The race to create a self-driving taxi fleet just took a bizarre turn with a $1 billion bet on Lyft led by Alphabet

Uber driverless carBusiness Insider/Corey ProtinUber’s fleet of self-driving Ford Fusions in Pittsburgh.
  • CapitalG, Alphabet’s investment arm, led a $US1 billion funding round in Lyft.
  • Alphabet has forged a close relationship with Lyft on self-driving cars as its pre-existing relationship with Uber has soured.
  • The funding round highlights the intense battle to get self-driving cars on the road.

Google is having a very public breakup with Uber.

Google Ventures in 2013 poured $US258 million into Uber — an investment that’s now worth more than $US3.5 billion. But the relationship has long since soured and now Google’s parent company, Alphabet, is preparing to reap the benefits of a full Uber meltdown.

Naturally, this much was clear when Waymo, Alphabet’s self-driving-car company, sued Uber over claims it stole intellectual property and trade secrets. The suit was bizarre from the get-go, marking a rare instance where a major investor would undercut its own investment.

But if the lawsuit was a stab in the back, then Lyft’s latest funding round is the twist of that knife.

CapitalG, the investment arm of Google parent company Alphabet, led on Thursday a $US1 billion funding round in Lyft.

CapitalG’s investment isn’t a bet on Lyft’s ride-hailing prowess, which still falls short of Uber despite its growth in the last year. But the $US1 billion funding round highlights Google’s willingness to bet that Lyft will ultimately be the go-to mobility provider on self-driving cars. Waymo is also partnering with Lyft on self-driving vehicles.

This is important because self-driving cars are unlikely to exist without a mobility service to support them. The vehicles are far too costly to own and can only seriously thrive as a method to cut taxi costs, encouraging more frequent ridership.

Major automakers see this as well. GM has invested $US500 million in Lyft, Volvo has partnered with Uber, and companies like Ford have launched their own car-sharing services.

“If you’re an employer building an autonomous car and looking out at the future market, you see that mobility will be a huge piece of that,” Tom Mayor, the head of KPMG’s automotive strategy practice, told Business Insider. “You want to make sure you have good access to very strong and well-positioned mobility-service providers.”

If Waymo is going to demand Uber pay over $US2 billion for the alleged theft of trade secrets, it can’t also expect Uber will be the provider for its self-driving taxi fleet. At this point, Alphabet is doing its best to essentially kill Uber’s self-driving-car program and get in bed with its next-biggest competitor in the US.

Whether or not Uber’s self-driving dreams will turn into a worst-case scenario nightmare will be determined when the Waymo suit goes to trial in December. Until then, Alphabet knows to cover all its bases.

Get the latest Google stock price here.

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