Google Auto – Lyft to market

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Google and Lyft can really help each other.  

• An investment in Lyft makes a lot of sense given that Waymo’s autonomous driving offering is likely to face a lot of problems getting into production vehicles.
• Furthermore, with the possibility of autonomous driving being central to its future, Lyft badly needs a solution and the partnership with Waymo puts it in pole position.
• Google is considering putting up to $1bn into Lyft in a move that would see it become one of Lyft’s biggest shareholders at a crucial time.
• This is because I see Lyft as still being subscale compared to Uber and when it comes to market places that can be fatal.
• My rule of thumb for market places is that for money to be made, one player needs to have 60% share or be twice the size of its nearest competitor.
• In the US, Uber has already achieved this hallowed status and in theory should be able to crush Lyft simply by applying sustained competitive pressure until Lyft runs out of money.
• However, the current run of bad publicity and executive turmoil has meant that Uber’s eye has not been on the ball and has allowed Lyft to gain some share.
• Furthermore, the problem that all the ride hailing companies face is that if all cars become autonomous, then their current businesses become obsolete as, while there will be riders, there will be no drivers.
• In effect one half of their market place will have evaporated meaning that they will become simply a purveyor of a service that requires best in class robot drivers.
• This is why they must have an autonomous offering as it will give them the ability to migrate from human to robot drivers as the technology comes to market.
• However, while I see a freight train of electric vehicles coming to market (see here), I think it will be a very long time before autonomy really arrives giving the ride hailing companies plenty of time to fix their shortcomings.
• From Google’s perspective, I think that it needs to get its ducks in a row now because the advantage it has over its competitors is now as great as it is ever likely to be (see here).
• It is ahead now but because the technology is likely to be ready before the market is, competitors will have time to catch up meaning that there is likely to be plenty of choice when crunch time comes.
• By cementing a deal and now an investment in Lyft, Google is giving itself a route to market which the vehicle makers have largely declined to provide.
• Google’s self-driving solution is by far the best available today but without a way to deploy it in the market, it is useless.
• This is why an investment in Lyft makes a lot of sense as Uber has already declined to play.