General Motors Cuts Funding for Robotaxi Project Robotaxi services serve as a stepping stone for full autonomous driving commercialization. Frost & Sullivan predicts large-scale commercialization of Robotaxi around 2026. By 2030, the global Robotaxi market could reach $66.6 billion. Many companies, including Tesla, Google, and Baidu, are entering the Robotaxi market. Dongfang Securities reports that Robotaxi can gradually achieve commercialization and accelerate automotive intelligence. However, at this critical moment, General Motors announced it would cut funding for the Cruise autonomous taxi project. The company will shift its focus to personal vehicle autonomous technology. This decision seems sudden but has clear reasons. Cost is the key factor. General Motors stated that expanding the autonomous taxi business requires significant time and high costs. The increasing competition in the autonomous taxi market influenced its choice to stop the Robotaxi project. Cruise was founded in 2013 and acquired by General Motors for $1 billion three years later. GM currently holds about 90% of Cruise shares. The company plans to buy out remaining Cruise shares from external shareholders by 2025, increasing its ownership to over 97%.
In January 2020, Cruise launched the “Origin” self-driving car. This autonomous vehicle lacks pedals and a steering wheel. General Motors, Cruise, and Honda plan to develop it together. This marks a highlight for Cruise. With General Motors’ resources, Cruise became the first company in the U.S. to offer paid services in major cities in 2022. However, self-driving cars are expensive to operate. The commercialization process is slow, and strict government regulations add challenges. In 2023 alone, Cruise reported losses of $2.414 billion. Since acquiring Cruise in 2016, General Motors has invested over $10 billion. This amounts to about $2 billion each year, roughly one-fifth of General Motors’ annual net profit. CEO Mary Barra stated, “The high costs of operating a self-driving taxi fleet far exceed General Motors’ core business, making it unsustainable.”
The global auto market faces weak demand. Sales in the major markets of the U.S. and China perform poorly. General Motors aims to cut costs. It focuses on core business and accelerates its electric transformation. The slow progress in autonomous taxi services faces scrutiny. Cruise will merge with GM’s driver assistance technology division. It will develop advanced driver assistance systems for GM’s future vehicle sales. GM expects to complete the restructuring by the end of June next year. GM predicts the restructuring will save about $1 billion annually. Cruise faces many internal issues. High investment and uncertain returns raise concerns. Cruise’s biggest crisis occurred in 2023. The National Highway Traffic Safety Administration reported two injuries involving Cruise’s autonomous vehicles in October. At the same time, the California Department of Motor Vehicles revoked Cruise’s permit to operate autonomous vehicles in California. Both agencies launched investigations, suspecting Cruise hid critical video data from the accidents.
Some believe that Cruise’s exit from the Robotaxi business won’t negatively impact the L4 sector. The capital market views General Motors’ decision to halt this business positively. GM’s stock rose 2.2% in pre-market trading. Due to this situation, Cruise suspended all its autonomous driving operations. Investigations revealed that Cruise’s software struggled to identify children on the road. This issue severely impacted Cruise’s autonomous driving business. Last year, Cruise recalled 950 autonomous vehicles and updated the software on some of them. In February, GM released a safety analysis report indicating that Cruise executives hid critical data from regulators, the media, and the public. In September, the National Highway Traffic Safety Administration fined Cruise $1.5 million. In November, Cruise admitted to submitting false reports, affecting a federal investigation, and agreed to pay a $500,000 fine. GM blamed Cruise’s management for these issues and overhauled its leadership. Since the accident last year, Cruise’s management has experienced turmoil. The CEO and co-founder resigned, followed by the dismissal of several executives. In February, the head of hardware for Cruise’s autonomous driving department also left. Cruise terminated the Origin project, incurring losses exceeding $500 million. General Motors has strengthened its control over Cruise. It appointed Craig Glidden, a member of the Cruise board and GM’s vice president of legal and policy, as CEO. The company also introduced a third-party safety officer as co-president. At the same time, Cruise cut a quarter of its workforce. After taking office, Glidden mentioned that Cruise still has a long way to go for large-scale commercial operations. Investors expressed concerns about GM’s support for Cruise’s autonomous taxi business. They suggested halting investments as market interest in Cruise waned, leading to a valuation drop of over half. At its peak, Cruise’s valuation reached $30 billion. Despite this, Mary Barra remained optimistic about Cruise’s future earlier this year. She called it a “very valuable asset.” She promised investors that Cruise could achieve $50 billion in revenue by 2030. Cruise plans to restore full autonomous ride-hailing services this year and expects to start charging fares in early 2025. This year, GM clearly stated it would reduce investments in Cruise but did not abandon its Robotaxi plans. In June, GM invested another $850 million in Cruise. In July, Cruise hired an executive from Amazon as CEO. Cruise employees reported that they had not received any notice about GM canceling financing or shutting down the Robotaxi business.
Mala Bora stated at the investor meeting that autonomous taxis require significant time and funds to scale in a competitive market. Therefore, resource integration aligns with our capital strategy. Compared to major autonomous driving companies, Cruise lags behind Waymo and Baidu’s Apollo. Waymo, focusing on the U.S. market, adopts a cautious and rigorous approach to technology and operations, reducing errors. Xiaopeng Motors’ founder praised Waymo. During Cruise’s one-year operational halt, Waymo rapidly expanded. From May to October 2023, its weekly orders grew from 10,000 to 200,000, widening the gap with Cruise. Xiaopeng Motors’ founder He Xiaopeng described his experience with Waymo as “very smooth.” Waymo outperformed Tesla’s FSD in San Francisco’s autonomous driving. Currently, Waymo’s market valuation reaches $45 billion, several times that of Cruise. Some believe Cruise’s exit from the robotaxi business won’t negatively impact the L4 sector. The capital market views General Motors’ decision favorably, leading to a 2.2% pre-market rise in GM’s stock.