Ford is buying Y Combinator shuttle van startup Chariot in an all-cash deal

Ford ChariotFordVans and bikes.

For over 100 years, Ford concentrated on building iconic cars and trucks. But under the leadership of CEO Mark Fields, on the job since 2014, the automaker is transforming itself into a company that isn’t afraid to invest in buses and bikes.

On Friday, Ford announced that it will acquire Chariot, a San Francisco-based shuttle service founded in 2014 that’s currently operating a fleet of Ford Transit vans.

Ford didn’t disclose the purchase price, but said that it was an all-cash deal. Chariot emerged from Y Combinator and raised $3 million in a seed round in April 2015, led by Semil Shah with 15 other investors, including Major League Baseball Venture and Winklevoss Capital.

“As much as we look at our core business of building wonderful cars and trucks, we see an emerging market around mobility services,” Fields told Business Insider.

“This world is moving toward both owning and sharing mobility,” he added. “I don’t view this as risk taking. The biggest risk is not to change and take advantage of opportunities.”

Chariot’s CEO, Ali Vahabzadeh, echoed that idea. “I can’t wait to get started,” he said, adding that he’ll remain CEO and that Ford has given him “considerable latitude” to scale the business and expand it initially to at least five new US markets, with a larger global presence to follow.

Under Fields, Ford has been pressing hard to develop new initiatives in transportation that will serve customers in the future. The traditional auto industry has been enjoying robust sales of new vehicles over the past two years, breaking a US record last year as 17.5 million cars and trucks rolled off dealer lots. Pickups and SUVs have led the boom, and Ford has benefited.

The emergence of megacities

But the world is changing.

“One of our biggest challenges is the growth of megacities,” Fields said. “And with that comes the problem of moving people and goods around.”

Chariot offers beleaguered Bay Area commuters and alternative to the overloaded mass-transit system. The startup uses 100 Ford Transit 15-seat vans to serve 28 crowdsourced routes, according to Ford. Currently, the routes are based on demand from riders, but after the Ford acquisition, data algorithms will take over and, Ford says, enable real-time mobility needs to be served.

User can use the pre-tax transit benefits to pay for rides, which typically cost less than $5. Various monthly pricing plans are also offered, with costs pegged to the time of day.

Chariot AppChariotThe Chariot app.

Ford’s acquisition, subject to the usual regulatory approvals, is the latest in a series of large and small deals involving conventional car makers and Silicon Valley startups. Last year, General Motors invested $500 million in ride-hailing service Lyft and established a separate business unit, Maven, to focus on urban-mobility solutions. GM also bought Cruise Automation, an autonomous-driving startup.

Fiat Chrysler Automobiles has joined with Google to pursue driverless technologies, Toyota has invested in Uber, and Volkswagen took a stake in Gett. Both Ford and GM have enhanced their on-the-ground presence in Silicon Valley, establishing local outposts to be closer to the action as the transportation landscape rapidly shifts.

Risk-taking at Ford

The Chariot deal continues a period of adventurous business moves by Ford since 2014. The automaker has redesigned its two most iconic vehicles, the Mustang muscle car and the F-150 pickup truck, rolled out a $400,000 supercar in the Le Mans-winning Ford GT, and completely revamped its highly profitable Super Duty pickup for the first time in two decades.

CES 2016 fordSteve Kovach/Business InsiderFord CEO Mark Fields presenting at CES in 2016.

In addition to the Chariot acquisition — the first by Ford Smart Mobility, the company’s future-of-transportation unit — the car maker announced that it would collaborate with bike-sharing service Motivate in the Bay Area to integrate its services into Ford’s FordPass app. Users will be able to access pedal-powered transportation through the Ford GoBike feature in 2018, when the services launches. By that time, Ford expects that there will be 7,000 bikes available for sharing.

Beyond bikes and vans, Ford also said that it is creating a City Solution team as part of Ford Smart Mobility to explore ways in which the automaker can continue to develop transportation opportunities worldwide.

Detroit and Silicon Valley

The Chariot deal first took shape over a year ago.

“Mark Fields first came out to San Francisco 18 months ago,” Vahabzadeh said. “They knew that the transportation landscape was evolving, and they didn’t just want to be part of that, they wanted to be a leader.”

Vahabzadeh said that discussions between Ford and Chariot had sped up over the past few months.

“Generally speaking, you’re seeing a trend of large corporations investing in startups to accelerate their R&D,” he said.

According to Jim Hackett, Chairman of Ford Smart Mobility, Chariot rapidly emerged as Ford’s best bet.

“There were a lot of shuttle ideas,” he said, recalling his frequent visits to the Bay Area from Detroit. “This one really impressed me. It’s a perfect fit for Ford, and it’s going to be a global play.”

And Ford isn’t finished yet.

“There are some cases where we’ll build [new technologies] ourselves, some cases where we’ll partner and others where we’ll acquire,” Fields said. “It’s an ongoing process, and that’s why we set up shop in Silicon Valley. We’re going to be significantly expanding into next year.”

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