A Cruise autonomous taxi glides through the streets of San Francisco, California, as captured on a sunny Thursday, August 10, 2023. This image by David Paul Morris for Bloomberg and Getty Images encapsulates a vision that, not long ago, promised to reshape transportation.
Switching gears to Detroit, General Motors, under the stewardship of CEO and Chair Mary Barra, has long been on a mission to transform from a traditional car manufacturer into a tech-forward innovator. Barra has been at the forefront, advocating for GM’s leap into new realms like electric vehicles (EVs), auto insurance, military applications, and the adventurous possibilities of urban air mobility, or “flying cars.” The vision was ambitious—measuring potential markets in the trillions of dollars.
During a keynote at CES in January 2022, Barra highlighted GM’s commitment to groundbreaking technology and services intended to revolutionize mobility. However, as of late, GM has shifted focus to conserve capital in an evolving industry landscape. With the recent halt in its Cruise robotaxi operations, Barra underscored a strategic pivot towards strengthening core pursuits such as software, EVs, and personal autonomous vehicles.
Acknowledging the substantial costs of operating a robotaxi fleet, which Barra noted isn’t GM’s primary business, the company has recalibrated its strategy. The robotaxi segment, once heralded as an $8 trillion opportunity expected to yield $50 billion by the decade’s end, saw GM invest over $10 billion into Cruise since its acquisition in 2016. The unforeseen scrapping of the Cruise business will integrate its operations and some of the 2,300 employees back into GM.
In the wake of this decision, GM is poised to encounter further expenses related to employee severance and the repurchasing of investor shares, expected impacts set for the upcoming year. This move comes in response to the highly competitive robotaxi field and a strategic focus on capital allocation.
GM contended mainly with Alphabet-backed Waymo, which emerges as the primary player in the public robotaxi domain. Though Tesla harbors aspirations in this space, commercialization has remained elusive. Wall Street’s reaction? A nod of approval, as GM stock experienced an initial rise following the announcement. Analysts praised the pivot, as GM’s focus on core business is expected to save over $1 billion annually, potentially fueling more share buybacks.
From a broader perspective, the financial world has witnessed GM and others shifting from pursuing dizzying growth goals towards solidifying their fundamentals. GM’s decision, viewed favorably by analysts, anticipates the freed capital will enable efficient reinvestments.
Despite this development, GM remains committed to autonomy. The focus has now shifted towards integrating Cruise with GM’s core technical teams, aiming to advance personal autonomous vehicles rather than public robotaxis.
Still, it’s evident that Cruise joins a series of GM’s aspirations that faced headwinds. From the sidelined BrightDrop EV vans to the muted initiatives in fuel cells for various vehicles, GM’s foray outside its mainstay business hasn’t always met expectations. Nonetheless, the automotive giant continues to hold success in its stable—GM Energy and BrightDrop remain vibrant under its “Envolve” business arm. The financial services arm with its insurance offerings launched in 2020 has expanded to 12 states, showcasing its potential for lasting success.
One silver lining in stepping back from robotaxis is the chance for GM to bolster its Super Cruise technology. This advanced driver-assistance system offers a semi-automated experience, with aspirations for fully autonomous functionality. GM, a trailblazer since Super Cruise’s 2016 debut, is gradually rolling out the feature across various models.
Highlighting the nuanced strategic shift, BofA Securities’ John Murphy notes GM’s ongoing dedication to enhancing autonomous vehicle technology. Yet, the decision could imply that competitors like Waymo and even Tesla might possess superior technology or more attractive market positions.
A turning point, indeed, as GM once led the robotaxi narrative, offering public rides—until a setback in October 2023, when a pedestrian accident in San Francisco paused operations. This incident and an ensuing investigation pinpointed cultural and leadership issues as contributing factors.
The examination led to the resignation of co-founder and former CEO Kyle Vogt, who publicly critiqued GM’s choice to drop the robotaxi venture, illustrating deep-seated challenges in executing a long-game strategy. Vogt cited GM’s history with innovative technology—a trend sometimes halted prematurely, as with its EV1 and Chevrolet Volt.
In the broader landscape, GM’s retreat is not unique. Its Detroit neighbor, Ford, previously closed its autonomous driving unit, emphasizing the uphill battle of scaling such technologies. Waymo remains at the forefront, steadily expanding in key U.S. cities.
Bernstein analyst Daniel Roeska offered insights on this shift, outlining the complexities and economic challenges in scaling robotaxi networks while acknowledging the opportunities for ride-sharing platforms and other automakers still pushing forward in autonomy.
As GM navigates this new direction, time will tell how its focus on core strengths will shape the future of mobility and technology within the automotive sphere.
