San Francisco, California - General Motors is to invest $500 million (R7.8 billion) in Lyft and 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 as technology companies such as Apple, Alphabet and Uber - Lyft's biggest rival - rush to control the cars of the future and possibly reshape the global automotive industry.
It’s one of GM's biggest investments in another company and the largest single cash injection yet 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 would first reach consumers as part of a ride-sharing service, rather than vehicles owned by drivers.
GM president Dan Ammann said: “We think our business and personal mobility will change more in the next five years than the “past 50.”
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.
The announcement came as Toyota and Ford said they would adopt the same software to link smartphone apps to vehicle dashboard screens, and invited rival car companies to join them to counter the push by Apple, Alphabet and Tesla into self-driving cars.\
UNDERSTANDING THE IMPLICATIONS
Industry analyst Matthew Stover said automakers were trying to prevent Silicon Valley from dominating the future of self-driving cars and ride-sharing, and investing as a way to see whether Lyft and Uber were on the way to making money.
“The only way to understand the implications and viability of the ride-sharing business model is to become an investor,” Stover commented.
In December chief executive Mark Fields said Ford would explore the ride-hailing business with a fleet of specially designed Transit vans at its Dearborn, Michigan facility, while GM boss Mary Barra pointed out several months earlier that while Apple and Google - now called Alphabet - were pushing to dominate dashboard displays with their software, automakers still controlled ‘the platform’ of the car itself.
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” at both.
Boston Consulting Group analyst Xavier Mosquet said the deal heralded a wave of alliances in varying forms between automakers and Silicon Valley companies, with each trying to capture new business as transportation evolves.
He expected ride-sharing driverless vehicles to develop first in big cities such as Singapore, London and New York, probably between 2022 and 2025.
“In the next 10 to 20 years, transportation will be one of the biggest areas for electronic and software investments.” he said.