General Motors (GM) pulled the plug on its Cruise robotaxi business on Tuesday night, a move marking a dramatic step back in its autonomous ambitions that began eight years ago.
GM said it would merge its Cruise robotaxi business with its in-house, consumer-facing autonomous and driving assist technology group in charge of its Supercruise software. GM said it would no longer fund Cruise’s robotaxi development efforts, which it had done so since acquiring the company in March of 2016.
Following the reorganization of Cruise, which requires GM to buy out the rest of its minority shareholders, the Cruise name itself may or may not exist. GM stock was higher in premarket trading.
“Given the considerable time and expense required to scale a robotaxi business and an increasingly competitive market, combining forces would be more efficient and therefore consistent with our capital allocation priorities,” GM CEO Mary Barra said on a conference call with analysts.
Barra added: “I would say it’s just as the technology has developed and evolved, we’ve seen an opportunity where we think we can move more quickly with focusing on personal autonomous vehicles, and our plan would be to bring the teams together.”
GM CFO Paul Jacobson added that launching and operating a robotaxi service would take a significant amount of capital, beyond the $10 billion or so GM already spent on Cruise.
It was becoming “too costly from an investment perspective,” a GM source told Yahoo Finance.
GM said the restructuring is projected to lower spending by more than $1 billion annually after the reorg is completed, which is expected in the first half of 2025.
It’s unclear what changed in GM’s management and board’s mind as to why the Cruise business model became untenable, especially considering rivals like Google’s GOOG (GOOG, GOOGL) Waymo and Tesla (TSLA) are essentially doubling down on autonomous technology and ride-hailing.
However, GM rival Ford (F) pulled the plug on its Argo AI self-driving venture two years ago, merging those engineers with its in-house team to develop its Bluecruise assisted driving tech.
Philip Koopman, Carnegie Mellon associate professor and self-driving expert, said GM’s move, and Ford’s before it, show that the companies believe investing in autonomous driver assistant software (ADAS) over time is a “better business bet” than scaling up robotaxis.
“Even though robotaxi deployments have shown impressive capabilities, Cruise found out the hard way that scaling up too fast can lead to serious problems,” Koopman told Yahoo Finance, referring to the high-profile pedestrian accident last October that led to the company shutting down service temporarily, reorganizing the business, and laying off workers. “Any company trying to scale up robotaxis is in for many years of a city-by-city expansion campaign.”