General Motors’ Savvy $500 Million Investment

The partnership between GM, America’s largest automaker, and ride-sharing app Lyft is designed to create a “network of on-demand autonomous vehicles” that would see Lyft deploying driverless cars to service customers nationwide. These functions, GM believes, will “create a richer ride-sharing experience for both driver and passenger”.

But Lyft’s goal, which it states in the news release as “redefining traditional auto ownership”, and the goals of other ride-hailing companies, appear to be counter to General Motors’ business model. The ride sharing company has announced that it managed to secure as much as $1 billion in capital, made possible by a recent $500 million investment by General Motors (GM).

Under the agreement, General Motors (GM) is planning to invest $500m in Lyft to help the company continue its growth in ridesharing service. Lyft said the new investments bring the company’s valuation to $5.5 billion. GM and Lyft did not provide a timeline for this on-demand network. In return, GM will receive a seat on Lyft’s board of directors and become a preferred provider of short-term use vehicles to Lyft drivers.

Lyft president John Zimmer said his company shared the same vision.

That target is still some way off however, and neither GM nor Lyft has set a timeframe for the deliver of autonomous services.

Founded out of San Francisco in 2012, Lyft had received $1.2 billion in funding prior to this deal. For comparison, Lyft operates in just 190 USA cities, and just recently formed partnerships in China and India.

Lyft president and co-founder John Zimmer says the arrangement may mean that people will no longer own their own cars. But it is the GM funding that is sure to garner the most attention due to the sheer size of the investment and its strategic significance.

Some may wonder why a company that makes and sells cars would work with a company that allows people to travel without purchasing one.