GM is making a $500 million bet that it can use Lyft’s rideshare technology to provide self-driving cars to customers.
Lyft announced Monday it was closing a $1 billion funding round led by a $500 million investment from GM, which would have a seat on its board.
The companies envision an integrated “autonomous on-demand network,” with GM working on the development of self-driving cars and Lyft developing software to bring the cars to customers’ doors.
“We see the future of personal mobility as connected, seamless and autonomous,” GM president Dan Ammann said in a news release. “With GM and Lyft working together, we believe we can successfully implement this vision more rapidly.”
GM will also work with Lyft to provide short-term rental hubs where people who do not own cars can pick up a vehicle and drive for Lyft to earn money.
The deal is the first between a large automaker and a rideshare company and, according to Time, marks a further recognition in Detroit that transportation is on the verge of a “potentially massive paradigm shift.”
“Why would anybody spend tens of thousands of dollars on a vehicle that sits idle for most of its life, when they could just hail a self-driving car with the tap of an app instead?” Time said.
The Wall Street Journal noted that the rideshare industry poses a threat to auto sales as “more urban commuters hail rides from Lyft and Uber Technologies instead of owning a car.”
But Ammann said GM’s core profit comes from cars sold outside the urban areas where Lyft mostly operates. “From a GM perspective, we view this as much more of an opportunity than a threat,” he told the New York Times.
Lyft’s latest funding round values the company at $4.5 billion. Other investors include Saudi Arabia’s Kingdom Holding Co., Janus Capital Management, Rakuten, Didi Kuaidi, and Alibaba.
“Uber is using its massive war chest to do its own autonomous car research as well as expand at a nearly incomprehensible pace,” Time said. “The GM deal should help Lyft extend its life as a smaller but still potent number two in the ride-hailing space.”