Lyft's own self-driving cars will join its ride-hailing fleet "in the coming years", while Magna will disperse the technologies throughout the automotive industry.
Lyft is developing self-driving auto technology at its Silicon Valley engineering facility called Level 5.
In addition to the partnership, Magna is investing $200 million in Lyft for an equity stake in the company. Lyft has previously worked in a less formal fashion with a number of other autonomous vehicle firms such as NuTonomy.
Lyft and Ford teamed up to test self-driving auto tech.
As a result, automakers are confronting a choice: Pay big for a technology startup or risk falling behind.
For its partnership with Magna, Lyft will take the lead on development and Magna will focus on manufacturing.
After lagging behind Uber, Lyft has recently made a concerted push into self-driving cars. It's also opened its own hardware and software engineering facility in Silicon Valley dedicated to autonomous vehicle development, called Level 5.
It also has a major asset for self-driving technology - a ride-hailing network picking up and dropping off passengers 10 million times a week. Attendees could summon the vehicle with Lyft's app.
Lyft and Magna expect their tech to be ready for market use "over the next few years". "I believe this relationship will get us there faster", Kapoor said.
Magna is a top North American vehicle parts supplier.
Magna has already been working on hardware for self-driving cars, including radar and lidar - an abbreviation for light detection and ranging - that help the vehicles see the world around them. Intellectual property created as part of the deal will be jointly shared between the two companies, while Lyft will have access to Magna's existing technology for its self-driving cars.
"There is a new mobility landscape emerging and partnerships like this put us at the forefront of this change", said Magna chief technology officer Swamy Kotagiri.
Under the partnership, Lyft would take the lead in developing self-driving vehicle technology while Magna would oversee manufacturing of the systems.
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