Uber Rival Lyft Gets Lift After GM Invests $500 Million, Plans System Of Self-Driving Cars

General Motors just got a piece of ride-hailing service Lyft, a big piece. On Monday, GM said they are investing $500 million in the Uber competitor.

The automaker’s investment will potentially give Lyft some strategic advantages over much larger rival Uber Technologies, Inc. By becoming a preferred partner with GM, Lyft drivers will get some big benefits from the “alliance.”

GM wants in the ride-sharing business and invests in Lyft.
GM will help Lyft compete against Uber through a half-billion investment in the ride-hailing service. [Photo by Bill Pugliano/Getty Images]

Lyft drivers who do not own cars will be able to use vehicles from various rental locations nationwide to earn money. Accessible in most new vehicles, GM’s OnStar services will be available for drivers, as well. The service includes an integral WiFi hotspot and diagnostic features to monitor car conditions while on the road.

As part of the deal, GM President Dan Ammann will join Lyft’s board.

Even though the ride-sharing industry could be a threat to new car sales, Ammann believes the automotive industry should be embracing the opportunity instead of fearing it. He noted that automakers are on the cusp of the biggest change in the last 50 years, and GM must be a part of that change.

Rather than sit back and watch what will happen between Uber and Lyft, GM invested to get involved in the continuing growth of the industry and stay ahead of the curve. Last year, Ford Motor Co. got into the on-demand driving business by offering a network of shared vehicles in London.

GM isn’t the only one interested in the Uber rival. Billionaire Prince al-Waleed bin Talal of Saudi Arabia dedicated more that $100 million to the company last month. Meanwhile, investor Carl Icahn, who just recently bought auto-parts retailer Pep Boys, also invested $100 million in Lyft last spring.

Other major investors include Janus Capital Management, Rakuten Inc., Didi Kuaidi, and Alibaba Holding Ltd. GM only sees growth by working with these other investors.

“We certainly see an opportunity to work together through those relationships,” Ammann said. “The U.S. is our home market and it continues to be our largest market and we think this is the right place to begin the journey.”

GM investment in Lyft will go towards self-driving car network.
Lyft using part of GM's investment to develop self-driving cars to compete against Google and others. [Photo by Justin Sullivan/Getty Images]

To compete against Google, Ford, Tesla, and Uber, part of the GM investment in Lyft will be used to develop a network of self-driving cars. Most experts believe the technology is at least five years away, so Lyft and GM have not announced any estimated timeframe for when the network will be available.

“We strongly believe that autonomous vehicle go-to-market strategy is through a network, not through individual car ownership,” John Zimmer, Lyft’s president, said in an interview.

According to documents obtained by Bloomberg, Lyft showed a significant gain in markets like San Francisco and generates approximately $1 billion in gross revenue. Additionally, Lyft claims to be currently operating in over 190 cities.

After Lyft partnered with three other similar ride-sharing companies in 2015, customers from around the world now have access to the service. The four companies combined cover almost 50 percent of the globe’s population.

While Lyft has been growing by leaps and bounds, another ride-hailing company called it quits last month. Sidecar, a lesser-known competitor, stopped the service on December 31.

Launched in 2012, Sidecar was an early innovator in the concept of ride-sharing and was one of the first to offer a smartphone app to connect people with drivers. Despite experimenting with other services, like marijuana delivery, the company could never gain the same traction as Uber and Lyft.

GM's investment in Lyft may hurt Uber.
Lyft is Uber's main competitor in the U.S. [Photo by Adam Berry/Getty Images]

Since the fail of Sidecar, Lyft is Uber’s only major competitor. Raising over $10 billion in financing, Uber has been aggressively spending to stay ahead, and GM’s half-billion dollar investment in Lyft may be a major setback in those efforts.

As of today, Lyft is valued at $5.5 billion, which pales in comparison to Uber’s $70 billion valuation. Prior to the $500 million investment by GM, Lyft had been actively looking for an additional $1 billion in new funding, and this commitment marks the largest gamble by the automaker in quite some time.

[Photo by John Sciulli/Getty Images for Lyft]