AI

GM hits the brakes on Cruise robotaxis after spending billions

General Motors’ move on Tuesday to exit the Cruise robotaxi business after spending $10 billion in recent years provides an object lesson in how complex it is to commercialize new technologies.

For the drop-out to happen to one of the largest corporations serves as a reminder and a warning to small startups that don’t have ready cash or investors with deep pockets. It also shows how much today’s tech innovators must be willing to gamble, even if they are tech savvy, because commercializing new technology is not just about knowing physics and circuits, but understanding markets and regulators. Something like 90% of startups fail and we rarely hear why, partly because everybody loves a winner and the winners win the publicity.

All the factors of tech and marketing and regulatory and public acceptance of robotaxis weighed on GM.  “The decision from GM raises an interesting question of whether AV economics can work at all,” Bernstein analysts wrote after the decision was announced on Tuesday.  “They can, but it requires capable tech and a willingness to spend billions if an AV provider is keen to scale a proprietary network, as we saw in the early days of rideshare.”

The biggest blow to Cruise came in 2023 when one of its self-driving vehicles, a Chevrolet Bolt in San Francisco, dragged a pedestrian 20 feet after the victim was hit by another vehicle. Investigations followed and the company was forced to halt operations. Cruise tried to make a comeback this year using supervised autonomous driving in Phoenix but then came the Tuesday decision, which reportedly left employees surprised.

Competitors to Cruise will pounce. They include Alphabet’s Waymo, Tesla and Amazon’s Zoox.  Baidu Apollo and WeRide are also testing autonomous vehicles in the US. Investigations into the Cruise accident and fines kept Cruise from making progress while Waymo raised more funds and Tesla shares grew on when Tesla CEO Elon Musk unveiled Cybercab to be produced in 2026. Cruise’s valuation crashed.  Tesla could have an edge, with Musk’s policy work with President-elect Trump and recent reports Trump will ease regulations on self-driving vehicles once in office. 

The lesson to innovators and investors might well be to focus first, last and always on safety because a bad result, or crash in this case with a lot of bad publicity, can sink a decent idea.

GM’s recovery, if you can call it that, will be to combine Cruise’s technical team with its own to work on advanced system to assist drivers. The new unit will focus on personal vehicles like Super Cruise and develop systems that can drive by themselves in certain situations. GM has plans to buy another 7% of Cruise and then buy the remaining shares so it owns the entire company. Cruise LLC is currently 90% owned by GM.  The decision is expected to lower GM spending by $1 billion a year.

In a statement, GM said it would leave the robotaxi space “given the considerable time and resources that would be needed to scale the business, along with an increasingly competitive robotaxi market.” 

Without the 2023 accident, it’s fair to ask whether GM would have dropped out of robotaxis. But the tech has also proven difficult for others, including Ford, which two years ago dropped its Argo AI autonomous vehicle project in Pittsburgh co-owned with Volkswagen.

Bernstein asked the right question: Can AV economics work?  Yes, with capable tech and a willingness to spend billions…and a campaign to post “safety first” signs everywhere  on production lines and websites. A warning to innovators of all sizes.