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Why are Toyota and VW investing in the ride-hailing business? (+video)

Shifts in thought

Toyota and Uber plan to develop self-driving cars together. General Motors has already partnered with Lyft. Automotive giants are becoming active partners with emerging transportation tech.

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    A sedan outfitted with radars, laser scanners and high-resolution cameras drives in Pittsburgh. Uber's partnership with Toyota could bring self-driving cars to the streets sooner.
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Toyota and Volkswagen are the latest in a string of auto industry giants to partner with ride-hailing companies, as the future of "mobility services" steers toward less ownership and more self-driving cars.

Toyota and Uber announced a partnership Tuesday in which Toyota, valued at $177 billion, will invest an undisclosed amount to collaborate with Uber to develop autonomous cars. Volkswagon has invested $300 million in Gett, a taxi-hailing service that operates in 60 cities in Israel, Russia, the United States, and Britain, allowing the Israeli startup to expand in Europe, The Wall Street Journal reported.

Tuesday's announcements are the latest in a series of major investments by the automakers to compete with Apple (whose $500 billion value is as much as seven major automakers combined) and Google, as the everyday commute appears poised to undergo a massive transformation. The focus on autonomous cars comes as Tesla, another tech startup, is attempting revolutionize the electric car and battery technology. Both paths of innovation point to a fundamental shift underway as Silicon Valley and Detroit compete to be the transportation companies of tomorrow.

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"Somebody outside of the auto industry doing things they were not doing, and doing it in a radical and disruptive way is definitely a factor," Bruce Belzowski, managing director of the University of Michigan Transportation Research Institute's Automotive Futures group, tells The Christian Science Monitor, referring to the development of autonomous cars and ride-hailing technology. "[Automakers] all have offices in Silicon Valley. They're all trying to make contacts with these companies."

"They want to be involved so they can make better decisions about what they're going to do in the future," adds Mr. Belzowski. "If they're not involved, they can't be part of the game. If they are involved, they can actually shape things and better understand where there is potential for them."

And the size of investments automakers can afford to pour into disruptive tech startups could fundamentally change how – and if – we drive.  

"Ride-sharing has huge potential in terms of shaping the future of mobility," Shigeki Tomoyama, Toyota Motor Corporation's senior manager officer, said in a joint statement Tuesday.

In the statement, Toyota and Uber announced a memorandum of understanding, in which Toyota will offer Uber drivers lease options they can pay off through the money they collect driving. And Gett said VW's investment would allow it to expand in Europe, as it serves VW's corporate partners, Shahar Waiser, Gett’s executive offer, told The Wall Street Journal.

Yet, the most intriguing news to come out of Tuesday's announcements is Toyota and Uber revealing they will collaborate "accelerating their respective research efforts." Uber has invested in self-driving technology, which includes mapping, reported Reuters. Toyota, meanwhile, had planned to spend $1 billion through 2020 in research and development for artificial intelligence and robotics that could be applied to self-driving cars, according to Reuters.

This relationship is a departure from the auto industry's long-established formula for "making bigger and more powerful cars to fuel their growth," writes The New York Times.

"But start-ups like Uber and Lyft and technology companies like Google and Tesla have disrupted that cadence," writes the Times. "Automakers have become increasingly concerned about those technologies and their potential to help people travel easily and cheaply without owning a car – or even without knowing how to drive."

The auto industry's response: If you can't beat them, join them.

General Motors, for instance, invested $500 million in Lyft, Uber's competitor, in January to research to create an on-demand network of autonomous cars. GM and Lyft plan to create a network self-driving cars that users can hail through the Lyft app.

Google and Fiat Chrysler announced their own partnership in early May to develop a self-driving minivan. While Google has created a prototype of a two-seater, autonomous car, it and the automaker are reportedly developing on is a seven-seater minivan.

And Apple invested $1 billion in the Chinese ride-hailing service Didi Chuxing, allowing Apple to diversify beyond its current portfolio, perhaps into the realm of self-driving cars, The Christian Science Monitor's Olivia Lowenberg reported.

It remains to be seen, though, how successful the auto industry can be selling "mobility services" – the industry's buzzword. Their relationship with consumers is almost entirely through dealerships or recalls, says the University of Michigan's Belzowski.

"They have no track record for doing this," he says. "It's a brave new world for them they're trying to understand."

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