Competition in the autonomous vehicle space is heating up as companies race to roll out this technology to consumers and secure their market position. 

Waymo and other players have been steadily developing technology to transport paying passengers between destinations through their AV units.

However, these companies aren’t the only players in this space. Ride-hailing firms like Uber and Lyft (LYFT) are entering the space as well, leveraging their existing platforms.

Uber has steadily integrated robotaxis into its business by partnering with AV manufacturers and adding their fleet into its ridesharing platform. Meanwhile, Lyft has played second fiddle, as it trails behind the market leader.

However, Lyft may be turning a corner. Earlier this week, its stock rose by more than 10% following the announcement of its partnership with Waymo.

Investors are hoping that these moves could translate into higher returns for the firm. If they do pay off, it could prove rewarding for investors.

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Competition in the autonomous vehicle (“AV”) space has heated up as companies race to deliver solutions at scale in this potentially transformative industry. 

Waymo, Google’s (GOOGL) self-driving unit, along with Tesla (TSLA) and other players, have been developing technology to transport paying passengers between destinations through their AV units.

However, these companies aren’t the only players in this space. Ride-hailing firms are joining in to provide these countries developing hardware and software with the platforms on which they operate.

After early development efforts, Uber (UBER) and Lyft (LYFT) abandoned plans to develop their own driverless taxis years ago.

Lyft sold its self-driving division to a Toyota subsidiary for over $500 million in 2021. Meanwhile, Uber spun off its own self-driving unit in 2020 after struggling with the development of its driverless taxis.

However while neither company would develop their own vehicles, they have still been involved in the AV industry.

In recent years, self-driving technology has vastly improved, progressing from trials to actual rollouts of AV units in select regions. As a result, ride-hailing companies have positioned themselves to benefit from this innovation by partnering with AV manufacturers.

Uber has partnered with Waymo to connect riders on its app with Waymo vehicles in cities like Austin and Atlanta. 

Under this partnership, Waymo will continue to operate independently in cities not covered by its agreement with Uber, ensuring the two companies don’t compete directly in Uber’s designated markets.

Uber gets a share of the self-driving taxi bookings while Waymo gets access to the firms’ customers without having to develop its own app to connect its fleet to passengers. A similar deal was also agreed to with May Mobility in Arlington, Texas.

This approach to AV integration appears to have paid off for Uber, as it has steadily grown and improved its business over the past couple of years. Starting in 2023, the company’s Uniform return on assets (“ROA”) trended positively.

Meanwhile, Lyft, Uber’s chief rival, seems to be lagging behind as it has largely flown largely under the radar over the past couple of years. 

Despite this perception, the company has been quietly making strategic moves. Late last year, the company announced a variety of AV partnerships. 

In a deal with Mobileye, Lyft made its platform available to vehicles equipped with the self-driving tech firm’s autonomous driving technology. Additionally, the company struck a deal with Lexar, combining its anonymized marketplace and fleet data with Lexar’s dashcam footage to enhance mapping and safety capabilities.

Lyft also partnered with May Mobility to deploy self-driving taxis in Atlanta, a service that launched just a few weeks ago.

Earlier this year, the company announced its partnership with Benteler Mobility, which will lead to the deployment of autonomous shuttles in late 2026. 

And more recently, Lyft made headlines when it announced its partnership with Waymo, which will enable Waymo to bring its robotaxi service to Nashville, Tennessee in 2026. As part of the agreement, Waymo will utilize Lyft’s fleet management services, which cover vehicle maintenance, infrastructure, and depot operations.

The fleet of self-driving vehicles will be first made available to Waymo’s app, with plans to expand the service to Lyft’s platform later on next year. Lyft will also build an AV fleet management facility to serve as a charging and service hub for vehicles. 

Investors were ecstatic upon hearing the news, as Lyft’s shares surged by as much as 25% on September 17, the day of the announcement.

Lyft has thus far mostly played second fiddle to Uber. The company has been barely profitable, with its Uniform ROA trending only slightly positive in 2024.

Investors are hoping that these strategic moves would translate into higher returns for the firm, and position it to emulate the success Uber has had thus far.

Lyft’s partnership with Waymo, a leading player in the AV space, along with its other under-the-radar moves, demonstrates that the company is positioning itself to become a key player in autonomous vehicles and hasn’t given up in its fight against Uber. 

Should this strategy pay off, it could prove rewarding for investors.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research