Lyft is selling its self-driving unit to Toyota for $550 million

The automaker will fold the division into its Woven Planet subsidiary.

A car with a Lyft logo in its window drives down a street as the company prepares for its upcoming IPO in New York, U.S., March 19, 2019. REUTERS/Lucas Jackson TPX IMAGES OF THE DAY (Lucas Jackson / reuters)

Lyft is offloading Level 5, its internal autonomous vehicle development team. The company announced on Monday it plans to sell the division to Toyota for $550 million. In turn, the Japanese automaker will integrate the team into its Woven Planet subsidiary. Toyota will pay Lyft $200 million upfront for the division, and another $350 million over five yealrs to complete the transaction. The two companies say they expect the deal to close sometime in third quarter of this year.

And Lyft isn't being shy about its reasons for selling Level 5. Provided the deal goes through, the company expects that its R&D spending will go down sharply as a result, an important step as the company tries to become profitable. “Assuming the transaction closes within the expected timeframe and the COVID recovery continues, we are confident that we can achieve Adjusted EBITDA profitability in the third quarter of this year,” said John Zimmer, the co-founder and president of Lyft.

With today's announcement, Lyft is following Uber in effectively leaving the self-driving car business to other companies. Lyft had been working on the technology since 2017, and while it didn't have the same high-profile setbacks as Uber, it's under the same pressure to become profitable as soon possible.

One significant angle to today's announcement is that Toyota is working with Aurora, the company that bought Uber's Advanced Technologies Group last year, to develop autonomous taxis. By the end of 2021, they plan to start testing self-driving vans, with an eye towards launching those on Uber and other ride-hailing networks sometime over the next few years.