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GM invests $500 million in Lyft. What’s in it for both sides?

Sally Herships Jan 4, 2016
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If you imagine ridesharing services are like soda, Uber is pretty clearly Coke. And while you might guess that Lyft, Uber’s smaller competitor, is Pepsi, it’s not.

“Lyft has always been like root beer” — it’s not always on the menu, said Harry Campbell, the voice behind rideshareguy.com, a blog and podcast for rideshare drivers.

“Uber is everywhere. It’s in cities with as few as 100,000 people, in small college towns, in medium-sized towns, out in the middle of nowhere,” he said. “I’ve heard people get into a Lyft while I’m driving and they think it’s an Uber. They don’t even realize that the person who called it, called a Lyft.”

But thanks to General Motors, Lyft may now have a chance to become more popular by blaring its own horn. According to the terms of a just announced deal, GM will invest half a billion dollars in Lyft. Campbell notes the money will help Lyft to get a lift, by marketing itself better.

And even though rideshare services like Lyft encourage people to take rides in somebody else’s car, not buy vehicles of their own, there’s a lot of potential in this deal for GM toosaid Matt Stover, an auto industry analyst with Susquehanna Financial Group, an investment bank.

“Number one, it allows for them to get more return on the investment of building a car,” he said. 

Part of the deal the two companies have forged will see GM get a seat on Lyft’s board. It will also become a preferred provider of vehicles to Lyft drivers, meaning GM will rent used cars – cashing in again on its products a second time. But that’s just the short term. In the long term, GM can use its partnership with Lyft to figure out how to design cars for the future – when more buyers may be rideshare drivers.

“There’s certain vehicles that are probably going to be better and more amenable for the drivers — the vehicles that they’re going to want,” Stover said. “And right now it’s sort of now the vehicle that the driver has.”

But GM is thinking of a future even further down the road, said Ed Kim, vice president of industry analysis for market research and automotive industry consulting firm AutoPacific

“We see that there’s a significant demand among consumers to give up the act of driving entirely,” he said.

And ridesharing companies, said Kim, like Lyft and Uber would be only to happy to following suit – hoping to eject humans from the driver’s seat. After all, human drivers can mean problems, paychecks and lawsuits — just look at Uber.  “Ultimately,” said Kim of driverless cars, “that would be the goal – the holy grail of any ridesharing company.”

And if the future means a time when cars drive themselves, a deal with Lyft would help GM to prepare now.  

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