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Will Toyota Get Self-Driving Unit to Lyft-Off?

Following Uber spinning off its self-driving unit to Aurora last December, Lyft is now the latest ride-hailing giant to give up on the dream of developing this technology in-house.

Lyft has just sold off its very own autonomous vehicle unit to Woven Planet Holdings, a subsidiary of Toyota that is focused on future mobility, digitalization, AI and developing smart city technologies. The deal was struck for $550 million and will see the transfer of Lyft’s so called ‘Level 5’ division, including its employees and offices, over to the Toyota subsidiary. This transaction will officially close the curtains on Lyft’s 4-year foray into developing its own autonomous driving system. Lyft will however keep its team of engineers, product managers, data scientists and UX designers who are focused on the consumer experience of traveling in an autonomous vehicle.

From Lyft’s side, it appears that the central motivation for this sell-off is Lyft’s attempt to focus on reaching profitability later this year. Co-founder and president John Zimmer made a point of mentioning that by selling off ‘Level 5’ it expects to be able to remove $100 million of annual cash burn from its operating expenses, which will be critical for the company’s plans to post its first ever profit in the third quarter. Lyft will dedicate its resources to what the company says it was its core focus all along: to become the go-to ride-hailing network and fleet management platform used by all commercial robotaxi services. But instead of powering such a service with their own self-driving software and hardware stack, they will now be leaning on existing partnerships with other AV developers such as Waymo, and the Hyundai-Aptiv joint venture known as Motional.

For Toyota, or Woven Planet Holdings, this aquisition is just one of but a string of high-profile investments and partnerships in the self-driving space. Amongst these is its partnership with Aurora, a joint-venture with Softbank, as well as a stake in China’s largest ride-hailing company (also with its own self-driving development) DiDi Chuxing. Toyota’s Woven subsidiary is also invested in autonomous delivery with a stake in Nuro.  

Personal Comment:

On the part of Lyft, this latest development appears to be another fallen domino resulting from the industry’s realisation that developing self-driving technology is going much harder than anyone had predicted even just few years ago. In 2018, Waymo forecasted that up to 20,000 electric Jaguars and 62,000 Chrysler minivans would be in operation in its driverless fleet over the next two years. Today, Waymo’s official fleet size remains at around 600. In an interview with the Financial Times in January this year, the Waymo CEO conceded that the path to success remains an “extraordinary grind” and that “it’s a bigger challenge than launching a rocket and putting it in orbit around the Earth...”. And this is coming from Waymo, the company that is considered to be one of the undisputed leaders in this race, and almost certainly the most well-resourced. Indeed, they raised a cool US$3.2 billion last year in their first external investment round. Compared to this, Lyft’s US$100 million annual cash burn on its internal self-driving unit starts to look like small change.  

So it’s no surprise that with this realisation of the enormity of the challenge setting in across the whole self-driving industry, many are bowing out – particularly those who don’t yet even have a profit source to finance this continuous cash drain (here’s looking at you, Uber and Lyft). So even though ride-hailing companies would be the most strategically positioned to benefit from having their own-self-driving technology, since they already have the customers and hailing platform, they clearly no longer have a blank check from their investors to stay in the race. Just last month, one of Uber’s earliest investors declared that the billions Uber spent on self-driving was a “waste of money”. It will be interesting to see if China’s Didi Chuxing, which unlike Uber and Lyft, is already profitable (earning US$1 billion in 2020 despite the Corona virus) will decide to stay in the game.

From Toyota’s point of view, they appear to be taking a cautious approach to their self-driving investments. Despite their own sizable resources, they are not jumping head-on into trying to compete with Waymo on cashburn and developing the technology by themselves – rather they are looking for strategic purchases and partnerships. The value of its acquisition of Lyft’s ‘Level 5’ division maybe be in the access to real-world driving data that is part of the deal. Lyft collects this data for some 10,000 vehicles it rents out to consumers and ride-hail drivers. The data would be valuable for the development of self-driving vehicles that Woven Planet will have access to under the deal.

Written by Bobby Chen,
RISE Mobility & Systems (Elektromobilitet)