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General Motors Invests $500 Million in Lyft to Form New Partnership

U.S. car manufacturer General Motors Co. GM and ride-hailing company Lyft Inc. have announced the two are forming a new partnership with one another that could increase their chances of being the leaders in self-driving vehicles.

According to Lyft, GM has invested $500 million into the company, which is a part of a $1 billion round of fund-raising. With its investment, GM will gain a seat on Lyft’s board, as well as access to the young company’s software, which matches its drivers with riders and automatic payments. GM also becomes Lyft’s preferred vehicle provider, improving chances that drivers will be behind the wheel of a Chevrolet, GMC, Cadillac, or Buick.

On Lyft’s side of the deal they now get the help of an experienced and mature company like GM who has been in the auto-making business for over 100 years. GM also has a global reach that Lyft hopes to tap into, as GM sells nearly 10 million cars a year in over 100 countries. For comparison, Lyft operates in just 190 U.S. cities, and just recently formed partnerships in China and India.

Together Lyft and GM plan to open a network of U.S. hubs where Lyft drivers will be able to use GM vehicles. This could be very beneficial for both companies, as it could expand Lyft’s business by providing people who don’t own cars an opportunity to work with Lyft. Also for GM, the partnership could give the company an advantage over rivals like Ford Motor Co. F and Daimler AG DDAIF, who are both currently working to develop ride-sharing services of their own.

Looking farther into the future, GM and Lyft will work together to develop a group of autonomous vehicles that consumers could call on using Lyft’s mobile app. The partnership could provide a leg up on fellow ride-sharing company, Uber Technologies Inc., who is also currently working to develop a similar program.

After its latest round of fund raising, Lyft is now valued at around $5.5 billion, and the company is projected to have approximately $1 billion in revenue this year. This value is much smaller than Lyft’s rival Uber, which is valued at around $50 billion as of its own latest round of fundraising.

Bottom Line

Though this new partnership between Lyft and General Motors gives the two companies several advantages over other competitors, both currently and in the self-driving car future, the two companies will still have to work incredibly hard to be leaders in the space. As mentioned above, Uber is pushing hard to develop a similar program, and is already nearly ten times more valuable then Lyft; it’s almost worth as much as GM, and could even surpass GM’s value of $53 billion. Also, other companies like Alphabet Inc. GOOGL and Apple Inc. AAPL are working to further their own self-driving vehicle technologies.

In the release regarding the Lyft and GM partnership, GM President Dan Ammann stated, “We see the world of mobility changing more in the next five years than it has in the last 50”, and with more and more companies working to develop autonomous vehicle fleets, he may very well be correct.

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