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Lyft is working with a third self-driving tech company

NuTonomy, based out of Boston and Singapore, will be plugging some of its self-driving cars into the Lyft network.

A nuTonomy autonomous car parked in an urban setting nuTonomy

While Uber is busy trying to build its own self-driving technology, Lyft has opted to focus on what it is good at: Building a network for cars.

The younger ride-hail player, which recently closed a $600 million round valuing the company at $7.5 billion, has left the autonomous tech development to the autonomous tech companies — most recently Alphabet’s Waymo.

Today, the company announced it has struck a third autonomous tech deal with self-driving startup nuTonomy. NuTonomy, which was co-founded by Karl Iagnemma and Emilio Frazzolli, was spun out from MIT and develops autonomous vehicles. It already has pilots running in Boston as well as Singapore.

The deal: There’s no financial exchange, according to Lyft co-founder and CEO Logan Green. For now, the two companies are focusing on researching and later developing technology and software that will help with the passenger experience.

That means Lyft and nuTonomy will be working to answer the question: How will passengers interact with a “driver” that isn’t there? Green said the company expects to have a physical console in the car that will allow riders to connect to the Lyft app.

The deal will also give both Lyft and nuTonomy crucial data to later loop back into the software the companies are developing. Lyft, for instance, doesn’t have robust data on how its app should perform when hailing another human versus when it’s hailing a car.

The company is also working on ways to make the experience more instructive in order to help customers better understand how the car is working.

Eventually, nuTonomy will plug in a handful of its test vehicles into the Lyft platform to eventually chauffeur customers around Boston — which should be happening in the next few months.

Ultimately, the companies hope to ramp the nuTonomy vehicles on the Lyft platform up to “thousands” of vehicles.

nuTonomy’s Peugeot test vehicle

But that requires an automaker partner.

Before Waymo and nuTonomy, Lyft partnered with General Motors — which also invested in the company — and its subsidiary Cruise. Unlike its deal with General Motors, Lyft’s partnership with nuTonomy and Waymo essentially puts the burden on the self-driving tech companies to come up with automaker partnerships.

NuTonomy, for its part, has a relationship with the PSA group which it announced in early May. For now, the company is only working with two Peugeot cars but expects to add more as time goes on. Waymo also has a deal with Fiat Chrysler which it’s just beginning to expand.

The deal with Lyft — and a sure path to commercialization — might help nuTonomy secure more partnerships with carmakers.

Yet unclear, however, is which company will own the vehicles in this ecosystem. Will automakers simply sell their autonomous vehicles to the networks, will the self-driving tech company buy a few thousand and retrofit them (probably not), or will Lyft take on that overhead?

Also unclear is how the revenue share agreement will be settled.

Neither Green nor Iagnemma had an answer. “The economics are still being worked out,” Green said.

“My job is to make sure nuTonomy will be part of the winning team,” Iagnemma said. “[That’s what] Lyft is for us when we look at North America.”

In Singapore, nuTonomy has a similar partnership with the Southeast Asian ride-hail player Grab. When it comes to the international self-driving landscape, it’s easy to see how several partnerships with local players will work out for companies like Lyft and Grab.

But what of Waymo and nuTonomy, which will ostensibly eventually operate in the same markets? Will Lyft operate a Waymo car in the same market it operates a nuTonomy car? Lyft wouldn’t go into any additional detail.

It’s a smart strategy for Lyft. Instead of spending money and time trying to build its own autonomous tech the way Uber is, Lyft is left with plenty of resources to pour into perfecting the efficiency of its network as well as user experience.

The industry has yet to determine what will become the most important part of the self-driving ecosystem, though many experts have their thoughts. For Lyft, the ideal outcome is that the auto industry will eventually look a lot like airlines where customers know and make decisions based on the network — Delta, JetBlue, etc. — rather than the make and model of the plane itself.

In that world, the manufacturer — in the auto industry players like GM or Ford but for air transportation Boeing or Airbus — will choose the self-driving technology that powers its vehicles.

Then, the customer experience and branding — what Lyft has long pitched as its advantage over Uber — becomes the driving factor for customer decisions.

But for now, self-driving tech companies are front and center. Automakers are still competing on how well the tech and therefore their car can drive itself, that’s why there’s been such an influx of carmaker cash into outright acquiring or buying into autonomous tech startups. Eventually, however — and we’re already beginning to see this — the focus will be on whether any of these companies have a clear path to market.

Hence, Waymo and nuTonomy’s recent eagerness to partner with Lyft.

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