Lyft Partners With Google's Waymo to Challenge Uber

Tesla is still the recognized leader in the autonomous vehicle concept on the strength of its Model S and Model X. But the new partnership between Google's Waymo and Lyft aims to give Elon Musk a run for his money.

The two Silicon Valley companies have agreed to unify their resources and expertise to commercialize self-driving cars.

A spokesperson for Lyft said, “Waymo holds today’s best self-driving technology, and collaborating with them will accelerate our shared vision of improving lives with the world’s best transportation.”

The partnership was also confirmed by a spokesperson for Waymo who remarked, “Lyft’s vision and commitment to improving the way cities move will help Waymo’s self-driving technology reach more people, in more places.”

Waymo may possess the “best technology” since its self-driving cars are already averaging 5,000 miles without any human help, according to a report from the California DMV. In contrast, GM's Cruise Automation is only averaging in the “hundreds of miles.”

However, Waymo does not have the knowledge on transportation networking to really make the jump between the deployment of its automated cars and mass commercialization. This is where Lyft will come in.

For those who are not familiar with Lyft, it's similar to Uber but targets ordinary drivers looking to make some extra buck as partners. Customers also pay through the company's app, but while the tip is already integrated into the final cost for Uber, Lyft asks users to add the tip through its app.

By the end of the year, Lyft will be available in 300 key US cities.

But this partnership will be beneficial not just for Google's Waymo, but Lyft as well. It's not an accident that people have not heard about Lyft because it comes a distant second to Uber. For instance, the company only has a $5 billion market valuation compared to Uber's $68 billion.

The problem with ride-sharing networks is their heavy dependence on their partner drivers in order to scale up their business. In fact, drivers—along with the vehicles and fuel—make up 85% of the cost. Uber has the money to invest on a grand scale to cut the difference, a luxury that Lyft does not possess.

One solution is to cut the human drivers and go fully automated, the report said. Instead of sharing the revenues with their human partners, they can quickly recoup their investments by operating an automated fleet.