By Nora Eckert and David Shepardson
DETROIT (Reuters) -General Motors had to exit its Cruise robotaxi business, most Wall Street analysts agreed on Wednesday, but the automaker’s decision to do so was still a disappointing end to an operation that GM had touted as a potential $50 billion revenue generator. 2030.
The largest U.S. automaker pulled the plug on Cruise on Tuesday after evaluating the continued investments needed in a competitive space, executives said, adding that they plan to pour some of Cruise’s talent into GM to develop driver assistance systems to continue.
“We view the news as a step in the right direction for GM, as we believe investors are losing patience with the high expenses (~$10 billion) associated with robotaxi development, with very little to show for the investments,” said Garrett Nelson, analyst at CFRA. Research wrote.
GM shares rose 3% after business hours on Tuesday immediately after the announcement, but gave back those gains during Wednesday’s regular session to close 1.3% lower.
Nelson said the announcement was “a black eye on the credibility of GM management, which last year told investors that its cruise business could generate $50 billion in annual revenue by 2030.”
Speaking to reporters Wednesday evening, GM CEO Mary Barra explained why the automaker was bullish on Cruise.
“At the time, we really felt like we were going to roll our vehicles faster than we did,” Barra said, adding “there was definitely a regulatory piece where we hadn’t built the right relationships with our regulators.”
Cruise came under scrutiny after an October 2023 crash in which one of its robotaxis in San Francisco struck and seriously injured a pedestrian after she was struck by another vehicle. Last month, Cruise admitted to filing a false report to influence a federal investigation and agreed to pay a $500,000 criminal fine as part of a U.S. Department of Justice deferred prosecution agreement.
This year, GM has far surpassed its competitors. The stock is up 45% through 2024, while Ford (NYSE:) is down 14% and Stellantis (NYSE:) is down 37%.
“I hope you see that we are proactive in making decisions,” Barra said as she was also asked other questions about cost-cutting measures the automaker is taking as it battles turbulence in electric car demand, changing technology and a new presidential government.
GM recently scaled back electric vehicle plans, selling a stake in one of its joint venture battery factories and posting a $5 billion loss on its China operations as it restructures. GM is now doubling down on its core business of making gas-powered pickup trucks and other large vehicles.
Cruise’s competitors — including Alphabet’s (NASDAQ:) Waymo, Baidu (NASDAQ:) and Tesla (NASDAQ:) — are well-funded and may have better technology, analysts said. Waymo, which is expanding its autonomous taxi services, is still losing billions of dollars a year.
Barclays (LON:) noted that Alphabet, which generates more than $100 billion in revenue annually, can absorb costs associated with developing Waymo. However, GM is expected to post a profit of $14 billion to $15 billion in 2024.
“It is clear from Waymo that an AV robotaxi company is best owned by an entity with deep pockets,” Barclays said.
CHINA, TRUMP AND ELON
Separately, Barra said GM has a future in China, and it can be profitable there with its Buick and Cadilla portfolios.
She also discussed Tesla CEO Elon Musk and newly elected President Donald Trump, saying she hopes the pair will help establish a federal framework of autonomous regulation.
“I think a federal framework will allow everyone to be more efficient. I think there’s an opportunity there,” Barra said.
Barra will have to interact again with Trump, who has publicly bashed her in the past over GM’s layoffs and plant closures in the US. Barra said she hopes the president-elect will be open to discussing how some of his proposed policies, such as eliminating EV tax credits or increasing tariffs for Mexico and Canada, would impact the automaker.
“My experience is that he listens attentively,” she said.
In addition, Microsoft (NASDAQ:) said Wednesday that it expects to record an impairment charge of approximately $800 million in the second quarter of fiscal 2025 related to GM’s Cruise decision.
