A few months after Uber sold its driverless unit to startup Aurora, its ride-hailing rival Lyft, is towing the same path. Lyft will sell its self-driving technology unit to Toyota in a $550 million deal, the companies said on Monday.
The decision will allow Lyft to reach its profitability target one quarter earlier, focusing on other businesses it deems more profitable.
The sale of Level 5 to Toyota’s Woven Planet division will allow Lyft to focus on partnerships with self-driving companies that want to deploy their technology on its platform, rather than develop costly technology that has yet to enter the mainstream.
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In addition to the acquisition of Level 5, Woven Planet and Lyft have signed commercial agreements for utilization of the Lyft system and fleet data to accelerate the safety and commercialization of the automated-driving technology that Woven Planet will develop.
“This acquisition advances our mission to develop the safest mobility in the world at scale. The Woven Planet team, alongside the team of researchers at TRI, have already established a centre of excellence for software development and technology in the Toyota Group,” said James Kuffner, CEO of Woven Planet.
“Bringing Level 5’s world-class engineers and experts into the fold—as well as additional technology resources—will allow us to have even greater speed and impact. This deal will be key in weaving together the people, resources, and infrastructure that will help us to transform the world we live in through mobility technologies that can bring about a happier, safer future for us all,” he added.
According to the deal, Lyft will receive $200 million cash upfront, with the remaining $350 million paid over five years, the companies said. The deal is expected to close in the third quarter.
The company said the sale will allow Lyft to report third-quarter profit on an adjusted basis of earnings before interest, taxes, depreciation and amortization as long as the company continues to recover from the coronavirus pandemic.
Reuters’ further report on the deal said the sale will also remove $100 million in annual net operating costs, Lyft said.
Woven Planet, which Toyota set up in January to develop connected vehicle, autonomous and semi-autonomous driving technology, will take over all of the more than 300 employees of Level 5.
The deal marks Toyota’s latest foray into ride-hailing at a time of growing consolidation in the capital-intensive self-driving industry. The Japanese automaker already owns a stake in China’s top ride-hailing firm Didi Chuxing and Southeast Asia’s Grab.
It also owned a stake in the self-driving unit of Lyft’s larger rival Uber, but transferred the stake when Uber sold the unit in December to Aurora at a steep drop in valuation.
Toyota said in February it would develop and build autonomous minivans for ride-hailing networks with Aurora and longtime supplier partner Denso Corp.
Lyft’s sale allows it to offload cash-burning side businesses and focus on reviving their core divisions following a bruising pandemic year.
Lyft will now focus on what it can do best with autonomous vehicles by offering services such as routing, consumer interface and managing, and maintaining and cleaning partners’ autonomous vehicle fleets, which could mean added revenue, it said.
Lyft already allows consumers to book rides in self-driving vehicles in select cities in partnerships with Alphabet’s Waymo and Motional, the joint venture between Hyundai Motors and Aptiv.
It will continue to collect real-world driving data through some 10,000 vehicles it rents out to consumers and ride-hail drivers. The data is valuable for the development of self-driving vehicles that Woven Planet will have access to under the deal.
But Lyft also believes human ride-hail drivers will remain important for the foreseeable future to serve customers during peak demand periods, bad weather, or in areas that self-driving cars are unable to navigate.
“Lyft has spent nine years building a transportation network that is uniquely capable of scaling autonomous vehicles. This deal brings together the vision, talent, resources and commitment to advance clean, autonomous mobility on a global scale,” Logan Green, CEO of Lyft said.