General Motors Co. will invest $500 million in Lyft Inc., giving the ride-hailing startup a valuation of $5.5 billion and a major ally in the global battle against Uber Technologies Inc.
The investment, part of a $1 billion financing round for Lyft, is the biggest move by an automaker to date when it comes to grappling with the meteoric rise of the ride-hailing industry.
GM and Lyft said they will work together to develop a network of self-driving cars that riders can call up on-demand, a vision of the future shared by the likes of Uber Chief Executive Officer Travis Kalanick and Google-parent Alphabet Inc. More immediately, America’s largest automaker will offer Lyft drivers vehicles for short-term rent through various hubs in U.S. cities, the companies said in separate statements on Monday.
GM President Dan Ammann, who is joining Lyft’s board as part of the deal, expects the automotive industry to “change more in the next five years than it has in the last 50 and we obviously want to make sure we’re at the forefront of that change.”
Ammann called the investment an “alliance” with Lyft. Rather than stay neutral in the battle between Uber and Lyft, GM invested because of the “level of integration and cooperation that will be required, particularly for the longer term nature of this,” he said in a phone interview.
Uber’s Kalanick, whose company has been investing aggressively in self-driving cars, has said that it could take between 5 and 15 years before such vehicles are meaningfully deployed around the country.
GM is open to working with some of Lyft’s international partners, which include Didi Kuaidi in China, Ola in India and GrabTaxi in Southeast Asia, Ammann said.
“We certainly see an opportunity to work together through those relationships,” Ammann said. “The U.S. is our home market and it continues to be our largest market and we think this is the right place to begin the journey.”
The partnership is a blow for Uber, which has fought to overwhelm Lyft, its only substantial U.S. competitor. Sidecar, another American rival, announced in December that it would shut its network.
Uber has raised more than $10 billion in financing and is spending aggressively to grow. Its last round of financing valued the company at $62.5 billion.
Ford Motor Co. is experimenting with its own ride-sharing initiatives: the company last year started offering a network of shared cars in London to tap the growing market for on-demand driving. Fontinalis Partners LLC, the venture firm funded by Ford family heir Bill Ford, has previously invested in Lyft.
Lyft’s latest financing round nearly doubles the three-year-old startup’s total financing. Since 2013, Lyft has raised more than $2 billion, the company said. Bloomberg previously reported that Lyft had filed to raise $1 billion as part of this financing round. Its latest $5.5 billion valuation is post- money, meaning it includes the value from raising its latest $1 billion.
Saudi Arabian billionaire Prince Alwaleed Bin Talal’s Kingdom Holding Co. invested $100 million as part of the round and existing investors Janus Capital Management, Rakuten Inc., Didi Kuaidi and Alibaba Group Holding Ltd. also participated, according to the statement.
Lyft lost $127 million in the first half of 2015 on $46.7 million in revenue, according to fundraising documents obtained by Bloomberg. It said in November it has gained share in key markets such as San Francisco, and has a gross revenue “run rate” of $1 billion. Lyft has said it’s operating in more than 190 cities.
This article was written by Eric Newcomer from Bloomberg and was legally licensed through the NewsCred publisher network.