Tuesday, 31 January 2023 21:02

Google invests in Uber's rival Lyft

Number two in the United States, the platform of cars with drivers benefits from the setbacks of its rival. It has just raised a billion dollars in funding.

Lyft continues to take advantage of Uber's bad times. On Thursday, October 19, the American platform of cars with drivers has made public a major fundraising, amounting to $ 1 billion (845 million euros). On this occasion, Alphabet, Google's parent company, became one of its main shareholders. This is a further symbol of the privileged relationship between the two companies for several months.

The round of financing values Lyft at $11 billion (€9.31 billion), or $4 billion more than in the spring. However, the Californian company is still a long way from its competitor Uber, whose valuation, a record for an unlisted company, is close to $70 billion. Most of the funds that Lyft has just raised were contributed by CapitalG, one of Alphabet's investment funds, which is taking a seat on the company's board. But the exact amount was not specified.


A number two that resists Uber

This operation will further complicate Uber's task in the United States. Its strategy is to eliminate its rivals by operating at a loss in the most competitive markets - a policy considered dumping by its critics. It has worked in several countries. But in the U.S. market, Lyft is more than holding its own. And the more capital the company raises, the harder the battle and the longer the road to profitability.

Yet in the summer of 2016, many observers doubted the sustainability of the U.S. number two, speculating about a buyout at a discount. At the time, Uber had just pulled out of China, handing over its operations to the Chinese group Didi Chuxing, in exchange for a stake. This admission of failure not only reallocated financial resources to other countries, but also sabotaged the embryonic international alliance launched in late 2015 by its rivals.


The situation quickly evolved. At the end of 2016, General Motors injected $500 million into Lyft, with the ambition of designing a driverless cab network together. In January, Uber becomes the target of a boycott campaign because of its alleged ties to the Trump administration. The following month, the platform fell into a serious governance crisis, after revelations questioning a sexist culture within the company. The controversies followed, leading in June to the forced resignation of Travis Kalanick, its founder and CEO, who has since been replaced by Dara Khosrowshahi, the former head of the travel site Expedia.

Main challenge: to become profitable

Benefiting from Uber's battered brand image, Lyft has seen a jump in business. In July, the platform surpassed the 1 million daily rides mark. According to Second Measure, its market share reached 23 percent in August, up from just over 15 percent a year earlier. The company has also accelerated its expansion plans, launching its service in more than 160 cities in the first half of the year. "We now cover 95 percent of the U.S. population, up from 54 percent at the beginning of the year," boasts John Zimmer, its president.

In April, Lyft had already taken advantage of Uber's setbacks with a $600 million fundraising. And its leaders now have new ambitions. They plan to set up in Canada by the end of the year, reviving international projects that were abandoned several years ago. According to the New York Times, they would also like to conduct an IPO as early as 2018, a year before the deadline set by its competitor.

If Lyft is doing better, its main challenge remains: becoming profitable while its losses remain very high ($600 million in 2016 and $412 million in 2015). However, the momentum seems positive. Last year, the average loss per ride was reduced to $3.75, down from $7.77 a year earlier.

A complex financial mix

In May, Alphabet and Lyft had already come together with a partnership in the autonomous car space. But the investment announced Thursday further complicates the incredible financial assemblage of the sector. Alphabet does indeed own 5 percent of Uber, but the two companies are now enemies - they will even meet in a courtroom in December.

Similarly, Didi is a shareholder in both Lyft and Uber, while continuing to invest in Uber's rivals in Europe (such as Taxify, which just landed in Paris) and Asia. Japanese group SoftBank, which has also injected funds into several competitors, will soon enter the capital of Uber. And GM, upset by the relationship between Lyft and Google, is now reportedly discussing a partnership with Uber.



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Last modified on Friday, 02 December 2022 11:35

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