GM no longer believes in the business case for robotaxis.
After investing $10bn the Cruise self-driving car company, with the promise of significant future revenues, the venture is ending. But why?
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Like all of America’s legacy car companies, GM’s had a brutal year. The core business of pick-up trucks and large SUVs remains terrifically profitable, but many of the ‘new’ market initiatives are struggling. Sales in China have been decimated, with executives at all traditional car companies desperate to find new revenue or cut costs.
After a GM staff resizing effort that retrenched 1000 staff only three weeks ago, the announcement of its disinvestment in Cruise reveals that America’s biggest legacy car company is all about trimming costs. And preparing for much lower expectations in near-term.
Robotaxi safety
The autonomous robotaxi business has lured talented software engineers and technologists to solve what appears to be a simple problem. But has proven incredibly hard in practice.
Robotaxis operate in select American cities, but can they be profitable? Experienced taxi drivers have argued that the human cost is much lower than the technology hardware and software required to make robotaxis work profitably.
Despite all the miles of incident-free operations, one accident could claim to have derailed the Cruise project. In 2023, a jaywalking pedestrian was knocked-over and dragged by a Cruise robotaxi for 6m. The damaged claim was settled, but GM admitted to falsifying information submitted to investigators, which tarnished trust in its self-driving project.
The margins are so narrow
After much optimism during the early and mid-2010s regarding self-driving technology and autonomous robotaxis, the market is questioning how solvable the edge case safety issues are.
The expectation for a public robotaxi service, especially in densified urban areas, is 100% collision avoidance. A real-world margin of error is allowed for human-driven taxi drivers, where it’s accepted that ‘accidents happen’. That collision grace isn’t afforded to robotaxis by public perception.
Even with the latest computing and sensor technology urban traffic, pedestrians, and animals are unpredictable patterns to model and respond to. Not to mention perpetrators fleeing a crime scene, using the road network in a chaotic way. These issues are proving exceedingly difficult to solve for an intelligent self-driving system.
Is GM leaving too soon?
What is the state of the robotaxi market after GM’s decision to close Cruise? Powerful tech companies with superior expertise in software development and AI technology stacks crucial to self-driving remain committed. Alphabet’s Waymo operates in Austin, Los Angeles, Phoenix, and San Fransisco, with ambitions to add six American cities soon.
For GM investors Cruise will be gauged as an expensive misdirection of funding. There were optimistic predictions that it could deliver revenues of $50bn annually by 2030. Will that now become Waymo’s money to make?
