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Why General Motors Is Moving Into the Ridesharing Business

By John Rosevear – Jan 20, 2016 at 4:40PM

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GM just bought the remains of ridesharing pioneer Sidecar, just a couple of weeks after making a $500 million bet on Lyft. What's the General's plan here?

Lyft co-founders Logan Green (left) and John Zimmer (right) with GM president Dan Ammann (center) and a pair of Chevy Volts. Ammann will join Lyft's board of directors following GM's $500 million investment in the ride-sharing company. Image source: General Motors.

General Motors (GM -1.24%) has acquired the technology and most of the assets of Sidecar Technologies, a San Fransisco-based pioneer of the crowdsourced ride-hailing business model that was subsequently popularized by better-funded rivals Uber Technologies and Lyft. 

GM's move to acquire Sidecar's assets follows the Jan. 4 announcement that GM had invested $500 million in Lyft. What's going on here? 

GM is trying to disrupt itself before anyone else does
GM can see the winds shifting in Silicon Valley, and it's moving to make sure it's still relevant 15 years from now.

It's no secret that several big Silicon Valley companies are aiming to "disrupt" the auto business as it has existed for decades. Many experts think that combining the technology behind a service like Uber with self-driving cars will result in businesses that replace car ownership for many people. Instead of buying a car and paying to park, maintain, and insure it, the thinking goes, many people (particularly those in urban areas) will happily sign up to use robot-Uber instead.

There are several such services in the works. Alphabet's (GOOG -0.36%) (GOOGL -0.58%) Google self-driving project is expected to evolve into a ride service. Uber is said to be investing heavily in a project to develop its own advanced driverless-car technology. Many analysts, including your humble Fool, believe that Apple's rumored car project is part of a plan to introduce a similar service, perhaps one that is tightly integrated with the company's ecosystem. And GM isn't the only automaker thinking along these lines: Ford's (F -2.60%) recently announced "FordPass" initiative is expected to evolve into a ridesharing service of some kind over time. 

It's easy to see the potential of such a service, especially if it can deliver all of the reliable, safe, timely transportation that one needs for less than the price of a monthly car payment. Such services are unlikely to replace vehicle ownership entirely, at least not anytime soon.

But it's easy to see how they could make a big dent in the market for new cars, and GM CEO Mary Barra can surely see it at least as well as we can.

GM's "alliance" with Lyft is a big deal with long-term ramifications
The Sidecar deal gives GM some technology (and some new employees) to help its effort with Lyft. But Lyft is the bigger deal: As part of GM's investment, which both GM and Lyft are referring to as an "alliance," GM president Dan Ammann has joined Lyft's board. But the alliance between the two companies goes well beyond a passive investment.

GM and Lyft said that they will work together to develop an "autonomous on-demand network," combining GM's work on driverless cars with Lyft's ride-sharing expertise. GM will also become a "preferred provider" of short-term rental vehicles to Lyft drivers. 

It's not clear what that will look like in the very short term. But GM officials at the North American International Auto Show in Detroit last week told me that the new Chevrolet Bolt electric car was designed from the start with ridesharing in mind, suggesting that the company plans to deliver on these ambitious statements in the not-too-distant future.

Lyft could help GM immediately in one important way
GM is surely hoping to get something else out of this arrangement: Some cred in Silicon Valley.

That's not (mostly) about PR preening. To meet all of its high-tech goals, GM needs -- and will need -- to recruit thousands of new engineers. That's a challenge for the General: As things stand, not too many freshly minted tech-minded engineers are likely to choose a stodgy old company in Detroit over a fast-paced start-up in San Francisco. 

It remains to be seen whether GM's big investment in Lyft will help its recruiting efforts. But it's increasingly clear that Barra and her team are doing much more than paying lip service to the idea of disrupting GM before Silicon Valley does. 

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Rosevear owns shares of Apple, Ford, and General Motors. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool recommends Ford and General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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