From growth to gone: GM’s Cruise robotaxi business is latest growth initiative to falter

DETROIT — For years, General Motors CEO and Chair Mary Barra has promised a new future for the company, away from a stodgy metal-bending automaker into a tech-driven, forward-thinking company poised for growth.

Part of the plan was for GM’s innovation division to identify trillions — yes, trillions — of dollars in new market opportunities such as electric commercial vehicles, auto insurance, military defense, autonomous vehicles and even, eventually, the potential for “flying cars,” also known as urban air mobility.

“We are creating world-class technology solutions and services that will change the way people move, along with new fleet solutions and entirely new business models,” Barra said during a virtual CES keynote in January 2022.

While GM has declined to disclose how much revenue such businesses have produced, Barra, with the ending of its Cruise robotaxi operations on Tuesday, made it clear that the automaker’s growth priorities have shifted amid a broader, industrywide retrench to preserve capital. Companies including GM are now focused on more “core” operations and adjacent business opportunities, including software, EVs and “personal autonomous vehicles.”

“You’ve got to really understand the cost of running a robotaxi fleet, which is fairly significant, and, again, not our core business,” Barra said during a Tuesday call with Wall Street analysts.

The driverless ride-hailing service was supposed to be the shining star of GM’s growth opportunities, with executives just a few years ago referring to it as an $8 trillion market opportunity that the automaker would lead. That included former executives touting $50 billion in revenue by the end of this decade, and Cruise being valued at more than $30 billion.

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

As part of the wind down, GM is expected to disclose additional expenses from employee separation packages and repurchasing equity investments from outside investors, among other costs, in the next year.

GM cited the increasingly competitive robotaxi market, capital allocation priorities, and the considerable time and resources necessary to grow the business as reasons for its decision.

The automaker’s main competitor was Alphabet-backed Waymo, which is now the last entity with any notable public operations. Others, most notably Tesla, have ambitions for robotaxi businesses, but have failed to commercialize those operations thus far.

To GM’s credit, Wall Street, which previously pushed for such growth businesses, applauded the decision to end Cruise’s robotaxi ambitions. Shares of the company were initially higher, before ending the week level with when the announcement was made.

GM, like other companies, has quickly shifted from trying to impress Wall Street with growth initiatives, including generating $280 billion in new businesses by 2030, to refocusing efforts on its core business to generate profits amid economic and recessionary concerns.

Analysts largely viewed GM’s decision as positive, saving the automaker more than $1 billion in capital annually, which they expect could be used for additional share buybacks, including a target to lower its outstanding shares to under 1 billion.

“It has been apparent for some time now that most investors have removed Cruise from their GM valuations, so today’s news comes as less of a surprise,” Wells Fargo analyst Colin Langan wrote in a Tuesday investor note.

GM will combine the majority-owned Cruise LLC with GM technical teams. Barra repeatedly said last week that the automaker is not giving up on vehicle autonomy; it will focus on personal autonomous vehicles instead of robotaxis.

But it’s hard to ignore that Cruise is GM’s latest mobility venture or growth business to fold or not live up to expectations.

GM’s plans to diversify its business through fashionable industries such as ridesharing and other “mobility” ventures — a trendy term used previously by the industry for growth initiatives — or startups have largely fallen flat since the automaker started investing in such growth areas in 2016.

The automaker earlier this year folded its BrightDrop EV commercial vans into Chevrolet amid lackluster sales. It’s also failed to announce any meaningful plans for fuel cells for tie-ups with boats, trains and airplanes, and it’s shuttered several prior “mobility” businesses.

Not all of GM’s noncore businesses that were launched in recent years have failed. GM Energy and the BrightDrop commercial EV unit continue to operate under the automaker’s” Envolve” fleet business.

GM’s financial arm, meanwhile, continues to operate an insurance business that was launched in late 2020 as part of its growth initiatives with its OnStar telematics and data unit. GM on Friday said the operations are now in 12 states, and remain “well positioned for long-term success.”

GM also continues to operate a military defense unit and fuel cell business that have both recently announced new contracts or partnerships. That includes hundreds of millions of dollars in contracts for GM Defense.

Other than saving capital, GM’s silver lining for canceling the Cruise robotaxi business was that it sees more promise in continuing to develop its Super Cruise hands-free advanced driver assistance system. That includes more semi-automated and, eventually, autonomous capabilities.

GM was the first automaker to offer such a hands-free system in 2016. However, it was an infamously slow ramp up until recently, when the automaker began rolling it out across its lineup. That started in 2021 and has continued to expand to more than 20 models, including high-volume vehicles such as its full-size pickup trucks and SUVs.

“The strategy shift demonstrates that GM continues to believe in the potential of AV technology for personal vehicles. Going forward, GM will focus on improving the capabilities of SuperCruise, which will be further enabled by ongoing technological advancements including in artificial intelligence (AI),” BofA Securities’ John Murphy said in a Wednesday investor note.

On the other side of the coin, Murphy also points out that the move could imply that other companies such as Waymo and Tesla “have better tech and/or that the market may not be appealing for later entrants.”

GM wasn’t expected to be a “later entrant” in robotaxis. In fact, it was the first to offer such rides to the public, and many believed it was one of the leaders until last year, when the company grounded its driverless operations in October 2023 following a crash involving a pedestrian in San Francisco.

The National Highway Traffic Safety Administration fined Cruise $1.5 million after the company failed to disclose details of the crash, which included a pedestrian being dragged 20 feet by a Cruise robotaxi after being struck by a separate vehicle.

A third-party probe into the incident ordered by GM and Cruise found that culture issues, ineptitude and poor leadership fueled regulatory oversights that led to the accident. The probe also investigated allegations of a cover-up by Cruise leadership but found no evidence to support those claims.

The report outlines multiple instances in which then-CEO and co-founder Kyle Vogt, who resigned from the company in November 2023, made the final calls to withhold information, specifically regarding media.

Vogt was not enthusiastic about GM’s decision to kill the robotaxi operations. He posted on X after the announcement, “In case it was unclear before, it is clear now: GM are a bunch of dummies.”

Vogt earlier this year pointed out GM’s history of having a first-mover advantage with technology, as it did with Cruise and Super Cruise, and squandering it. GM had a similar path with EV tech, like the EV1 — a battery-electric vehicle produced in the 1990s — and the Chevrolet Volt plug-in hybrid-electric vehicle in the 2010s, which were both abandoned by the company.

GM follows several other companies in abandoning robotaxis, including its closest crosstown rival Ford Motor, which shut down its Argo AI autonomous vehicle unit with Volkswagen in 2022.

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

“In many ways this announcement highlights the economic challenges of scaling a robotaxi network and the role rideshare platforms can play as AVs attempt to commercialize (a bullish indicator), but we think the more tangible impact right now is on the partnership ecosystem given Waymo is already scaling despite the costs and Tesla has ambitions to do so as well,” Bernstein analyst Daniel Roeska said in an investor note last week.