General Motors Co. has given up on its Cruise robotaxis, saying that it would take too much time and money to grow the business and that the market for self-driving cars is “increasingly competitive.”
The car company said that once the restructuring is done, which should be in the first half of 2025, it plans to cut its costs by more than $1 billion a year.
When the market was open for longer on Tuesday, GM shares GM -2.29% went up more than 3%, and shares of Tesla Inc. TSLA +2.70%, a company that is betting its future on robotaxis, went up 1%. After hours, shares of Uber Technologies Inc. UBER -4.63%, which merged with Cruise earlier this year, fell almost 1%.
I talked to Sam Fiorani, vice president of global car forecasting at AutoForecast Solutions LLC. He said, “GM doesn’t think there’s a market for robotaxis in the near term.”
Fiorani said that GM will keep putting its “really good” AV technology in its own cars and will someday make self-driving cars, but not a robotaxi any time soon.
He said that getting to a point where cars can drive themselves without any help from a person “is a very big leap” that wasn’t paying off for GM right now.
Cruise got a lot of bad press. Last year, one of its self-driving cars pulled a pedestrian who had been hit by a car driven by a person in San Francisco, which led to the suspension of Cruise’s license to offer robotaxi rides in California.
Investors were getting impatient with GM’s spending on Cruise’s robotaxi development “with little to show” for it, said CFRA analyst Garrett Nelson in an interview. Tuesday’s move was “a step in the right direction for GM.”
He said, “We didn’t think this effort would turn the corner any time soon.”
Nelson also said that GM’s move to cut back on non-core spending “could reflect larger concerns about auto demand and its profitability looking out over the next year or so.”
GM CEO Mary Barra said in a statement that the company is “dedicated to giving our customers the best driving experiences in a disciplined and capital-efficient manner.”
Barra said that Cruise was “an early innovator in autonomy.” She also said that combining Cruise teams with other companies that are also working on autonomy and advanced driver-assistance systems would “help advance our vision for the future of transportation.”
The company said that GM owns more than 97% of Cruise because of deals with other parties that make it worth that much more. After buying the rest of the shares, GM “will work with the Cruise leadership team to restructure and refocus Cruise’s operations,” as long as the Cruise board agrees to the deal.
GM stock has gone up about 47% this year, while the S&P 500 market SPX +0.69% has only gone up about 27%.
