TRANSPORTATION AND LOGISTICS BRIEFING: Lyft raises $1 billion, led by Alphabet - IDG Capital and Foxconn to invest in auto startups - FAA opening up airspace for commercial drones

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LYFT GAINS $1 BILLION IN NEW FUNDING LED BY ALPHABET: US ride-hailing startup Lyft announced that it has closed a new $1 billion funding round led by CapitalAG, Alphabet's growth investment fund. The new round valued Lyft at $11 billion, up from its previous valuation of $7.5 billion in March of this year.

The new funding signals Alphabet and Lyft are deepening their partnership as Alphabet's relationship with Uber sours. Lyft partnered earlier this year with Waymo, Alphabet's self-driving car spinoff, to collaborate on technology development and tests for autonomous vehicles. As part of the new investment round, CapitalAG partner David Lawee will join Lyft's board. Alphabet's other investment arm, Google Ventures, has invested more than $300 million in Uber, making it Google Ventures' biggest investment ever. However, the Alphabet and Uber are now engaged in a contentious legal battle over alleged theft of documents related to Alphabet's self-driving technology, which is set to go to trial in December. A deep relationship the Waymo-Alphabet family is extremely beneficial for Lyft, as Waymo's self-driving technology, which the company has been testing since 2009, is among the most advanced in the world. It could help Lyft incorporate autonomous vehicles into its ride-hailing service before Uber does, thus realizing the huge cost advantages of driverless vehicles.

Lyft will be able to use the funding to continue its rapid growth in the US and to expand internationally. Lyft is now available to 95% of consumers in the US. The company also booked more total rides in the first half of this year than in all of last year, and grew its gross bookings by 25% sequentially in Q2, compared to Uber's 17% growth in the quarter. Meanwhile, media outlets reported earlier this year that Lyft could enter Canada by the end of this year, and is already contemplating other international markets as well, including the UK and Australia. This would allow Lyft to put pressure on Uber in multiple markets while the bigger ride-hailing firm fights through an array of legal challenges and fills out a number of empty executive positions.

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FOXCONN, IDG TO RAISE $1.5 BILLION FOR AUTO STARTUP FUND: Foxconn and Beijing-based private equity firm IDG Capital are looking to raise $1.5 billion for an investment fund for automotive startups in China, Japan, and the US, according to Bloomberg. This could include companies working in connected car, self-driving, ride-hailing, and electric vehicle (EV) spaces. Under the proposed plan, both companies would invest 10% of the $1.5 billion, and would raise the rest from the governments and financial institutions as well as other investors.

Foxconn hopes moving further into the automotive space will help supplement its core electronics manufacturing business. The company, which assembles Apple's iPhone, recently started moving into the automotive world - earlier this year it participated in a Series F funding round for electric carmaker Future Mobility.

China in particular could provide a massive opportunity for companies developing new car technologies.

• The country is already the world's largest automotive market, according to McKinsey estimates. In fact, 40% more vehicles were sold in China than in all of Europe last year.
• Changes in government policies will create a larger opportunity for electric and autonomous vehicles. The country's government recently began working on a timeframe for banning gas and diesel cars from its roads, which could happen as soon as 2020. That will drastically expand the market for EVs, and could also expand the market for self-driving cars since their technologies work better with electric motors than with gas engines.

But the companies aren't alone in eyeing the global automotive startup space. Chinese search giant Baidu consolidated its self-driving investments into a similar fund earlier this year to help accelerate the development of its Apollo open self-driving platform. Meanwhile, Softbank's Vision Fund has invested in several auto startups, and is on the verge of a major investment in Uber, while Chinese ride-hailing giant Didi Chuxing poured several millions into European ride-hailing firm Taxify. These investments have helped global venture funding for automotive startups working on connected, autonomous, and cybersecurity technologies climb to $2.8 billion in aggregate since 2012, according to CB Insights. That amount is dwarfed by the $30.4 billion that venture capital firms have invested in global ride-hailing startups over the same period.

FAA OPENING UP COMMERCIAL DRONE USE CASES: Several updates this week indicate that the FAA is moving forward with easing restrictions on businesses looking to use drones for commercial purposes.

• Within the next few days, the FAA is expected to announce a series of tests involving several programs designed to link federal, state, and local regulations. The goal is to reduce FAA authority to commercial drones flying at altitudes between 200-400 feet, with state and local government responsible for lower altitude flights. Right now, the FAA has oversight responsibilities for all commercial drone flights in the US. However, many states, counties, and localities have developed their own drone regulations as well. The tests aim to clarify this regulatory patchwork by drawing distinct areas of jurisdiction for different levels of government in order to simplify compliance for businesses launching drones.
• The FAA also awarded Verizon-owned enterprise drone software company Skyward approval to give commercial drones instant access to controlled airspace. The approval means that companies using Skyward's drone management platform can get instant authorization to fly drones near airports in Cincinnati, Reno, San Jose, and Lincoln, Nebraska. That authorization will be enabled by the FAA's Low Altitude Authorization and Notification Capability (LAANC) software service. The service, which cuts the time it takes to gain approval for temporary commercial drone flights in restricted airspace from months down to minutes, is currently being tested by the FAA with a number of drone software vendors, including Skyward. It will be expanded to a nationwide test in early 2018.
• Finally, the FAA also granted CNN the first ever waiver to fly drones over public crowds, allowing the news organization to collect aerial footage over public events. CNN said that it took two years of research together with drone manufacturer Vantage Robotics to gain the necessary FAA approval and pilot certifications.

Companies looking to use drones are likely encouraged by these announcements, which show the FAA is committed to making progress on commercial drone regulations. The US has trailed behind other major markets like the EU and China in opening up airspace for commercial drones. Recent news reports have suggested that law enforcement agencies, including the FBI, have hamstrung efforts to expand commercial drone approvals by the FAA over safety concerns. This has led to speculation that the FAA may delay the new set of commercial drones regulations it is scheduled to issue next year. Drone operators can take this week's news as a clear signal that the FAA is trying to make progress on this front by making it easier to operate in previously restricted airspace and streamlining compliance procedures.

In other news…

• Mitsubishi will invest $5 billion over the next three years on research and development and to revamp its factories around the world, according to The Wall Street Journal. The money will be used to explore new vehicles, including a potential lineup of electric vehicles. The company hopes this effort, which was made possible by an investment from Nissan last fall, will help it overcome a tattered image and financial losses in the wake of a scandal where it was found to have falsified fuel economy data about its vehicles.
• Nissan announced that its 2018 Rogue crossover models will come with an option to add a semi-autonomous feature, known as ProPilot Assist, according to Engadget. The feature will cost about $11,000 extra, and allows drivers to take their hands off the wheel during single-lane highway driving. ProPilot Assist keeps the vehicle in-lane, adapts to the speed of traffic, and alerts drivers when other vehicles are in its blind spots. The vehicle is one of a handful of semi-autonomous cars currently on the market, including some Audi, Cadillac, and BMW sedans, and all of Tesla's electric cars.