General Motors has made the tough decision to halt operations for its Cruise robotaxi division, a bold initiative that once symbolized the automaker’s vision for the future of mobility. Cruise, which GM had projected to generate $50 billion in annual revenue by 2030, will now be folded into the company’s broader efforts to develop advanced driver-assistance systems. For an industry grappling with the immense challenges of bringing autonomous vehicles (AVs) to market, GM’s decision underscores the harsh realities of competing in a space dominated by costly innovation and deep-pocketed rivals.
Despite years of hefty investment, estimated at nearly $10 billion, Cruise ultimately failed to gain significant traction in a highly competitive market. GM executives noted the decision came after evaluating the substantial financial resources required to keep Cruise competitive against industry leaders like Waymo, Baidu, and Tesla. Instead, GM has decided to double down on its core business of producing gasoline-powered vehicles while refining its approach to EVs and driver-assistance technologies.
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GM’s decision to shutter Cruise represents a stark reversal of the automaker’s once-ambitious plans for the robotaxi business. Just a year ago, GM management was touting Cruise as a revolutionary profit driver. However, analysts now describe the move as inevitable. Garrett Nelson of CFRA Research argued that investor patience had been running thin, with little to show for the billions spent on Cruise’s development. “This was a black eye for the credibility of GM management,” Nelson remarked, referencing GM’s bold claims about Cruise’s profitability potential.
The timing of this announcement coincides with broader challenges for GM, including fluctuating EV demand and the need for cost-cutting measures. Over the past year, GM has scaled back its EV ambitions, sold off stakes in battery joint ventures, and recorded a staggering $5 billion loss on its China business. CEO Mary Barra emphasized that these decisions reflect GM’s commitment to focus on technologies that align with the company’s long-term goals and market realities.
The AV market remains one of the most capital-intensive segments of the automotive and tech industries, and success is far from guaranteed. Cruise’s competitors, including Alphabet’s Waymo, Baidu, and Tesla, are all pushing forward with their own robotaxi programs but face similar financial hurdles. Waymo, for example, continues to expand its services but loses billions annually. The difference, analysts note, is that Alphabet’s massive $100 billion in annual earnings gives it the financial cushion to absorb these losses—something GM, with projected 2024 earnings of $14 billion to $15 billion, simply cannot afford to match.
“It’s clear from Waymo’s trajectory that an AV robotaxi business is best owned by an entity with deep pockets,” Barclays analysts wrote in a recent report, highlighting the capital-intensive nature of the industry.
Although Cruise is no more, GM plans to integrate some of the division’s talent and technology into its broader efforts to enhance driver-assistance systems like Super Cruise and Ultra Cruise. By focusing on incremental advancements in driver aids rather than full autonomy, GM may find a more sustainable path forward.
Meanwhile, the automaker is doubling down on its bread-and-butter business: building gasoline-powered pickup trucks and SUVs, which continue to deliver strong profits. While this strategy may seem like a step backward to some, it reflects a pragmatic approach to staying competitive in a rapidly changing industry.
GM’s stock, which initially saw a 3% bump after the announcement, has since leveled out, reflecting investor skepticism about the broader implications of the decision. However, for 2024, GM has performed well compared to its Detroit rivals, with its stock up 45% year-to-date, significantly outpacing Ford and Stellantis.
GM’s retreat from Cruise raises broader questions about the viability of autonomous robotaxi services as a business model. While the technology holds promise, the immense costs and long timelines associated with AV development mean that only companies with substantial financial reserves may survive the journey. For now, GM has decided to focus on what it does best, leaving the race for fully autonomous robotaxis to its better-funded competitors. Whether this move will prove wise in the long term remains to be seen, but for now, it’s a clear signal that the road to autonomy is still far from smooth.
