General Motors has lost nearly $5 billion since 2018 trying to build a robotaxi business in San Francisco, and now as the automaker's Cruise unit starts charging for rides, the losses are accelerating.
GM said on Tuesday it lost $500 million on Cruise during the
second quarter - more than $5 million a day - as it began charging for rides in
a limited area of San Francisco.
Cruise's costly effort to transform autonomous driving
technology from a long-term research project to a profit-spinning business
comes as investors are backing away from riskier bets on technology, and
reassessing how soon robot vehicles of any kind will be deployed in large scale
on public roads.
Shares of autonomous vehicle technology company Aurora
Innovation Inc, for example, are down 80 percent for the year to date. Shares
of robo-trucking company TuSimple Holdings have lost more than 70 percent of
their value. Some automakers, including Ford Motor, have scaled back
investments in automated vehicle units, or taken on partners to share the
costs.
Tesla Inc has missed deadlines to deploy software to enable
what it calls "full self driving" capability as regulators
investigate accidents involving its Autopilot assisted driving system.
Cruise's losses for the first six months of the year
deepened to $900 million from $600 million during the same period in 2021 -
when Cruise was not charging for rides. Higher compensation costs to keep staff
on board after putting aside plans for an IPO were one factor in the results,
GM executives said.
Chief Executive Mary Barra said on Tuesday she is still
bullish on Cruise, and reaffirmed a forecast that the unit could generate $50
billion a year in revenue from automated vehicle services and technology by
2030.
But turning the losses around will depend on some factors GM
cannot control, including winning approval from California regulators to
greatly expand Cruise's hours of operation, and widening the territory covered
by its automated taxis.
GM said in an investor presentation the permit from San
Francisco was "a major event" in pursuing the $50 billion target.
Cruise in February petitioned US auto safety regulators to
grant exemptions to deploy up to 2,500 self-driving vehicles without human
controls like steering wheels and brake pedals. The National Highway Traffic
Safety Administration (NHTSA) last week published the petition and opened it
for public comment for 30 days.
Scaling up
GM wants to deploy the Origin, a vehicle with subway-like
doors and no steering wheels, for both rideshare and delivery operations.
Reports of accidents involving Cruise automated cabs and
brief traffic tie-ups caused by Cruise-operated Chevy Bolt electric cars could
complicate that effort, as will opposition from San Francisco transit unions.
NHTSA said earlier this month it opened a special investigation into a recent
crash of a Cruise self-driving vehicle in California that resulted in minor
injuries.
During a call with analysts on Tuesday, Barra and Cruise's
chief executive, Kyle Vogt, portrayed the losses at Cruise as investments in
scaling up a business with enormous growth potential.
"When you've got the opportunity to go after a
trillon-dollar market, you don't casually wade into that," Vogt said.
"Aggressively pursuing the market is a competitive advantage."
Barra said Cruise and GM plan to offer a more detailed
explanation of the strategy to turn a profit at an event in San Francisco in
September.
But some analysts were skeptical.
"Can this unit (or any other AV/robotaxi effort) scale
without exacerbating the losses?" Morgan Stanley analyst Adam Jonas asked
in a note. "We are fans of autonomy with a 10- to 20-year view, but
believe investor expectations are due for a major reset. "
Cruise is not in immediate need of cash. GM said the
robotaxi unit has $3.7 billion, and a $5 billion credit facility from GM's
financial arm dedicated to buying automated Cruise Origin electric vehicles
from the automaker.
However, that cash would run out in less than two years if
Cruise keeps burning money at the current rate.
Asked whether Cruise could consume even more cash as it
tries to grow next year, Barra told analysts they will have to wait for an
answer until a Goldman Sachs conference in September.
"I would say we are going to make sure we fund Cruise
and the spending is done in such a way that we can gain share and have a
leadership position," Barra said. "We have plans that we're taking
cost out as well, as the technology matures." © Reuters
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