Bottom line: Lyft is the latest company to offload its self-driving car efforts as part of structural changes needed to ensure its path to profitability. The company believes that if the transaction with Toyota goes through as expected, it could technically achieve that goal by the end of this year.
Lyft and Toyota subsidiary Woven Planet announced a deal where the latter will take over the self-driving car division of the former for $550 million in cash. Of that sum, $200 million will be paid upfront in the third quarter of this year, while the rest will be paid out over the next five years.
The move appears to be a no-brainer as Lyft will be saving some $100 million annually in non-GAAP expenses. This, in turn, will help the company carve an easier path to profitability, as self-driving research and development has proven too expensive to be sustainable over the long run. This is a lesson that Uber also learned recently, with a similar result of selling off its Advanced Technologies Group (ATG) to a third party firm.
Moving forward, Lyft's 300-strong Level 5 engineers will join Woven Planet to work on Toyota's autonomous car dream, which is an important part of its "Woven City" project. The deal will also help expand Toyota's reach for engineering talent in London and California, as the company plans to extend "far beyond" the automotive industry.
Toyota has been making steady investments in autonomous vehicle technology over the past few years, including a $600 million deal with Didi Chuxing to develop fleets of robotaxis.
According to IHS Markit, 33 million self-driving vehicles will be sold globally in 2040, whereas the forecast for this year is a rather modest 51,000 units, all of them limited to Level 2 autonomy, meaning they require a human driver behind the wheel.