General Motors (GM) has ultimately decided to abandon its Robotaxi research and development endeavors. On December 10, local time, GM announced it would cease funding Cruise's Robotaxi research and instead merge it with GM's technology team to jointly promote autonomous and assisted driving technologies. This move stems from the substantial time and resources required to scale up the Robotaxi business, alongside the intensifying competition in the autonomous taxi market. During a subsequent conference call, GM CEO Mary Barra explained that the merger would streamline operations, accelerate progress, and harness the strengths of both entities. She acknowledged GM's ongoing quest for enhanced capital efficiency, noting that the deployment and maintenance costs of the Robotaxi business are substantial, and Robotaxi is not GM's core business. "We are also confident that, from the perspective of individual autonomous vehicles, assisted technology holds greater potential."

As part of this new strategy, GM will continue to repurchase Cruise shares. Currently, GM owns approximately 90% of Cruise's shares and has reached an agreement with the largest minority shareholder to increase its stake to over 97%, with plans to acquire the remaining shares in early 2025. Following the share repurchase, GM will collaborate with Cruise leadership to restructure and realign Cruise's operations. GM anticipates completing the restructuring plan by the end of next year, resulting in annual cost savings exceeding $1 billion. This signifies that Cruise's team, assets, and operations will gradually integrate into GM.

Cruise, once a prominent player in the autonomous driving industry, may soon fade into history.

01 Robotaxi Exits, but Autonomous Driving Continues

"In the current environment, agility and capital efficiency are crucial success factors," said Paul Jacobson, GM's Executive Vice President and Chief Financial Officer, during the conference call. This could be the decisive factor behind GM's decision. Paul noted that over the past few years, GM has been evaluating its autonomous driving technology strategy and engaging with potential investors. However, the investment and operational costs of launching and operating the Robotaxi business exceeded the initially estimated $10 billion, failing to maximize benefits for GM's business and shareholders. Therefore, GM has opted to halt funding for Cruise's Robotaxi research and merge it with GM's technology team to jointly advance autonomous and assisted driving technologies.

According to Paul, GM is in discussions with other shareholders to acquire the remaining Cruise shares it does not own. An agreement has already been reached with the largest minority shareholder, increasing GM's stake in Cruise to over 97%, with plans to purchase the remaining shares in early 2025. "We plan to share more information in our fourth-quarter earnings report to be released in January next year and provide further details about Cruise's restructuring in the first half of next year," Paul said. Upon completion of the restructuring, it is expected to save over $1 billion annually, reducing current annual expenditures of approximately $2 billion by more than half. Paul believes these measures are vital for cost reduction and efficiency improvement.

He cited GM's recent announcement of restructuring its China business, anticipating these measures to restore profitability in China next year. This adjustment to the Cruise business aligns with that strategy. Paul emphasized that GM remains committed to investing in driving assistance and autonomous driving technologies but will do so pragmatically and capital-efficiently, while capturing revenue opportunities from Super Cruise and L3 technologies. Mary also admitted that when assessing the Robotaxi business, she found the deployment and maintenance costs to be substantial. Robotaxi is not GM's core business, and pursuing autonomous driving through a singular path is more efficient than dual paths.

Dave Richardson, GM's Senior Vice President and Head of Software and Services Engineering, also stated that the company's goal is to safely introduce autonomous driving technology into millions of vehicles, and the best approach to achieve this is through a unified strategy offering progressive autonomous driving capabilities. "We plan to leverage Super Cruise technology initially and advance to L3 and higher levels of autonomous driving technology." Regarding the distinction between Robotaxi and the evolution from L3 to L4 autonomous driving, Mary explained that the former is more complex, citing increased operational costs and management complexity in deploying and maintaining a Robotaxi fleet.

Moreover, vehicle assets must be managed on the company's balance sheet. In contrast, the business model of deploying individual autonomous vehicles aligns better with GM's core business. "Especially the gradual expansion from the existing Super Cruise to L4 level is a direction that fits well with individually owned vehicles. Even at the full L4 level, consumers may still prefer driving themselves in certain situations." Therefore, Mary believes that the demand for private vehicles differs significantly from the Robotaxi business model, from technology to application.

02 Stopping Robotaxi: A Surprising Yet Unsurprising Move

GM's decision is both surprising and unsurprising. Its surprise stems from its abruptness. This year, Cruise has consistently emphasized testing through "manual driving" and "supervised driving" to gradually resume Robotaxi operations.

In August, Cruise announced a partnership with Uber to deploy Robotaxi. Additionally, Cruise planned to collaborate with Uber to introduce a fleet of autonomous vehicles based on the Chevrolet Bolt on the Uber platform next year. Regarding the future of this partnership, a reporter inquired if the collaboration would be canceled or reorganized, such as selling vehicles to Uber. Mary did not directly respond, stating that GM would no longer continue investing in Cruise's ride-sharing business. These issues would be addressed by Cruise itself.

What is unsurprising is that GM has gradually scaled back its Robotaxi layout, particularly last year. In 2023, progress in the autonomous driving industry was generally unsatisfactory, with Cruise facing particular challenges, culminating in stress in November of that year. In November, Cruise announced layoffs, primarily affecting contract workers in its Robotaxi fleet responsible for cleaning and charging vehicles, though the specific number of layoffs was not disclosed. Around the same time, Cruise also announced discontinuing production of the fully autonomous vehicle model Origin, which was under development.

Cruise had planned to launch the fully autonomous vehicle Origin. The development of this model dates back to January 2020 when Cruise unveiled the Origin, an autonomous vehicle without traditional controls like pedals and steering wheels, jointly created by GM, Cruise, and Honda. According to the plan, this model should have entered mass production in 2023 but ultimately did not materialize. The emergence of these negative stories was not unexpected, as Cruise's Robotaxi operations, particularly safety concerns, have long been criticized. Since the comprehensive deregulation of Robotaxi operations in Silicon Valley last August, Cruise has attracted concern.

In August last year, 10 of Cruise's operating vehicles unexpectedly clustered and shut down, causing traffic congestion. Shortly after, two Cruise autonomous vehicles blocked an ambulance, ultimately leading to the death of an injured person. In October, another Cruise vehicle hit a pedestrian in San Francisco, dragging them several meters, causing a serious traffic accident. These incidents within two months sparked public outcry and led the California Department of Motor Vehicles (DMV) to initiate an investigation, ultimately revoking Cruise's operating license due to safety concerns. Cruise officially suspended its fleet operations and recalled its 950-vehicle Robotaxi fleet the day before layoffs.

Cruise has experienced multiple accidents. The successive occurrence of these incidents eroded public trust in Cruise. Consequently, despite Cruise's continuous efforts to resume its Robotaxi business this year, external skepticism persisted. Especially given the delay in Robotaxi profitability, GM's operational pressures, and external distrust, GM's decision is understandable.

03 GM's Ongoing Struggle to Effectively Leverage Cruise

Looking back at Cruise's development, it has been a journey of constant evolution. From GM's perspective, effectively leveraging Cruise to maximize the company's value has been a recurring and challenging process. In 2016, GM acquired Cruise, which had been established for only three years, for $581 million. During the early days of autonomous driving, GM's significant investment showcased the value of autonomous driving technology to many automakers, such as Volkswagen's acquisition of Argo AI.

GM acquires Cruise in 2016

Cruise was a worthwhile investment at that time. In 2013, Cruise was founded by Kyle Vogt and Dan Kan, who currently serve as CEO and CTO, respectively. In 2015, Cruise obtained a California autonomous driving testing license, becoming one of the few star companies in the autonomous driving field to achieve this feat. This marked the first stage of Cruise's development. After joining GM, Cruise, which had passed its nascent stage, became more closely tied to GM's fortunes.

In the second stage, Cruise entered an integration period, with former President Dan Ammann taking over as CEO and committing to continued investment in Cruise's research and development. During Ammann's tenure as Cruise's leader, he attracted significant investment from SoftBank's Masayoshi Son and Honda, boosting Cruise's valuation. By 2021, Cruise had become the most funded autonomous driving company globally, with a valuation of $30 billion. During this process, whether it was Masayoshi Son or Honda, the narrative told by GM and Cruise primarily centered on Robotaxi. Masayoshi Son's investment agreement also included clauses related to the commercialization and listing of Robotaxi.

Masayoshi Son once significantly increased Cruise's valuation. As an autonomous driving company under an automaker, Cruise also served purposes beyond investment value during this stage, such as developing the Super Cruise intelligent driving assistance system for GM. However, for GM, placing the full value of Cruise solely on Robotaxi did not align with its own considerations. At the end of 2021, Dan Ammann, who had been heavily betting on Robotaxi, was ousted due to disagreements with GM over Cruise's future direction. Mary preferred that Cruise remain under GM's control to provide technical support for the parent company's mass-produced models. This led to the return of the original CEO and founder, Kyle Vogt, while Masayoshi Son soon "cashed out" and left, with GM acquiring all of Cruise's shares held by SoftBank Vision Fund for $3.45 billion.

After the adjustment, Cruise began to consolidate its Robotaxi business while bringing greater value to GM. At CES 2022, Cruise officially launched the Ultra Cruise intelligent driving system developed for GM, supporting functions such as lane changing on highways and exit ramp assistance. GM stated that Ultra Cruise aims to achieve hands-free driving in 95% of driving scenarios. According to the plan, Ultra Cruise will be deployed starting from 2023, initially equipped on the Cadillac flagship all-electric sedan, the Celestiq.

Additionally, GM has not abandoned Cruise's investment and research in Robotaxi. In June 2023, Mary Barra stated that Cruise's self-driving vehicle division presents a "huge growth opportunity" and predicted that self-driving vehicles for private consumers would be available by 2030. She reiterated that Cruise could generate $50 billion in annual revenue by 2030. At least at this stage, GM's expectations for Cruise are to create short-term value for the parent company and hope for $50 billion in annual revenue in the long term, adopting a dual-pronged approach. However, in reality, despite being backed by GM, Cruise still struggles to excel in both areas.

The consequence of this dual-pronged approach is that neither area performs well. Ultra Cruise is taking too long to materialize, and the Robotaxi business continues to face significant setbacks. At this juncture, GM's choice to focus aligns with the interests of both GM and Cruise. For GM, given the significant investment in Cruise's Robotaxi business and the uncertain outlook, focusing on intelligent driving to empower automakers is clearly more valuable. After all, as GM has stated, agility and capital efficiency are the keys to success in the current environment. END