Tech and Auto Industry Giants Begin Taking Sides in Uber and Lyft’s Arch-Rivalry

Self-driving technology is coming along much more quickly than many of us expected, and big automakers are doing anything but trying to squash the nascent technology from moving forward. In fact, in many instances they're leading the way.

What may be most interesting is that self-driving technology is getting a major boost from the ridesharing industry, where the major players Uber and Lyft hope to one day transition from needing to attract drivers to having a fully autonomous fleet. Of course, the other part of the equation is passenger acceptance, and there may be a period where both aspects of the system are present -- even in the same vehicle!

In this clip from the Industry Focus: Consumer Goods podcast, the Fool's own Vincent Shen and John Rosevear look at the state of self-driving car technology today and when we'll start to see it take some bigger steps into the cities and suburbs; which surprising companies are the primary movers in the space; who Lyft and Uber are partnering with and what might come of their agreements; and more!

A transcript follows the video.

This podcast was recorded on Jun. 7, 2016. 

Vincent Shen: More on the opportunities, now, with the self-driving cars, I've seen this presented both as a huge chance for them to essentially reduce their cost and to have a more flexible business model, but at the same time, I think it might represent a double-edged sword, because if you think like Alphabet (GOOGL 1.27%) (GOOG 1.25%), which is seen as a leader in the space in terms of actual driverless car technology, they could hop into this themselves, couldn't they?

John Rosevear: Well, our friends at Google Cars don't want to build cars. They would need an automaker partner. Let's back up a minute. Uber has a partnership going with a research team out of Carnegie Mellon, where they are working on self-driving technology. They just, a couple weeks ago, put their first self-driving prototype on the road in Pittsburgh, where they're testing it with the support of the Pittsburgh city government and so forth. I think their idea is that if the auto makers don't get to market quickly enough with something, they will develop a system that maybe can be retrofitted to existing vehicles to provide self-driving technology.

Their program seems to be not too far along compared to where some rivals, and we're going to get into this in a moment, not just Alphabet's Google Cars, but some of the automakers are farther along than people realize, and one in particular, General Motors (GM 4.37%), put $500 million into Lyft in January, and has become Lyft's new best friend. This comes down to GM's new electric car, the Chevrolet Bolt. I think some casual investors have looked at it and said, "Ha ha, it's ugly, and the Tesla's not ugly." What they're missing is that the Bolt was designed, in part, with ride hailing as well as ride sharing services, sort of a Zipcar type thing, that GM is starting on its own.

It's designed with those kinds of services in mind. It's an electric car that can be easily maneuvered in tight city spaces, it can come right up to the curb, it has great visibility, a rear view mirror that's aided by cameras to provide a much wider view, rear doors that open wide, a flat floor to make it easy to get in and out of the rear seat. I was looking at the car at the North American International Auto Show in January, and the GM folks who had worked on the project were going on and on about all the features that they'd built in for ridesharing and for ride hailing, for Lyft drivers, to make it friendly for Lyft drivers, and maybe even for Uber drivers, if they buy one on their own.

There's a program going forward. Lyft has talked about this, GM officially has no comment, but they certainly didn't challenge it when Lyft came out with this a few weeks ago, and said, "We're going to be testing a self-driving car service in a to-be-determined American city within a year, and the self-driving cars will be Chevrolet Bolts, equipped with GM self-driving technology," which has taken a big leap forward recently because they acquired another start-up called Cruise Automation, which apparently had the missing piece of the technology that GM had been struggling to develop. We don't know exactly the whole story around this, but this acquisition has apparently let GM take a big leap forward with self-driving cars, and Lyft is probably going to be the first to benefit from that with this test program.

They're actually going to be testing a self-driving taxi service. Apparently, the way this will work, at least in the beginning, to get people comfortable with it, is there will be a driver in the car, and you can opt in or opt out in the Lyft app. If you opt in, the car comes and picks you up, with a driver keeping an eye on things, but the car drives itself. This is part of their test program that they're going to roll out, and that this, in time, with this Express Drive service that Lyft has, where GM provides this weekly rental service to its driver, right now those are small Chevy SUVs, crossover SUVs. It's thought that, in a couple years, those are going to be Chevy Bolts. Maybe a few more years after that, there isn't going to be that, they're just going to be self-driving Chevy Bolts, and GM leases them to Lyft or something like that, or maybe Lyft will buy them. We don't know how that deal will work yet.

That does seem to be, given that finding drivers is the hassle here, just replacing the drivers with self-driving cars, in time, seems to be where both companies are going. Although, again, they're going about it very differently, where Uber is trying to grow the technology organically within its own organization, and Lyft is looking to partnerships to keep pace or maybe even get an advantage.

Shen: Yeah, absolutely. I was really surprised to see, in that General Motors-Lyft tie up, how quickly they were expecting to do their first test with those Chevy Bolts that you mentioned, and just the fact that Uber has generally had that first mover advantage, but I think management, their side, has generally said that the timing to launch full driverless fleet wouldn't be until 2020, and here you have Lyft, in a not yet determined city, but potentially testing something within the next year. It's really incredible how quickly this is coming along after the investment that General Motors made earlier this year.

Rosevear: It's really GM, and just to take a little diversion here, GM, as Americans, I think we say, "Ah ha, stumble bum GM, they sell giant SUVs. They don't know anything about technology," but since GM reformed out of bankruptcy and got a new management team, it's a really different company, and they were maybe the first automaker to see what was coming out of Silicon Valley, between Tesla and companies like Uber in 2011, 2012, and really say, "Okay, we got to jump on this." CEO Mary Barra talks repeatedly about how GM is determined to disrupt itself before anybody else does.

A lot of automakers are now saying things like this, but GM is actually doing it. They've got a very advanced self driving program. They have started their own car sharing service, sort of a Zipcar competitor, called Maven, which is in cities, which uses GM vehicles, and partly, this is a revenue opportunity for them, and partly, it's about, I think, introducing people to GM vehicles. If you're in your 20s, and you live in Chicago, and you use Maven to get that same Chevy Volt every weekend, and then you move to the suburbs, well maybe Chevy is what you're going to consider when it's time for you to buy a car for your house, now that you're setting up a family outside of the city. I think that's part of their vision for this as well, and I think that might even be part of the partnership with Lyft. Lyft drivers, maybe they're young, and maybe as they, it's a way for them to expose this large crowd of people to General Motors vehicles.

GM has not traditionally been strong in American cities, doing better in the suburbs and in rural areas, and they would like to do better in cities, with cars like the Chevy Volt and, soon to come, the Chevy Bolt, and vehicles like that. It's interesting that they have been able to give Lyft a real boost, and to really jump into this partnership with Lyft, and step up and give them what looked like some roots to some really significant advantages.