Lyft’s Bet on Autonomous Vehicles: Can It Pay Off?

Key Points

• Lyft’s capital-light approach focuses on connecting riders with autonomous vehicles from multiple technology partners.

• If scaled, AVs could eliminate Lyft’s largest expense: human drivers.

• Autonomous vehicles aren’t a near-term revenue driver, but Lyft’s strategy positions it to benefit from AV adoption while maintaining strong cash flow.

• 10 stocks we like better than Lyft ›

Lyft (NASDAQ: LYFT) has spent most of its public life in the shadow of Uber Technologies, fighting to prove that a smaller, more focused ride-hailing player can still win. Over the past year, the company has impressed Wall Street by stabilizing its business, improving cash flow, and showing it can operate profitably.

But Lyft isn’t just tightening its core operations. It’s also making a calculated bet that autonomous vehicles (AVs) could transform its business model — and maybe give it a new edge in the ride-hailing race. The big question: Can Lyft’s AV strategy pay off before larger players or technology leaders capture the market?

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Lyft’s quiet, partnership-first approach

Unlike Uber, which sold its self-driving unit in 2020 and continues to invest selectively in AV partnerships, Lyft has embraced a capital-light strategy from the start. Rather than building expensive hardware and software in-house, Lyft positions itself as the network that connects riders with self-driving cars from multiple technology providers.

Currently, Lyft partners with Motional to offer limited autonomous rides in select U.S. cities. It has also teamed up with Mobileye, May Mobility, and Nexar as it positions itself across the whole AV value chain. These partnerships remain small-scale and experimental, but they give Lyft a foothold in the emerging AV ecosystem without burning billions on research and development.

By focusing on its strengths — managing the rider network, handling bookings and payments, and integrating AV fleets into its app — Lyft avoids the enormous capital and technical risk associated with building AV tech from scratch.

Why AVs could change the economics of ride-hailing

Lyft’s most significant cost today is paying human drivers. Driver supply fluctuates with wages, gas prices, and broader labor market conditions, creating volatility and pressure on margins.

If AVs become viable at scale, they could eliminate this single biggest expense. That would transform Lyft’s unit economics, allowing the company to capture more of the ride fare or pass savings to riders to gain market share.

There’s also an operational benefit. AVs don’t tire, don’t reject trips, and don’t need surge pricing to incentivize work during peak hours. A fleet of autonomous vehicles could theoretically run 24/7, improving utilization rates and reducing cost per ride.

In theory, then, AVs could make ride-hailing cheaper, more predictable, and more profitable — if the technology and regulatory landscape allow it.

The long road ahead: Timing and competition

That “if” is doing a lot of work. The path to widespread AV adoption has been slower and bumpier than early enthusiasts hoped. Expectations of large-scale commercial deployment in the early 2020s haven’t materialized.

Significant technical hurdles remain, including perfecting safety and reliability. Regulatory environments vary across jurisdictions, and public acceptance is still evolving.

Meanwhile, competition is fierce. Waymo, Cruise (GM‘s AV arm), Tesla, and others are all investing heavily to dominate the AV market. Lyft’s partnership approach gives it access to multiple providers, but it also means Lyft won’t control the underlying technology and could have less pricing leverage.

Moreover, early AV fleets are costly to build and maintain. The economic benefits may take years to materialize at scale, tempering near-term expectations.

Why Lyft’s strategy makes sense

Despite these challenges, Lyft’s approach is arguably the smartest for a company of its size and resources. Building AV technology internally has proven to be a money pit even for the most prominent players.

By staying asset-light and focusing on the platform side, Lyft can avoid that risk while positioning itself to benefit if and when AV adoption grows. If the market matures, Lyft could integrate multiple autonomous providers, offering riders more options and expanding service reach without the driver recruitment headaches.

Importantly, Lyft’s improved cash flow and recent adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) breakeven means it can afford to experiment with AVs without jeopardizing its core business.

What does it mean for investors?

Lyft’s AV strategy is not a near-term growth catalyst. Investors shouldn’t expect a sudden revenue surge driven by autonomous vehicles anytime soon.

But it is a calculated, capital-light bet on a potentially disruptive technology that could reshape ride-hailing economics and competitive dynamics over the next decade.

For long-term investors, the key question is whether Lyft can maintain its current operational momentum while positioning itself for this future wave. If the autonomous vehicle revolution arrives, Lyft’s partnership-first, platform-focused approach could allow it to ride that wave without having risked everything to build the surfboard.

Investors looking to benefit from the rise of AV should closely track Lyft’s execution in the coming years.

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Lawrence Nga has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla and Uber Technologies. The Motley Fool recommends General Motors, Lyft, and Mobileye Global. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.