GM invests $500 million in Lyft ride-hailing service

The automotive industry is placing its biggest bet yet that using a device to hail a ride — with or without a driver — is the future of transportation.

General Motors Co. said Monday it is investing $500 million in ride-hailing company Lyft Inc. and forming an unprecedented partnership that could eventually lead to on-demand, self-driving cars. It’s the largest investment yet by a traditional automaker in a new mobility company, and is an acknowledgment by GM that the transportation landscape is changing quickly.

“We see the world of mobility changing more in the next five years than it has in the last 50,” GM President Dan Ammann told The Associated Press in an interview.

The partnership is a blow for Uber Technologies Inc., which has fought to overwhelm Lyft, its only substantial U.S. competitor. Sidecar, another American rival, announced in December that it would shut its network. Uber has raised more than $10 billion in financing and is spending aggressively to grow. Its last round of financing valued the company at $62.5 billion.

GM made the investment as part of a $1 billion round of fundraising by Lyft.

Together, the companies plan to open a network of U.S. hubs where Lyft drivers can rent GM vehicles at discounted rates. That could expand Lyft’s business by giving people who don’t own cars a way to drive and earn money through Lyft. It also gives GM a leg up on competitors like Daimler AG and Ford Motor Co., who are developing their own ride-sharing services. And it would put more young drivers behind the wheel of a Chevrolet, Buick, GMC or Cadillac.

Longer term, GM and Lyft will work together to develop a fleet of autonomous vehicles that city dwellers could summon using Lyft’s mobile app.

Karl Brauer, an industry analyst with Kelley Blue Book, expects to see automakers and tech companies form more partnerships over the next few months.

“Each one has an area of specialization to make both of them stronger,” he said.

GM isn’t the only automaker with an eye on Lyft. Fontinalis Partners, a venture capital firm co-founded by Ford Motor Co.’s Executive Chairman Bill Ford, invested in Lyft last May. The amount invested wasn’t disclosed.

GM gets a seat on Lyft’s board and access to the three-year-old company’s software, which matches riders with drivers and automates payments. The partnership also better positions the automaker for a future in which customers don’t buy cars every five or six years but share rides or hail drivers when they need to get somewhere.

Ammann said the resulting partnership is unlike any other in the auto and tech industries.

“Do we want to deploy the resources and people to do everything ourselves, or get there faster by working in partnership?” Ammann said. “We see a really compelling, complementary set of capabilities.”

GM has made previous forays into the ride-sharing world. In 2011, GM invested $3 million in Relay Rides and teamed up to let GM owners rent their cars to other drivers through the OnStar connectivity system. Relay Rides eventually stopped using OnStar, but retains GM as a partner.

Some automakers are going alone. Daimler’s Car2Go rents out tiny Smart cars in 28 European and U.S. cities. BMW is experimenting with renting out electric cars through its Drive Now service. Apple and Tesla are also believed to be developing their own autonomous software and ride-sharing schemes.

Others are forming partnerships. Ford, for example, encourages owners in a handful of U.S. cities to rent cars through Getaround, a car-sharing service. Google, which is testing a small fleet of driverless cars, invested $250 million in Uber in 2013.

This story was originally published January 4, 2016 at 9:37 AM with the headline "GM invests $500 million in Lyft ride-hailing service."