “the platform” of the vehicle itself.
Ammann, who is to 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, Detroit-based Boston Consulting Group US auto practice leader Xavier Mosquet said.
“In the next 10 to 20 years, [transportation] will be one of the biggest areas for electronic and software investments,” 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 US$1 billion fundraising round included Kingdom Holding Co, the investment firm of Saudi billionaire Prince al-Waleed bin Talal, which put in US$100 million.
Lyft said the latest funding round valued it at US$5.5 billion, cementing its status as one of Silicon Valley’s much-prized “unicorns,” or companies worth more than US$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 start-ups.
Lyft is locked in a fundraising race with rival ride-hailing app Uber. Lyft said it has raised a total of US$2 billion since August 2013. Uber is reportedly in the midst of a US$2.1 billion funding round that would value it as high as US$64.6 billion.
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