Lyft Inc will sell its self-driving technology unit to Toyota Motor Corp in a $550 million deal, both companies have revealed.
The sale allowed the ride-hail company to hit its profitability target one quarter earlier.
The sale of Level 5 to Toyota’s Woven Planet division will allow Lyft to focus on partnerships with self-driving companies that want to deploy their technology on its platform, rather than develop costly technology that has yet to enter the mainstream.
Lyft will receive $200 million cash upfront, with the remaining $350 million paid over five years, the companies said. The deal is expected to close in the third quarter.
The sale will allow Lyft to report third-quarter profit on an adjusted basis of earnings before interest, taxes, depreciation and amortization as long as the company continues to recover from the coronavirus pandemic.
The sale will also remove $100 million in annual net operating costs.
Woven Planet, which Toyota set up in January to develop connected vehicle, autonomous and semi-autonomous driving technology, will take over all of the more than 300 employees of Level 5.
The deal marks Toyota’s latest foray into ride-hailing at a time of growing consolidation in the capital-intensive self-driving industry.
The Japanese automaker already owns a stake in China’s top ride-hailing firm Didi Chuxing and Southeast Asia’s Grab.
It also owned a stake in the self-driving unit of Lyft’s larger rival Uber Technology Inc, but transferred the stake when Uber sold the unit in December to car startup Aurora at a steep drop in valuation.
Toyota said in February it would develop and build autonomous minivans for ride-hailing networks with Aurora and longtime supplier partner Denso Corp.
Lyft’s sale allows it to offload cash-burning side businesses and focus on reviving their core divisions following a bruising pandemic year.
Lyft will now focus on what it can do best with autonomous vehicles by offering services such as routing, consumer interface and managing, and maintaining and cleaning partners’ autonomous vehicle fleets, which could mean added revenue.