GM’s $500 million interest in Lyft — an alliance that pairs an auto stalwart with the kind of startup trying to disrupt it — is the single largest direct investment by an auto manufacturer into a ride-hailing company in the United States.
The founders of Lyft, the ride-hailing service, have long imagined that the future of transportation would involve fewer cars on the road. Now General Motors is helping the startup reach that goal.
Lyft announced Monday that GM had invested $500 million in the company, or half its latest $1 billion venture-financing round. The funding, which recently closed, values Lyft at $4.5 billion, not including the new capital.
GM’s support includes more than financial backing. As part of the investment, GM and Lyft will work on developing an on-demand network of self-driving cars, an area of research that companies like Google, Tesla and Uber have devoted enormous resources to in recent years.
GM will also work with Lyft to set up short-term car-rental hubs across the United States, places where people who do not own cars can pick up a vehicle and drive for Lyft to earn money.
- Thinking of voting for Jill Stein or Gary Johnson? Here are their policy positions
- Hugs, tears and messages scrawled in chalk: Hundreds mourn Mukilteo victims WATCH
- Doctor who killed partner, child in Seattle penthouse gets 49 years
- 6 Seattle spots for truly great pizza VIEW
- AP FACT CHECK: Misfires in Hillary Clinton's speech
Most Read Stories
Daniel Ammann, president of GM, will join the board of San Francisco-based Lyft.
“We strongly believe that autonomous vehicle go-to-market strategy is through a network, not through individual car ownership,” Lyft President John Zimmer said in an interview.
GM’s $500 million interest in Lyft — an alliance that pairs an auto stalwart with the kind of startup trying to disrupt it — is the single largest direct investment by an auto manufacturer into a ride-hailing company in the United States, according to data from PitchBook.
The investment reflects how much consumer automotive habits have been changed by technology during the last decade. With the rise of ride-hailing companies, automakers have raced to adapt to how people can now use each other’s vehicles for rides, which could potentially lead to a decline in car ownership.
The shifts have started a spate of partnerships between carmakers and auto-related startups.
In 2011, GM teamed up with RelayRides, a car-sharing marketplace, to let GM auto owners rent out their idle vehicles. Ford struck a similar deal last year with Getaround, another car-sharing marketplace startup. And Daimler has been experimenting with Car2Go, a service that offers short-term SmartCar rentals.
In an interview, Ammann said GM wanted to be part of the changing business models in transportation. “We think there’s going to be more change in the world of mobility in the next five years than there has been in the last 50,” he said.
Ammann noted the core profit from GM’s business comes from cars sold outside the urban environments where Lyft primarily operates, especially sales of SUVs in suburban areas.
“From a GM perspective, we view this as much more of an opportunity than a threat,” he said.
GM’s investment is also a vote of confidence in Lyft, which faces a competitive ride-hailing field. Founded in 2012, Lyft helped promote the ride-hailing trend in the United States, positioning itself as a superior option to car ownership or public transportation. Lyft users can summon a private or shared car with a few taps of an app.
Lyft and GM did not give a specific timeline for when they expected their autonomous vehicle network to become publicly available, nor did the companies offer details on how the network is expected to function.
It will most likely be some time before a fully autonomous network of cars becomes a reality. Early rules for self-driving vehicles may hinder the speed of progress. California recently passed legislation requiring a driver to be behind the wheel of a self-driving car at all times.
A mix of Lyft’s existing investors, including the Asian e-commerce giants Rakuten and Alibaba, also contributed to the most recent financing round, as did the Chinese ride-hailing startup Didi Kuaidi.
Uber, Lyft’s largest and most formidable rival, has raised more than $10 billion to date, and it is valued at $62.5 billion, about 14 times Lyft’s new valuation.
Uber operates in hundreds of cities in 67 countries. It also operates its own research center for self-driving cars in Pittsburgh and is steadily recruiting engineering talent from Carnegie Mellon University as well as from competitors like Google, whose efforts on autonomous vehicle research have been well publicized.
Lyft has been working to catch up to Uber. The company recently teamed with ride-hailing competitors in Asia like Didi Kuaidi, Ola and GrabTaxi to expand. It has also struck deals with major brands like Starbucks and pop stars like Justin Bieber to broaden its reach.
Lyft also partnered with Hertz to offer rental cars to drivers who don’t own cars, and has a deal with Shell that gives gas discounts to Lyft drivers in some cities.