Toyota buys Lyft’s self-driving unit for $550 million

On Tuesday, Toyota’s Woven Planet announced that it acquired Lyft’s self-driving division in a $550 million deal. Julie Hyman, Brian Sozzi and Myles Udland break down what the deal means for the companies and the auto industries.

Video Transcript

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JULIE HYMAN: Toyota is getting further into autonomous driving, or at least exploring it. It's buying Lyft's self-driving technology unit. The price on that-- $550 million. Woven Planet is the name of Toyota's division that is exploring this. And, of course, as we kind of look at the development of these various technologies in the automotive industry, you have to talk about Tesla, which has been so, sort of, vocal on the autonomous driving front, but which has seen some setbacks. Most recently, the sort of questions and controversy over the crash that killed two men in Texas.

So, guys, as you look at this and as you look at all the automakers making investments in this area, you have to wonder when this stuff-- you know, all of this seems like it's at the very, sort of, development stages at this point. That we're not going to see this mature technology for quite some time, Myles.

MYLES UDLAND: Yeah. No, we're not. And I think-- and that's fine, right? I mean, a company like a Toyota, which sells millions of cars every year and has a lot of data on what does and doesn't work inside the vehicles and blah, blah, blah, knows how to implement new changes, that's the kind of company-- like, if you go buy a Toyota Camry in 15 years, there's going to be some rudimentary version of a self-driving mechanism within that car. Maybe it's an enhanced cruise control, such that you might be comfortable not always having your hands on the wheel when you're in a highway setting, as an example.

Maybe in 30 years, then we're starting to really talk about the self-driving future that we've been discussing for the last five. But I see this move from Lyft, and you look at the way that Uber has pared back some of its self-driving ambitions. I mean, it sounds great and I think those companies and their ambitions within self-driving were saying that their model-- their business model of picking people up and dropping them off-- was not going to be viable with actual humans driving the cars.

But Sozzi, we're obviously past that point in the hype cycle. Everyone is now realizing we're several decades away from-- what is it-- level five autonomy where you basically just get in a car and it drives itself and drops you wherever you need to go. Like, everyone knows that's not coming tomorrow. And the actual car companies-- Tesla, Ford, Toyota, go on down the line-- they're going to try to incrementally get us there. But this future Travis Kalanick outlined for us four or five years ago where he said everyone's going to be in a self-driving car by 2020. Well, it's 2021 and obviously that's not here.

BRIAN SOZZI: No, it's amazing, Myles, to see the turnarounds and these stories, whether it's Uber, it's Lyft. You know, before, in that lead up to that Uber IPO-- I think I may have even been sitting with you on set watching that first tick on Uber-- part of the selling, part of the pitch to investors was, we're going to do everything. We're going to be a super app. We're going have self-driving cars. We're going to be able to take you to the grocery store. We are going to essentially run your entire life.

And I think Lyft and an Uber have realized in order to be successful public companies, they have to do one thing, likely, and do it very well. Whether it's Drizly and Uber joining forces to deliver alcohol, whether it's Lyft delivering vaccines. Just focus on the core technology.

Very important point, though, I do want to mention here-- and it comes from our friend of the network, Dan Ives over Wedbush-- noting that when Lyft went public-- before it went public-- they came out long-term operating margin targets. And included in that target were a push into level five autonomous. So it's likely the next time we hear from Lyft-- when they report earnings-- or at some point this year, they're likely to lift their long term profit margin targets because they no longer have this division, and that could ultimately prove to be another catalyst to this stock.

JULIE HYMAN: That's an interesting note.

MYLES UDLAND: Whoa, hold on, hold on. So the margin profile is going to go up because they're not going to have self-driving cars?

BRIAN SOZZI: That's correct.

JULIE HYMAN: Because they don't have to spend--

BRIAN SOZZI: This business has been a big expense.

JULIE HYMAN: --on the development.

MYLES UDLAND: Mm-hmm. Right, but wouldn't the long-term margin target be, like, when we developed the self-driving cars, and then we don't have to pay the drivers, we can operate at X terminal margin or whatever.

BRIAN SOZZI: My assumption is when he said long term, it's five years. You know, I don't think this was baked into--

MYLES UDLAND: OK. All right, fine.

BRIAN SOZZI: --the analyst models on Lyft where we're going to self-driving cars in five years. It's more along a five year timeline.