General Motors’ exit from robotaxis rolls out red carpet for Google, Tesla

If there’s one pairing that’s proving fruitful, it’s the cozy “First Partnership” between President-elect Donald J. Trump and the co-leaders of the yet-to-be-formed Department of Government Effectiveness (DOGE) and Tesla (Tesla) CEO Musk.

The relationship between the two has come to fruition, with significant implications for Musk’s interests.

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According to a report first published by Bloomberg on the evening of November 17, members of the Trump transition team told the financial publication that the incoming administration plans to make a federal framework for autonomous vehicles a priority for the upcoming transportation department.

The move would effectively streamline the process for companies — including Tesla — that are working to advance the robotaxi cause. However, prominent companies will be unable to reap the benefits if legal red tape is removed.

General Motors terminates Cruise

In a surprising turn of events, General Motors announced on the evening of December 10 that it would shut down operations of its Cruise robotaxi venture, citing the cost of continuing to develop the technology as prohibitively expensive.

“We looked at the amount of capital it would take to deploy the robotaxi business and sustain and grow it, and it’s a significant amount,” GM Chief Executive Mary Barra told analysts on a conference call on Tuesday. Funding. “The robotaxi business is not GM’s core business. “

The move to divest Cruise is another step in rethinking the “aspirational” goals set for 2021. The automaker has scaled back its production goals for electric vehicles and noted that it would abandon production of hybrid vehicles if President-elect Trump makes it easier for automakers to meet fuel economy standards.

If it wasn’t clear before, it’s clear now: GM is a bunch of fools.

— Kyle Vogt (@kvogt) December 10, 2024

Cruise founder and former CEO Kyle Vogt slammed Barra’s decision in a post on social media platform X, formerly known as Twitter, saying the world’s second-largest automaker What they did was “a bunch of fools”.

“If it wasn’t clear before, it’s clear now: General Motors is a bunch of fools,” Vogt wrote on X.

GM expects to combine its Cruise business with its own self-driving technology team to share expertise that could lead to the development of more advanced systems in its vehicles, including fully driverless systems for Chevrolet and Cadillac.

Currently, drivers can select a “hands-free driving” feature called SuperCruise on select General Motors vehicles such as the Cadillac Escalade and Chevrolet Tahoe. Like Ford’s BlueCruise, the Supercruise system is only compatible with a select number of roads, including major highways and corridors, such as major interstates.

The move caught Cruise employees off guard as they moved closer to a full recovery from an accident in late 2023 in which a pedestrian was dragged underneath a Cruise self-driving Chevrolet Bolt, according to people familiar with the matter who spoke to Bloomberg About 20 feet away.

The incident led the California Department of Motor Vehicles to revoke Cruise’s license to operate its robotaxi fleet in the state, effectively halting self-driving operations nationwide. Additionally, its founder and then-CEO Kyle Vogt resigned. The company subsequently laid off a quarter of its workforce and laid off nine key senior executives.

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in order to retain [Cruise] Just keep spending money

Cruise was already on his way back. In February of this year, reports from Bloomberg and Reuters stated that Cruise would resume operations on public roads in cities such as Dallas and Houston, with safety drivers ready to drive when necessary.

As time went on, however, funding problems became increasingly apparent. Since taking over Cruise in 2016, GM has spent $10 billion on Cruise, $850 million of which came from a capital injection in June this year.

In a letter to shareholders in July, along with its second-quarter 2024 financial results, GM Chief Executive Mary Barra said it would halt development of Cruise Origin self-driving vehicles.

Conceptually, Origin predates Tesla’s Robotaxi by offering a car without any pedals or steering wheel, however, getting such a vehicle through any form of red tape would be a bureaucratic nightmare that could hamper GM Car investment return.

“The Cruise team will also streamline their path to scale by focusing their next-generation self-driving vehicle efforts on the next-generation Chevrolet Bolt rather than the Origin,” Barra said in the company’s letter.

“This resolves the regulatory uncertainty we face due to Origin’s unique design. Additionally, unit costs will be significantly reduced, which will help Cruise optimize its resources.

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Analysts see GM’s green push as opportunity for robo-taxi rivals

GM said in a company statement that it would stop “funding Cruise’s robotaxi development efforts given the significant time and resources required to scale the business and the increasingly competitive robotaxi market.” It added that the move would result in “more than $1 billion in annual spending reductions.”

Bank of America analyst John Murphy emphasized in an analyst report released on December 11 that GM’s exit and annual savings of $1 billion will allow “shareholders to obtain greater returns on capital.”

However, he also said that GM’s exit may prove that its competitors such as Tesla and Google’s Waymo (Google) Might be better in the whole robot taxi game.

“We believe GM’s move may also mean that other companies (Tesla and Waymo) have better technology and/or the market may not be attractive to later entrants,” Murphy said. “Waymo already has a strong presence in the U.S. Robot taxi services are available in several cities, and Tesla plans to launch the service in 2025.”

However, analysts at Bank of America believe that GM’s decision to absorb the Cruise team will actively promote the development of its SuperCruise technology, because the existing team has already mastered most of the heavy responsibility, knowledge and experience in building advanced autonomous vehicles.

“We expect [SuperCruise tech] Meaningful investment is still required, but GM appears to believe this strategy makes more sense than using externally developed AV technology from the likes of Mobileye (MBLY),” the analyst said.

“Interestingly, GM believes people still enjoy driving (we do!) and its goal is to make personal self-driving technology safer and less stressful. In addition, it also wants to make self-driving technology easier to use.”

General Motors is listed on the New York Stock Exchange under the stock code GM.

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