Lyft’s off-ramp leads to General Motors. The No. 2 U.S. ride-sharing service recently rebuffed takeover interest from its 9 percent owner, according to news service the Information. There are good reasons for Lyft to steer clear of Detroit, despite a shared vision for autonomous cars. But cash-flush rivals could yet force the Silicon Valley upstart into GM’s lane.
The Chevrolet maker’s overture was probably only a matter of time after it paid $500 million for a stake in Lyft in January and took a seat on the board. In March, the companies unveiled a deal to lease GM vehicles to Lyft drivers. They also plan to collaborate on building a fleet of autonomous on-demand vehicles.
Speculation about Lyft’s future heated up in June when it emerged that the company had hired Frank Quattrone’s Qatalyst Partners, a Silicon Valley investment bank known for helping clients find lucrative exits. Meanwhile, market leader Uber’s recent agreement to merge its China operations with rival Didi Chuxing, freeing up some $1 billion a year to spend elsewhere, could make Lyft’s fight for market share in the U.S. even harder.
Despite the mounting pressures, there are some good reasons for founders Logan Green and John Zimmer to try to stay independent, at least for a while longer. GM has been investing heavily in driverless technology, but so have many of its peers, as well as the likes of Alphabet and Apple. So there’s no guarantee the Motor City carmaker will come up with a winning product. With software, rather than the power train, the more valuable component of autonomous vehicles, Lyft has little incentive to sell for anything other than top dollar. It would also presumably find it easier to recruit top programming talent as an independent company.
Lyft may run out of road eventually. Being second to the much-larger Uber is a big disadvantage in an industry where drivers and riders prefer the biggest, most active network. An expensive battle for ride-hailing supremacy would distract from the bigger prize: a chance to fundamentally disrupt car ownership – an opportunity Zimmer calculates is worth over $2 trillion per year in the U.S. alone, including the cost of buying, maintaining and insuring cars – with driverless technology. That may ultimately direct Lyft to seek an off-ramp. It just has to hope that when it does, GM is still willing to take the wheel.