The race to create a self-driving taxi fleet just took a bizarre turn with a $1 billion bet on Lyft led by Alphabet

Uber's fleet of self-driving Ford Fusions in Pittsburgh.

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Uber’s fleet of self-driving Ford Fusions in Pittsburgh.
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Business Insider/Corey Protin

    CapitalG, Alphabet’s investment arm, led a $1 billion funding round in Lyft. Alphabet has forged a close relationship with Lyft on self-driving cars as its pre-existing relationship with Uber has soured. The funding round highlights the intense battle to get self-driving cars on the road.

Google is having a very public breakup with Uber.

Google Ventures in 2013 poured $258 million into Uber – an investment that’s now worth more than $3.5 billion. But the relationship has long since soured and now Google’s parent company, Alphabet, is preparing to reap the benefits of a full Uber meltdown.

Naturally, this much was clear when Waymo, Alphabet’s self-driving-car company, sued Uber over claims it stole intellectual property and trade secrets. The suit was bizarre from the get-go, marking a rare instance where a major investor would undercut its own investment.

But if the lawsuit was a stab in the back, then Lyft’s latest funding round is the twist of that knife.

CapitalG, the investment arm of Google parent company Alphabet, led on Thursday a $1 billion funding round in Lyft.

CapitalG’s investment isn’t a bet on Lyft’s ride-hailing prowess, which still falls short of Uber despite its growth in the last year. But the $1 billion funding round highlights Google’s willingness to bet that Lyft will ultimately be the go-to mobility provider on self-driving cars. Waymo is also partnering with Lyft on self-driving vehicles.

This is important because self-driving cars are unlikely to exist without a mobility service to support them. The vehicles are far too costly to own and can only seriously thrive as a method to cut taxi costs, encouraging more frequent ridership.

Major automakers see this as well. GM has invested $500 million in Lyft, Volvo has partnered with Uber, and companies like Ford have launched their own car-sharing services.

“If you’re an employer building an autonomous car and looking out at the future market, you see that mobility will be a huge piece of that,” Tom Mayor, the head of KPMG’s automotive strategy practice, told Business Insider. “You want to make sure you have good access to very strong and well-positioned mobility-service providers.”

If Waymo is going to demand Uber pay over $2 billion for the alleged theft of trade secrets, it can’t also expect Uber will be the provider for its self-driving taxi fleet. At this point, Alphabet is doing its best to essentially kill Uber’s self-driving-car program and get in bed with its next-biggest competitor in the US.

Whether or not Uber’s self-driving dreams will turn into a worst-case scenario nightmare will be determined when the Waymo suit goes to trial in December. Until then, Alphabet knows to cover all its bases.