The Lyft-GM Deal and Why You Probably Won’t Buy a Self-Driving Car
For years, the US auto industry has eyed Silicon Valley with a mix of envy and anxiety. As the tech sector has boomed, Detroit automakers have seen companies from Google to Tesla, Uber, and Apple force a rethinking of how personal transportation will work in the future. But now the two sides have come together in a deal that reimagines Silicon Valley and Detroit as allies rather than antagonists.
Lyft and General Motors revealed yesterday that they are teaming up to build a network of self-driving cars. The country’s biggest automaker will invest $500 million in Lyft to develop a fleet of autonomous vehicles that can be summoned on demand; while waiting for that day to arrive, GM will also set up national hubs where Lyft drivers can rent and operate cars without owning them.
On the face of it, Lyft and GM may just look like they’re followers of a trend where others are farther ahead. Lyft’s chief rival, Uber, has reportedly pulled out all the stops in its pursuit of autonomous vehicles, poaching a cadre of top engineering talent from Carnegie Mellon University and setting up its own research center for self-driving cars in Pittsburgh. Google and Ford are also rumored to be working together on autonomous cars.
But the Lyft-GM deal differs in one crucial way from any other effort. More than just getting the self-driving car built, the two companies working together offers the clearest picture yet of how those cars might actually be used. Autonomous vehicles won’t just get us out from behind the wheel. They’ll change the way the business of transportation works altogether.
“Selling individuals a self-driving vehicle isn’t as game changing as getting people to use self-driving cars they don’t own,” James McQuivey, an analyst with research outfit Forrester, tells WIRED. “The former only adds a new technology while the latter changes the economics of one of the world’s biggest industries.”
A Symbiotic Deal
General Motors for its part says it understands that the business of personal mobility is changing, and quickly. “[It’s] obvious to us that there are large groups of customers out there that want to have the convenience and access to a car when they need it, but they don’t want to have the hassle of ownership,” Daniel Ammann, president of GM, tells WIRED.
At the same time, Ammann thinks it isn’t counterintuitive that GM would want to partner with a tech startup which has a stated goal of reducing the number of cars on the road. “The biggest part of GM’s business will continue to be the owner-driver model where someone buys a car and owns it, use it when they need to, and park it when it’s not in use,” he says. That model still works well, especially in the suburbs, where the company still makes most of its money, according to Ammann. Elsewhere, he says, it’s a different story. “For us to partner with Lyft and shake things up in the big urban centers is an opportunity for us,” he says. It doesn’t hurt that GM has been working on driverless solutions for years (an effort that ironically, has included a partnership with Carnegie Mellon). The company has hinted that it could roll out a fleet of self-driving cars on its Detroit campus by 2016.
Meanwhile, Lyft co-founder John Zimmer says the two companies are of like minds about the way in which most consumers will likely have that first experience of riding a self-driving car: not when they buy one, but when they summon one with an app like Lyft. “When you look at what needs to happen in order to create the future that everyone’s excited about, you need both the strengths of a car company and a ride-sharing company,” Zimmer says.
Step by Step
But shouldn’t it follow that Uber, by far the biggest player in car-hailing services, would also be the natural leader in bringing app-summoned autonomous cars to the world? Not necessarily, says Karl Brauer, a senior analyst at automotive research company Kelley Blue Book. “Uber is in a kind of ‘go it alone’ mindset,” says Brauer. “Maybe it will work and Uber will be able to independently control its destiny, not just in terms of ride-hailing, but also car construction and design. But it’s a big challenge.” According to Brauer, it would take a tech company a long time and a lot of money to become a successful automaker.
The challenge isn’t just technical. It’s an endeavor that carries enormous overhead. It requires institutional knowledge to navigate the supplier networks for tens of thousands of car parts, not to mention insider marketing and manufacturing knowhow. Detroit has this part of the car-making process perfected. Established automakers may look to be scrambling to ally themselves with tech companies, but to bring autonomous cars to the road, tech companies likely need the automakers, too.
“Google’s knowledge of how to do the software side of a self-driving car is unparalleled,” Forrester’s McQuivey says. But Google likely needs a partner like Ford to get that software on the streets to a broad consumer market. And both companies will need a partner like Lyft or Uber to get passengers in those cars. “It will be up to the companies to invest in transportation services to get their cars used,” he says.
As these alliances play out, it’s not a given that the biggest players in the space now will automatically dominate. “If Lyft and GM come together and this greatly shortcuts each other’s ability to get into each other’s space, both those companies could benefit and move very quickly, versus the time it would take for a company like Uber to get to the same place,” says Brauer.
The Lyft and GM partnership also enables the two companies to focus in the short-term on taking incremental steps towards an autonomous driving future, says McQuivey, such as working on semi-autonomous cars where Lyft-employed drivers are still behind the wheel as backup.
Whoever succeeds first, the move by GM and Lyft to team up is undeniably clever. By leveraging each other’s strengths, the two companies have found a way to stay in the battle for the self-driving car—a battle that is about not just the car, but who’s in the car, and how they get there.