GM's Cruise robotaxi business, once a promising growth initiative, has now faltered.

• Mary Barra, the CEO of GM, announced that the company's growth priorities have changed as it ended its Cruise robotaxi operations, amid a broader industry-wide effort to conserve capital.
• By the end of this decade, GM's growth opportunities were expected to be driven by the success of its driverless ride-hailing service, resulting in $50 billion in revenue.
• Cruise's robotaxi business is being shut down by GM, and its operations and an undetermined number of its nearly 2,300 employees will be folded into the automaker.

For years, Mary Barra, CEO and Chair, has pledged to transform the company from a traditional metal-manufacturing automaker to a cutting-edge, forward-thinking enterprise primed for expansion.

The innovation division of GM aimed to discover billions of new market opportunities, including electric commercial vehicles, auto insurance, military defense, self-driving cars, and potentially flying cars, known as urban air mobility.

In January 2022, during a virtual CES keynote, Barra announced that the company is developing innovative technology solutions and services that will revolutionize transportation, including novel fleet options and unique business models.

GM has not disclosed the revenue generated by its businesses, but Barra has stated that the automaker's growth priorities have shifted, with the end of its Cruise robotaxi operations on Tuesday. Now, companies like GM are focusing on core operations and adjacent business opportunities, such as software, EVs, and personal autonomous vehicles.

Barra stated during a Tuesday call with Wall Street analysts that it is crucial to comprehend the substantial cost of managing a robotaxi fleet, which is not our primary business.

The driverless ride-hailing service was once viewed as the key to GM's growth opportunities, with executives predicting it to be an $8 trillion market opportunity that the automaker would dominate. They projected $50 billion in revenue by the end of this decade and valued Cruise at more than $30 billion.

GM is ending its robotaxi business and folding Cruise's operations and an undetermined number of its nearly 2,300 employees into the automaker after spending more than $10 billion on Cruise since acquiring it in 2016.

Saving capital

In the next year, GM is anticipated to reveal additional expenses related to employee separation packages and equity investments from external investors, among other expenses, as part of the wind down process.

The robotaxi market is becoming more competitive, and GM has decided not to allocate capital to grow its business due to the considerable time and resources required.

Waymo, backed by Alphabet, is the last notable public entity with significant operations, while others, including Uber, have yet to commercialize their robotaxi businesses.

Wall Street initially praised GM's decision to abandon its robotaxi ambitions, but shares of the company ended the week level with when the announcement was made.

Instead of focusing on growth initiatives, such as generating $280 billion in new businesses by 2030, GM has shifted its efforts towards its core business to generate profits amid economic and recessionary concerns.

The decision made by GM was viewed positively by analysts, resulting in an annual savings of over $1 billion in capital. This extra capital could potentially be utilized for additional share buybacks, with a goal to reduce the company's outstanding shares to under 1 billion.

Colin Langan, a Wells Fargo analyst, wrote in a Tuesday investor note that it has been clear for some time that most investors have removed Cruise from their GM valuations, so today's news is not a surprise.

Cruising no more

GM will merge Cruise LLC with its technical teams, while Barra emphasized that the automaker remains committed to vehicle autonomy, focusing on personal autonomous vehicles rather than robotaxis.

It's difficult to overlook that Cruise, GM's newest mobility venture or growth business, may not meet expectations.

Since 2016, GM's attempts to expand its business through fashionable industries such as ridesharing and other "mobility" ventures have largely failed.

Despite earlier this year folding its BrightDrop EV commercial vans into Chevrolet due to lackluster sales, the automaker has failed to announce any significant plans for fuel cells to partner with boats, trains, and airplanes, and has shut down several prior "mobility" businesses.

Despite some of GM's noncore businesses launched in recent years failing, GM Energy and the BrightDrop commercial EV unit are still operational under the automaker's "Envolve" fleet business.

Meanwhile, GM's financial arm continues to operate an insurance business launched in late 2020 as part of its growth initiatives with its OnStar telematics and data unit. The operations are now in 12 states and remain "well positioned for long-term success."

GM Defense has secured hundreds of millions of dollars in contracts, while also continuing to operate its military defense unit and fuel cell business, which have both recently announced new partnerships.

Super Cruise

Although canceling the Cruise robotaxi business was a setback for GM, the company sees potential in further developing its Super Cruise hands-free advanced driver assistance system. This includes enhancing its semi-automated and eventually autonomous capabilities.

In 2016, GM was the first automaker to offer a hands-free system, but it took time to roll it out until recently. Now, the automaker has expanded the system to more than 20 models, including high-volume vehicles such as its full-size pickup trucks and SUVs.

According to John Murphy of BofA Securities, the strategy shift by GM indicates their continued belief in the potential of AV technology for personal vehicles. In the future, GM will prioritize enhancing SuperCruise's capabilities, which will be further facilitated by ongoing technological advancements, including AI.

On the flip side, Murphy argues that the move could suggest that other companies like Waymo possess superior technology and/or that the market may not be attractive for future entrants.

First-mover advantage lost

Despite not being anticipated to enter the market later, GM was the first to provide rides to the public through Robotax. Many believed it to be a leader until October 2023, when the company halted its driverless operations after a pedestrian crash in San Francisco.

The National Highway Traffic Safety Administration penalized Cruise $1.5 million for not revealing information about a crash involving a pedestrian being dragged 20 feet by a Cruise robotaxi after being struck by a separate vehicle.

The investigation ordered by GM and Cruise discovered that cultural problems, incompetence, and poor leadership were the root causes of regulatory oversights that resulted in the accident. Additionally, the probe examined accusations of a cover-up by Cruise leadership but uncovered no proof to support those claims.

The report highlights several instances where Kyle Vogt, the then-CEO and co-founder of the company, made the ultimate decisions to conceal information, particularly concerning the media.

Vogt expressed his lack of enthusiasm towards GM's decision to end the robotaxi operations. After the announcement, he posted on X, stating, "It is now clear that GM are a group of foolish individuals."

In the past, GM has had a history of utilizing its first-mover advantage in technology, such as with Cruise and Super Cruise, only to squander it. The company has also followed a similar path with EV tech, like the EV1 and the Chevrolet Volt, both of which were eventually abandoned by the company.

Several companies, including GM, have followed suit and abandoned robotaxis, including its closest crosstown rival, which shut down its Argo AI autonomous vehicle unit with Volkswagen in 2022.

Waymo remains the robotaxi leader in the U.S. and is expanding its operations for its publicly available fleet in Los Angeles, Phoenix, and San Francisco, and will soon debut in Miami, Atlanta, and Austin, Texas.

Daniel Roeska, a Bernstein analyst, stated in an investor note last week that while this announcement underscores the economic challenges of scaling a robotaxi network and the role rideshare platforms can play as AVs commercialise (a positive sign), the more immediate impact is on the partnership ecosystem, as Waymo is already scaling despite the costs and Tesla has similar ambitions.