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Old 01-11-2016, 02:09 PM   #1
XDCX
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Default GM invests $500 Million in Lyft

I'm not often a reader of Vanity Fair but I've been struggling to figure out why GM invested $500 Million in the ride sharing company Lyft. Vanity Fair published a story where they interviewed Mary Barra who provided more insight on why GM invested in Lyft. For a link to the report - click here

It appears that one of the attributes that made Lyft more appealing to Barra than Uber is the fact that approximately 30% of Lyft's executives are female - something that's almost unheard of in Silicon Valley.

Additionally, Barra indicated that approximately 50% of her senior executives are from outside of the car business and she believes this diversity allows GM to make better decisions.

Call me a skeptic, but I'm not sold on the idea that people outside of the car business are required to ensure GM remains competitive and I'm still not sure what GM for their $500 Million investment in Lyft.
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Old 01-11-2016, 04:04 PM   #2
steve_biegler
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This one has me scratching my head also. Why would any automotive manufacturer invest in a company whose basic reason for existence is to supply people a reason NOT to buy a car?
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Old 01-12-2016, 10:06 AM   #3
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This one has me scratching my head also. Why would any automotive manufacturer invest in a company whose basic reason for existence is to supply people a reason NOT to buy a car?
Yep, I totally agree.

I've read that part of Lyft's vision of the future is to have a fleet of vehicles that are available to their customers for temporary use - similar to the Car2Go business plan developed by Daimler.

It's not clear to me where GM's Dealers will fit into this equation but I'm guessing the welfare of their Dealers is not GM's primary concern.
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Old 01-12-2016, 10:05 PM   #4
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I will say, I do see a bright future for Lyft and Uber for that matter, but I don't know if becoming buddy-buddy with the traditional industries is the best way forward.

I am actually a frequent user of Uber when I am visiting my parents in Detroit and want to enjoy a night out without the responsibility of driving after a few beverages.

I do know that FCA had a partnership with Santander/Chrysler Capital to do an open-ended lease product for Uber drivers. I think the program has since ended, but the lease had few credit requirements and was paid for directly out of Uber earnings. I could only imagine with the possibility of irregular income from Uber driving as well the well-publicized business practices of Santander that this was not a match made in heaven.

If nothing else, it provided another option for those with limited credit. Also the only option in some cases, as more and more indirect lenders specifically note on the rate sheets or policies/provisions forms that contracts on vehicles used for ride sharing are ineligible for purchase.
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Old 01-13-2016, 10:02 AM   #5
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I will say, I do see a bright future for Lyft and Uber for that matter, but I don't know if becoming buddy-buddy with the traditional industries is the best way forward.

I am actually a frequent user of Uber when I am visiting my parents in Detroit and want to enjoy a night out without the responsibility of driving after a few beverages.
While I've never used Uber or Lyft, the people I've spoken with who have give the service favorable reviews. Like you, I think both companies have a bright future but I think the future will look a fair bit different that what we have today.

I think the reason Google is working so hard on self-driving cars is because they know they can beat Uber and Lyft at their own game if they can eliminate the biggest negative variable - the driver. Driverless vehicles not only offer the advantage of wage savings, they eliminate the downside risk of hiring drivers who assault their customers or being sued by drivers who are assaulted by their customers.

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I do know that FCA had a partnership with Santander/Chrysler Capital to do an open-ended lease product for Uber drivers. I think the program has since ended, but the lease had few credit requirements and was paid for directly out of Uber earnings. I could only imagine with the possibility of irregular income from Uber driving as well the well-publicized business practices of Santander that this was not a match made in heaven.

If nothing else, it provided another option for those with limited credit. Also the only option in some cases, as more and more indirect lenders specifically note on the rate sheets or policies/provisions forms that contracts on vehicles used for ride sharing are ineligible for purchase.
Interesting. I wasn't aware that some lenders have started to exclude financing for vehicles that are used for ride sharing.

I wonder if the lender's fears are limited to increased vehicle depreciation because the car will likely incur high mileage or if there is some other risk they perceive?
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Old 01-13-2016, 10:42 AM   #6
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Default Maybe the Lyft investment is GM's answer to a Google/Ford partnership?

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I think the reason Google is working so hard on self-driving cars is because they know they can beat Uber and Lyft at their own game if they can eliminate the biggest negative variable - the driver. Driverless vehicles not only offer the advantage of wage savings, they eliminate the downside risk of hiring drivers who assault their customers or being sued by drivers who are assaulted by their customers.
There was a lot of news over the past couple of weeks speculating that Google and Ford would partner and manufacture driverless vehicles. Maybe GM's investment in Lyft is a hedge against Ford's move?

Here's a link to a recent report concerning the Google/Ford rumors- click here

While I can see why Ford and GM would want to be part of what might become a wave of driverless vehicles, I'm betting that the margins will be pretty low on those vehicles. While a vehicle like an Escalade or Mustang is aspirational and worthy of paying a premium, I think a driverless car is more like an appliance.
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Old 01-13-2016, 11:17 AM   #7
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Additionally, Barra indicated that approximately 50% of her senior executives are from outside of the car business and she believes this diversity allows GM to make better decisions.
Trust me Mary, us here in the trenches know that you've hired people that know NOTHING about our business. It shows more and more everyday.
I really wish that GM was run by car guys again.

Sorry, if I'm not being politically correct, but the programs GM crams in our faces have nothing to do with customer service, or satisfaction, or anything except making a profit for GM, not our dealership.
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Old 01-13-2016, 01:06 PM   #8
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Originally Posted by XDCX View Post
While I've never used Uber or Lyft, the people I've spoken with who have give the service favorable reviews. Like you, I think both companies have a bright future but I think the future will look a fair bit different that what we have today.

I think the reason Google is working so hard on self-driving cars is because they know they can beat Uber and Lyft at their own game if they can eliminate the biggest negative variable - the driver. Driverless vehicles not only offer the advantage of wage savings, they eliminate the downside risk of hiring drivers who assault their customers or being sued by drivers who are assaulted by their customers.



Interesting. I wasn't aware that some lenders have started to exclude financing for vehicles that are used for ride sharing.

I wonder if the lender's fears are limited to increased vehicle depreciation because the car will likely incur high mileage or if there is some other risk they perceive?
I haven't asked any lenders why they don't want to book deals on cars that are used for ride sharing, but I would imagine there are some fears of increased depreciation, wear, and higher than normal mileage on the unit.

I also wonder if part of the fear is that they will be left holding the bag for a loss if the driver wrecks the car, insurance doesn't pay because it was used for commercial purposes. If I recall correctly Uber doesn't specifically require commercial insurance for drivers on the basic Uber plan. Their version of the "black car" program does require commercial auto insurance.

I don't know if I would ever risk the unknowns to drive with Uber, but many people do and usually the cars are pretty presentable. Only one time did I end up with a ride in a car that was truly a heap.
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Old 01-14-2016, 09:36 AM   #9
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I also wonder if part of the fear is that they will be left holding the bag for a loss if the driver wrecks the car, insurance doesn't pay because it was used for commercial purposes. If I recall correctly Uber doesn't specifically require commercial insurance for drivers on the basic Uber plan. Their version of the "black car" program does require commercial auto insurance.
That's an interesting thought.

I know that Uber and Lyft are supposed to provide some level of insurance coverage while the driver has a fare but I'm not sure if that coverage would cover collision damage to the driver's vehicle. Additionally there was controversy in the past because Uber's coverage didn't start until the fare was picked up. (As I recall, an Uber driver who was driving to pick up a fare hit a pedestrian and Uber indicated they were not liable because their coverage only started once the customer had been picked up. Uber may have changed their coverage since then based on public outcry.)

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Originally Posted by mryan55 View Post
I don't know if I would ever risk the unknowns to drive with Uber, but many people do and usually the cars are pretty presentable. Only one time did I end up with a ride in a car that was truly a heap.
Interesting.

I've read that there are people who will rent out their Uber/Lyft approved vehicle to other people who want to drive for Uber/Lyft but don't have a vehicle. That's pretty close to going full circle to the taxicab business model.

Additionally, I've read that some Uber/Lyft drivers do not pay any income taxes because the IRS mileage allowance is less than the money they receive from Uber/Lyft.
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Old 01-14-2016, 10:26 AM   #10
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I have also heard stories of people renting their vehicles to other drivers. This seems to be pretty common place -- Uber is certainly on board with it (more potential revenue for them)... I do know that the UberPartner driver app does allow multiple drivers accounts on a single license plate number, so conceivably the car could be on the road 24 hours a day if they wanted it to be (the lienholder wouldn't be too happy about that heavy use... haha).

I could see the tax liability being very low for an Uber/Lyft driver, for sure. If you choose to take the standard mileage rate versus itemizing you would write off $0.575 per mile. The most basic level of Uber service is $0.75/mile for the end user plus a $1.25 pickup fee here in Indianapolis right now. After Uber takes their share I would guess that the driver is earning close to the standard mileage deduction per mile.

I actually checked Detroit and Chicago, and it seems like fares are pretty similar around the Midwest. Only changes are in major downtowns. In Chicago the base fare is $4.20, certainly to account for shorter trips versus the rest of the Midwest.

With the Detroit Auto Show going on right now in Downtown Detroit, base fares are $5.30 plus mileage... earlier today when there was a "surge" of demand in Detroit (certainly because of Auto Show press/supplier days) the minimum fare was $10.14 with a mileage rate of $2.

Across the river in Windsor, Ontario where there isn't much going on today it's C$4.50 pick up and C$1.10/km... so the rates even convert pretty similarly. To round a little bit, that's a US$3 minimum fare and US$1.20 a mile.

If you are an Uber driver I guess the one thing to dirve for are the 'Surge' fares.

Uber is an interesting business and business model in my eyes, that's why I don't mind digging into it so much, but I don't know if its a long-term sustainable model for drivers... or should we say "partners."

All I can say definitively is that is a quick, reliable and easy way to get around when traveling.
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Old 01-15-2016, 10:17 AM   #11
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I have also heard stories of people renting their vehicles to other drivers. This seems to be pretty common place -- Uber is certainly on board with it (more potential revenue for them)... I do know that the UberPartner driver app does allow multiple drivers accounts on a single license plate number, so conceivably the car could be on the road 24 hours a day if they wanted it to be (the lienholder wouldn't be too happy about that heavy use... haha).
That is really interesting.

Essentially that's GM's short term vision. Here's an excerpt from the Vanity Fair article:
Beyond the injection of capital, the companies partnered with the goal of developing an on-demand network of self-driving cars, and in the shorter-term, setting up rental-car hubs across the country where Lyft drivers will be able to pick up GM vehicles at discounted rates.
Maybe the Lyft rental fleet will provide GM another avenue to dump some of their rental units? I'm guessing that the GM dealers will be mostly on the outside of this deal looking in.
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Old 01-15-2016, 10:27 AM   #12
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I could see the tax liability being very low for an Uber/Lyft driver, for sure. If you choose to take the standard mileage rate versus itemizing you would write off $0.575 per mile. The most basic level of Uber service is $0.75/mile for the end user plus a $1.25 pickup fee here in Indianapolis right now. After Uber takes their share I would guess that the driver is earning close to the standard mileage deduction per mile.

I actually checked Detroit and Chicago, and it seems like fares are pretty similar around the Midwest. Only changes are in major downtowns. In Chicago the base fare is $4.20, certainly to account for shorter trips versus the rest of the Midwest.

With the Detroit Auto Show going on right now in Downtown Detroit, base fares are $5.30 plus mileage... earlier today when there was a "surge" of demand in Detroit (certainly because of Auto Show press/supplier days) the minimum fare was $10.14 with a mileage rate of $2.

Across the river in Windsor, Ontario where there isn't much going on today it's C$4.50 pick up and C$1.10/km... so the rates even convert pretty similarly. To round a little bit, that's a US$3 minimum fare and US$1.20 a mile.

If you are an Uber driver I guess the one thing to dirve for are the 'Surge' fares.

Uber is an interesting business and business model in my eyes, that's why I don't mind digging into it so much, but I don't know if its a long-term sustainable model for drivers... or should we say "partners."

All I can say definitively is that is a quick, reliable and easy way to get around when traveling.
Thanks for the information. Like you, I'm interested in the Uber/Lyft business model and like learning about it.

I was curious what the current "cut" Uber and Lyft take from their drivers so I did a quick Google search and found a link to a news report concerning Uber drivers in the Tampa Bay area who are protesting Uber's recent price cut to 65 cents per mile. Here's the link - click here

The article indicated Uber takes a commission of 20 - 25% and they've cut the mileage rate in an effort to get more riders during a seasonal lull. While the Uber drivers might hate the 65 cents per mile rate, I'm betting the Uber customers love it - taxi cabs in the area charge $2.40 per mile.

One could argue that Uber is going to break the back of the traditional cab services with predatory pricing and they'll do it on the backs of their Uber drivers.
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Old 01-15-2016, 10:33 AM   #13
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Trust me Mary, us here in the trenches know that you've hired people that know NOTHING about our business. It shows more and more everyday.
I really wish that GM was run by car guys again.

Sorry, if I'm not being politically correct, but the programs GM crams in our faces have nothing to do with customer service, or satisfaction, or anything except making a profit for GM, not our dealership.
I meant to respond to this post when you first posted it.

I was really surprised to learn that Barra has surrounded herself with outsiders and thinks that's an asset. I'm not gender biased, I don't care if the person is male or female but I am biased against outsiders who try to reinvent the car business.

Some of GM's darkest days were back in the Roger Smith days when he was hiring people from Procter and Gamble and similar Fortune 500 companies to be automotive brand managers.
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Old 01-15-2016, 10:45 AM   #14
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Who could forget that guy from Home Depot!
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Old 01-15-2016, 08:45 PM   #15
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I took Uber to and from an Indiana Pacers game tonight in the event I had a few too many adult beverages. Which obviously I didn't since I am now posting on DealershipForum...

One thing I noticed was that both drivers I had today were in their first week driving for Uber. It's not unlike other pyramid type sales organizations where there are always new people being recruited who haven't yet realized that it isn't worth it to put their wear and tear on their car for relatively meager returns.

Just to give you an idea, my 30 mile ride to the city cost only $31.67 before Uber takes their share, and my return trip back to the sticks cost $29.32 for the same distance.

Even in the best case, I don't see how the math adds up for the drivers.

I guess that why new blood is always being recruited.
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