General Motors Co. is betting $500 million that ride-hailing services such as Lyft Inc. will be crucial to the future of autonomous-driving vehicles and the transformation of an industry dominated by car ownership.
The U.S.’s No. 1 car maker invested that sum in Lyft as part of a new $1 billion round of funding, the companies said on Monday. Saudi Arabia’s Kingdom Holding Co., Janus Capital Management LLC and Japanese e-commerce firm Rakuten Inc. also contributed to the financing, which values Lyft at $5.5 billion.
The deal marks the first time a major car maker has joined with a ride-hailing company, whose services threaten auto sales as more urban commuters hail rides from Lyft and Uber Technologies Inc. instead of owning a car. Ford Motor Co. Executive Chairman Bill Ford invested in an earlier funding round for Lyft, but that was through his venture firm, Michigan-based Fontinalis Partners LLC, and not associated with the auto maker.
At the same time, auto makers are moving quickly to smarten up their vehicles and develop their own autonomous capabilities as technology companies including Uber, Google parent Alphabet Inc. and Apple Inc. take aim at the industry. Ford and GM are among a slate of auto makers testing a range of future mobility experiments, either alone or in partnership with tech firms such as Alphabet.
GM said it would work with San Francisco-based Lyft to develop a service that could let customers order a car on their smartphones and have the vehicle appear at their doors with no driver required.
“We believe that the first large-scale deployment of autonomous vehicles will be in this kind of on-demand, ride-share platform,” GM President Dan Ammann said in an interview. GM was an initial mover on electric cars, and will unveil the production version of its Chevrolet Bolt in Las Vegas this week, a car aimed at taking on Tesla Motors Inc. ’s long-range electric vehicles.
Mr. Ammann said teams from Lyft and GM would begin working together soon but declined to offer specifics on what they would develop or how soon it could become available.
“A lot of the work will be centered around integrating capabilities that already exist,” Mr. Ammann said.
GM has begun developing its own autonomous-car technology and has said it plans to have a fleet of self-driving Chevrolet Volt plug-in hybrid sedans operational in its Detroit technical center this year.
The auto maker’s investment provides Lyft with more capital to compete with its main rival Uber and gives it a powerful new strategic partner.
In the coming months, GM and Lyft plan to build rental-car centers where Lyft drivers can rent vehicles at discounted rates. Last year, Lyft formed a partnership with several Asian ride-hailing companies to allow users of each company’s app to hail rides using the other apps while they are traveling in each country.
Lyft previously raised close to $1 billion from investors including Chinese ride-sharing company Didi Kuaidi Joint Co. and hedge-fund titan Carl Icahn. Other backers include Chinese technology majors Alibaba Group Holding Ltd. and Tencent Holdings Ltd., as well as U.S. investment firms Founders Fund, Andreessen Horowitz and Coatue Management LLC.
Lyft has more than doubled its valuation since May 2015, when it raised funds from Mr. Icahn in a round valuing Lyft at $2.5 billion.
Still, Lyft has raised a fraction of the funding that Uber has. Lyft’s larger competitor has raised a total of more than $12 billion in debt and equity. Uber, which is also developing its own autonomous-vehicle technology, recently raised $2.1 billion—roughly matching Lyft’s total—in a round valuing the company at $64.6 billion That valuation is higher than GM’s market value of about $53 billion.
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