How GM Can Disrupt with Lyft

GM’s Chairman and CEO, Mary Barra, has said that GM can and will be disruptive. By disruptive I don’t think she meant troublesome like an unruly child. I believe Barra meant that GM can and will lead.

With its $500M investment in Lyft, GM is now in position to fulfill that prophecy, but will it? The initial outlook is not good.

The $500M investment in Lyft gave GM an estimated 9% stake in Lyft, which now values itself at $5.5B after a $1B funding round. GM President Daniel Ammann joins Lyft’s board and the two companies say they will develop an on-demand network of self-driving cars.

The on-demand network of self-driving cars bit is important because it recognizes that consumers are unlikely to buy self-driving cars. Consumers may want cars capable of some autonomous driving, but the demand for fully self-driving cars is an entirely different application dependent for its success on a network of available vehicles intended for shared use.

So the self-driving car aspect of the GM investment in Lyft is a very long-term investment - maybe a decade.  Slightly shorter term is the announced intention of the two companies to make Chevrolet Bolt EVs available to Lyft drivers at rental centers to be established by GM in urban areas.

This latter effort seems to be intended to replace an existing test Lyft is running in Las Vegas with Hertz. Lyft drivers are paying as much as $65 a day for Hertz rentals but are expected to earn 20% to 30% more than other drivers, according to a Reuters report, “because they will be driving SUVs and charging passengers a premium for the bigger cars.” The Reuters report further noted that Lyft is also partnering with Shell to offer drivers cheaper gasoline.

It is possible that the Hertz program expands alongside the GM program, since the two programs involve very different vehicles. But both of these announced initiatives – self-driving cars and loaner Bolts – fail to do anything for Lyft or GM in the short term and raise questions regarding the efficacy and ultimate outcome of the investment.

The three key questions are:

1. Why didn’t GM just buy Lyft?
2. Does GM have what Lyft needs?
3. Does Lyft have what GM needs?

The fact that GM chose not to buy Lyft outright suggests that the investment, large though it may be, is a defensive move by GM. Senior executives are watching competitors such as Ford, BMW and Daimler make strategic investments in apps and car sharing services as a hedge against changing car ownership trends. But confusion as to the impact and leverage-ability of these investments remains a predominant sentiment in the industry.  (Hey, Daimler, what happened to RideScout?)

GM previously tied up with RelayRides, now known as Turo, for peer-to-peer car sharing, a relationship that has since lapsed. (Turo has shifted its focus to long-term rather than short-term rentals.) The outcome of that relationship is characteristic of car maker car- and ride-sharing partnerships – the car makers are conflicted and their behavior, skill set and priorities are ill-suited to the fiercely competitive and entrepreneurial environment of car/ride sharing.

The needs of GM and the needs of Lyft are misaligned. Lyft desperately needs more drivers to improve its coverage and availability vis-à-vis arch-rival Uber.  Of course, Lyft also needs more rides for its drivers - something of a chicken-egg situation.  Lyft also probably needs help with global expansion.

GM needs to sell cars and is probably particularly concerned that the Bolt not receive the kind of half-hearted reception accorded the Chevy Volt. In fact, the Bolt is not expected to arrive until late in 2016, with Federal tax credits expiring at the end of the year.

The Bolt loaner program, should it come to pass, could serve as a means to raise the visibility of the new Bolt when it arrives. EVs like the Bolt have been showing up in taxi and car-sharing fleets all over the world including everything from Smart, Leaf and Citroen EVs to Teslas.

GM’s decision to take a large stake in Lyft without making an outright purchase suggests serious ambivalence. Instead of long-term moonshot plans like self-driving car development, GM ought to be putting its investment dollars to work immediately in service of its core brands and value proposition - as well as in support of Lyft's urgent needs.

If GM is serious about being disruptive and if Lyft is to be part of that intention here are some suggestions:

1. Integrate Lyft into the OnStar service thereby allowing OnStar subscribers to become Lyft drivers.
2. Offer OnStar subscription discounts to Lyft drivers (of OnStar-equipped vehicles).
3. Integrate GM dealers into the driver and vehicle inspection process for Lyft recruitment – including closing open recall items.
4. Offer $100 in Lyft ride credits to GM vehicle owners to have their cars checked for open recalls – GM dealers will use Lyft drivers to dispatch mechanics to pick up customer’s cars at home or work and return them after making required repairs.
5. Offer Lyft drop-offs and pick-ups universally at all GM dealerships for routine maintenance and repairs – no charge.
6. Integrate free Lyft rides into automatic crash notification/roadside assistance support as part of OnStar service.
7. Offer Lyft incentives to returning former OnStar subscribers.
8. Extend Lyft’s generous driver incentives to OnStar subscribers.

Lyft is locked in hand-to-hand combat with Uber. GM has chosen a side in this fight and ought to step up with more than just its checkbook and a board seat. Desperate times call for desperate measures.

GM, itself, is facing changing customer relationships as Tesla pioneers over-the-air software updates and dispatches mechanics to customers' homes to make recall repairs.  Lyft can help GM dealers extend concierge-like amenities to customers and free up loaner cars.

The failure of the Turo relationship may have soured GM on over-committing to the ride-sharing opportunity, but a $500M investment is several hundred million dollars more than dipping a toe in the water. Uber is investing massively in an effort to smother and eliminate any competition. Lyft may have an impressive valuation and a newfound trove of cash – but tactical support is what is now needed on the ground.

The self-driving car business is a network business, but so is the car selling and servicing and ride sharing business. GM ought to leverage its dealer network and its OnStar service in the cause of ride sharing. The benefits for customer acquisition and retention will provide ample reward in the short-term for the long-term commitment to Lyft.