Toyota is accelerating its self-driving ambitions by purchasing Lyft’s autonomous vehicle company for more than half a billion dollars.
On Tuesday, the two companies announced a $550 million deal, claiming that it would allow them to form a “dream team” of about 1,200 researchers and engineers around the world.
Woven Planet, a newly created subsidiary founded by Toyota (TM) in January, will house the combined unit. The company is committed to investing in cutting-edge technology such as self-driving cars, smart cities, and robotics.
Woven Planet, based in Tokyo, will be able to expand internationally, with offices in Silicon Valley and London.
It will also provide much-needed funds to Lyft, based in San Francisco, as it works to recover from the coronavirus pandemic. According to its most recent earnings report, the ride-hailing giant lost $1.8 billion in 2020, but expects to turn a profit later this year.
The selling of Lyft “indicates a growing effort to simplify the business model and get it closer to financial profitability,” according to Fransua Vytautas Razvadauskas, a consultant at market research firm Euromonitor International.
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“In the end, the lacking commercial viability of its [autonomous vehicles] division was expensive to run and was ultimately hurting the company’s financial position.”
The companies said in a joint statement that Lyft would earn $200 million up front from the sale of its Level 5 self-driving division, with the remainder paid out over five years.
Furthermore, both companies announced that they had signed separate deals to bring their self-driving technology to market and find a way to integrate it with Lyft’s (LYFT) ride-hailing system and fleet data in the future.
“With the acquisition of Level 5, Woven Planet is driving towards its mission to combine the innovative culture of Silicon Valley with world-renowned Japanese craftsmanship to create the mobility solutions of the future,” George Kellerman, Woven Planet’s head of investments and acquisitions, said in a statement.
“It also provides a solid foundation for international expansion and future hiring efforts in the world’s strongest talent markets.”
In recent years, Toyota has made significant investments to modernize its lineup. It reclaimed its position as the world’s largest automaker in terms of revenue last year, surpassing Volkswagen (VLKAF).
In Japan, the company is also constructing a new smart city that will include streets “dedicated to autonomous driving.”
Toyota broke ground on the “Woven City” project in February, which is located near Mount Fuji.
The region, according to Euromonitor consultant Razvadauskas, is another example of Toyota’s ambitions in autonomous vehicles, as it will allow self-driving car testing.
He added that the Lyft deal enhances the company’s “vision of being a market pioneer in self-driving technology.”
Despite the financial consequences of the coronavirus pandemic, Toyota has remained relatively resilient and continues to invest in clean-air technology, such as electric cars, fuel cells and hybrids, robotics, and other technologies.
However, the introduction of such technology poses a challenge for established companies such as Toyota, because outsiders will emerge as pioneers in a completely new game.
“Who will be the economic winners in all of this? Auto companies around the world are girding themselves for the disruption ahead,” Daniel Yergin, IHS Markit vice chairman, wrote in a recent commentary.
“Toyota is rebranding itself as a mobility company. ‘Volkswagen goes farther, now billing itself as a software-driven mobility provider.’ But the big beneficiaries could well be companies that don’t yet exist.”