Lyft Inc. is selling its self-driving division to a unit of Toyota Motor Corp. for $550 million, a move the ride-hailing giant said will help it turn a profit sooner than previously expected.
Woven Planet Holdings, a Toyota subsidiary focused on autonomous technology, will pay $200 million up front as part of the deal, Lyft said Monday. The remaining $350 million will be paid in cash over a five-year-period.
Lyft’s departure from building self-driving cars follows rival Uber Technologies Inc.’s decision to shed its autonomous-driving division late last year. The money-losing companies overhauled their businesses during the coronavirus pandemic and pledged to scale back on costly ventures as the health crisis crushed their core rides operations.
Lyft said the sale would help it save $100 million in operating expenses, accelerating its path to profitability. The company said it now expects to become profitable on an adjusted basis before interest, taxes, depreciation and amortization in the third quarter. Previously, it expected to reach that milestone in the fourth quarter, alongside Uber.
Lyft’s shares rose nearly 3% in after-hours trading Monday.
Both companies spent big to expand into areas beyond ride-hailing in recent years, fueled by investors who backed their wide-ranging ambitions. But enthusiasm waned as they amassed billions in losses along the way. The pandemic dealt the final blow, forcing the companies to shed costly new bets.
In 2018, Toyota invested about $500 million in Uber as part of an agreement for the companies to work jointly on autonomous-vehicle development. Startup Aurora Innovation Inc. bought Uber’s autonomous-technology unit in December and announced a couple months later it was partnering with Toyota and supplier Denso Corp. to develop vehicles for autonomous ride-hailing networks.
A Lyft executive said the industry was becoming realistic: letting car makers develop the underlying technology, while tech companies help connect them to riders. The executive said Lyft will carve out a team of about 20 employees who strike such partnerships and deploy self-driving cars across its network in the future. Woven will inherit the 300 employees who worked at Lyft’s self-driving unit. This way, the executive said, "you let everyone do what they do best."
The deal is expected to close in the third quarter, subject to regulatory approvals.
—Ben Foldy contributed to this article.