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Volkswagen Follows GM With a Move Into Ride-Hailing

By John Rosevear - May 24, 2016 at 3:50PM

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VW announced on Tuesday that it has invested $300 million in Gett, a small but fast-growing Uber rival with a big presence in Europe. That follows GM's big investment in Lyft. What's VW thinking here?

Ride-hailing start-up Gett's biggest presence is in Europe, but it's having success with a "black car" service in New York City as well. Image source: Gett.

Volkswagen (VWAGY 1.01%) said on Tuesday that it has formed a strategic partnership with Gett, an up-and-coming global ride-hailing company with a large presence in Europe. As part of that partnership, VW has invested $300 million in Gett.

What Volkswagen and Gett said

"Alongside our pioneering role in the automotive business, we aim to become a world leading mobility provider by 2025," said VW CEO Matthias Mueller in a statement. "Within the framework of our future Strategy 2025, the partnership with Gett marks the first milestone for the Volkswagen Group on the road to providing integrated mobility solutions that spotlight our customers and their mobility needs."

"The Volkswagen Group and Gett is a great strategic partnership," said Shahar Waiser, Gett's founder and CEO. The pay-per-ride domain is growing rapidly. In that context, Gett provides VW with the technology to expand beyond car ownership to on-demand mobility for consumers and businesses."

What's this deal about?

For Gett, it's pretty clear: The small-but-growing Uber rival gets a big backer, and some cash to spend on building its business. While Gett isn't (yet) well-known in the United States, it has a presence in New York City, where it operates as an upscale alternative to services like Uber and Lyft. The company says that its service is currently available in "more than 60 cities worldwide, including London, Moscow, and New York." It's still a small company, with about 700 employees around the world, but it's growing rapidly. 

For VW, it's also pretty clear what this deal is about. While nearly all big automakers, including VW, have talked up the idea of becoming "mobility" providers in the future, rival General Motors (GM -1.85%) has grabbed the attention of the global auto industry with bold moves including its own strategic partnership with (and $500 million investment in) U.S. ride-hailing company Lyft. 

Lyft and GM are reportedly preparing to launch a pilot taxi service in a U.S. city with self-driving Chevrolet Bolts within a year -- and self-driving Bolts were recently spotted on the streets in San Francisco.

Meanwhile, Volkswagen is mired in a global scandal after admitting that it cheated on diesel-emissions testing for years. That scandal wiped out its 2015 profits and forced major changes in its executive ranks, including the appointment of Mueller as CEO last fall. 

CEO Matthias Mueller has been trying to move VW past the diesel scandal by pushing more aggressively into electric cars and "mobility" technologies. VW's investment in Gett is consistent with other recent moves. Image source: Volkswagen.

Even as he continues to deal with the repercussions of the scandal, Mueller has been working to move VW past the diesel issue, promising a slew of new electric vehicles and creating a subsidiary to spearhead the development of "mobility services". With Tuesday's announcement, VW appears to be taking another step toward the much-discussed future of personal mobility.

Isn't VW just following GM's example here?

Probably. But that doesn't mean it's not the right thing to do. It depends on what VW does with this new partnership: Does VW have big plans, or is the investment just a "me-too" move?

Between car-sharing services, ride-hailing companies, and "disruptive" Silicon Valley innovators pioneering electric vehicles and self-driving technology, it has become clear in the last couple of years that the business of automaking is headed for major changes in the decades to come.

My guess is that not all of today's big automakers will survive the changes. But cars will still have to be made, and some of today's automakers will thrive in the new world. GM CEO Mary Barra and her team are working hard to ensure that General Motors is one of those that will thrive for years to come, as is VW's other huge rival Toyota

I'm sure Matthias Mueller feels that VW can't afford not to be taking steps like these. But where GM's plans for its partnership with Lyft became clear quickly after its investment was announced, it's still not quite clear what VW intends to do with Gett. Until that changes, it's hard to say whether this was a good move for the troubled German auto giant.

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