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Woven Planet’s $550mn Acquisition of Lyft Level 5

By AJ Tomas (University of Chicago), Alexis Bernet, André Assouline, Martín Palomar, Kévin Insixiengmay, Olivier Baverez (HEC Paris)

Photo: Thought Catalog (Unsplash)


Overview of the deal

Acquirer: Woven Planet (a subsidiary of Toyota Motor Corporation)

Target: Level 5 (the self-driving division of Lyft, Inc.)

Total Transaction Size: $550M

Closed date: H1 2021

Target advisor: Not disclosed

Only three months after creating a dedicated division to self-driving vehicles, under the name of Woven Planet, the Japanese carmaker Toyota has announced it will acquire the autonomous car business from Lyft, the Nasdaq-listed ridesharing company. This $550m deal, including $300m paid upfront in cash and the remaining paid within the five next years, will allow Toyota to benefit from Lyft’s human and technological expertise in self-driving cars while establishing itself in the Silicon Valley. This acquisition appears to be in line with past recent strategic operations from Toyota targeting this promising segment, such as the joint venture with SoftBank or the consortium formed with General Motors Co. On the other side, Lyft’s incentive seems to focus on the need for cash used to invest in the development of its mobile app and the core business of the company.

“This is the first step of establishing and bringing together the people. Obviously building technology and product requires people, and that's much what this acquisition is about” - James Kuffner, CEO (Woven Planet Group)

Company Details: (Acquirer - Woven Planet Group )

Woven Planet is a newly established subsidiary of the automobile manufacturing giant, the Toyota Motor Corporation. The holding company is focused on delivering the safest next-generation mobility solutions at scale by marrying Silicon Valley’s deep tech innovation with quality-driven Japanese engineering. Through their three subdivisions of Core, Alpha, and Capital, the Group identifies, incubates, and invests in technologies that reimagine how people get from Point A to B.

Founded in 2021, headquartered in Hokkaido, Japan

CEO: James Kuffner

Number of employees: 760


Toyota is a leading Japanese automotive company headquartered in Toyota, in the prefecture of Aichi in Japan. In terms of unit sales, it is the largest automobile manufacturer in the world, with more than 10 million cars built per year. It is also the 10th largest company in the world in terms of revenues, and the world leader in terms of electric hybrid cars, having sold 15M hybrid vehicles since the inception of the Prius in 1997.

Founded in 1937, headquartered in Toyota.

CEO: Akio Toyoda

Number of employees: 359,000

Market Cap: $208.6B

EV: $355.3B

LTM Revenue: $243.6B


LTM EV/Revenue: 1.5x


Company Details: (Target - Lyft’s Level 5 Division )

Lyft is a multimodal ride-hailing and mobility company with over a billion dollars in monthly gross bookings, as well as 32% of the U.S. car-sharing market. Level 5 was the company’s autonomous driving research and development division which, before the carve-out, was focused on building a self-driving system for Lyft’s fleet network. Similar to Uber’s former Advanced Technologies Group (ATG), Level 5 was borne out of Lyft’s ambitions to leverage data collected through ride-sharing trips to be at the forefront of developments in self-driving.

Founded in 2017, headquartered in San Francisco, California (USA)

CEO: Logan Green

Number of employees: 400

Market Cap: $18.3B (as of market close 30/04/2021)

EV: $17.6B

LTM Revenue: $2.4B


LTM EV/Revenue: 7.4x

Projections and Assumptions

Short-term consequences

The self-driving unit of Lyft was a cash drain for the company. The deal is a way for Lyft to become more profitable and to get rid of the risk that this costly technology fails, after a very difficult pandemic year (Lyft reported a $1.8 bn loss in 2020). For Lyft, the short-term interest is the $550 million in cash they receive in the transaction ($200 million-plus $350 million over five years). The president of Lyft expects the company to be profitable on an EBITDA basis at the end of the year as they stop financing the project. Indeed, the deal will remove $100 million of annual expenses. Lyft will now focus on its core business.

This is a similar trajectory as Uber who abandoned its project of a self-driving vehicle, selling it to Aurora in December of 2020.

For Toyota, this acquisition is a way to develop the project Woven Planet, the subsidiary dedicated to self-driving vehicles. The Japanese firm will boost its deployment of self-driving technology after the launch in April 2020 of a Lexus with some self-driving capabilities. The head of investments and acquisitions of Woven Planet declared that this acquisition will allow them to “combine the innovative culture of Silicon Valley with world-renowned Japanese craftsmanship to create the mobility solutions of the future”.

Toyota will have access to the 300 engineers of Lyft. The firm will create a team with the engineers of Lyft, Didi Chuxing (a Chinese firm), and Aurora (Toyota has a stake in Aurora). On Tuesday the 27th of April, Toyota announced the creation of a “dream team” based on these 1,200 engineers.

Long-term Upsides

This carve-out and sale to Woven Planet provide much needed financial relief for Lyft. Like their primary competitor in the North American market, Uber, the company is selling Level 5 to double down on their core competencies in ride-sharing, e-scooters, and bicycles. Unloading the fiscal burden from the moonshot project’s capital intensive requirements, the company is aggressively working towards a path to long-term profitability. According to Lyft co-founder and President, John Zimmer, the company expects to achieve positive adjusted EBITDA profitability in the third quarter of 2021. After hitting this milestone, the company then seeks to generate a positive net income, although Zimmer did not guide on when this could happen.

However, this does not mean that the company has closed its doors entirely to self-driving technology. For starters, they seemed to have taken a page out of Uber’s playbook, borrowing a similar future strategic partnership hedge that Uber arranged through the Aurora deal. Lyft has negotiated terms that give them partnership access to the self-driving technology should Woven Planet be able to commercialize it at scale. Furthermore, Lyft’s will be able to continue its partnership with Hyundai-Aptiv’s driverless joint venture, Motional. Finally, Lyft will get to retain its talent network of engineers, data scientists, and UX designers who have been working on connecting customers to autonomous driving rides. They will be rolled into Lyft’s Fleet division.

The specifics of Woven Planet’s ambitions to shape the future of mobility is not yet widely publicized. While the final stretch to perfecting fully autonomous driving is a long one, Woven Planet will greatly benefit from the infrastructure that Level 5 already has in place. It is a smart strategic move to acquire assets from an established ride-hailing company with millions of monthly active users. Through their primary mobility business, the company has already collected billions of data points on real-world driving trajectories and common routes. Woven Planet would also have access - although not proprietary - to Lyft’s vehicle fleet and, more importantly, the trips data it captures.

Risks and Uncertainties

Self-driving is still an emerging technology that is not yet ready for mass commercialization. Woven Planet will still need to sink more capital into perfecting the back-end artificial intelligence technology. More specifically, the machine vision that ultimately guides the autonomous system needs to be perfected in real-world driving conditions.

Furthermore, increased regulatory scrutiny for self-driving systems can be expected. For example, two United States Senators have recently called on the National Highway Traffic Safety Administration to take “corrective actions” to respond to a Tesla autopilot crash. Ultimately, this could come in two distinct ways. Firstly, with machine ethics being a current top-of-mind concern in a lot of consumer technologies, it is not too far-fetched to believe that policymakers would try to enforce diversity standards on the algorithms. Historically, communities of colour have long been ignored in machine learning training data sets. As such, to ensure that public safety measures protect everyone, regulators could potentially introduce data ethics guidelines. Secondly, with all of the negative press and public concerns for self-driving technology, policymakers could potentially utilize the regulation to limit the scope of autonomous driving.

“Making the cars is easy. Making the radar, lidar, cameras, sensors and computer gear is (relatively) easy. Perfecting the computer code that makes sense of what all the data extraordinarily difficult when the ultimate goal is to never harm any humans involved.” - Bill Roberson (Forbes)


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