General Motors made waves in the auto industry earlier this week when it announced that it would be shutting down its Cruise robotaxi project, citing intense competition and heavy costs associated with self-driving.
In the eight years since the automaker acquired its self-driving subsidiary, Cruise proved to be an expensive investment: General Motors lost $3.5 billion on Cruise in 2023 alone, and it lost $435 million in Q3 2024, though that was an improvement year-over-year from its $791 million burn in Q3 2023. In total, General Motors had invested more than $10 billion in the self-driving startup since 2016 before deciding to pull the plug, a hefty price tag for a company worth around $57 billion.
Since 2013, Cruise had been in a competitive arms race with other self-driving players like Tesla and Google’s Waymo, but it suffered a major setback in October 2023 that may have been the nail in its coffin. A San Francisco pedestrian was struck by another vehicle in an adjacent lane, knocking her in front of a Cruise AV, and the Cruise car, failing to detect the woman, dragged her 20 feet before stopping. At the time, Cruise had about 400 vehicles operating across San Francisco, Austin, Houston, and Phoenix, but in the aftermath of the incident, California suspended Cruise’s robotaxi permit, setting the company back as its competitors continued to make strides.
Cruise was supposed to be General Motors’ crown jewel that would give it an edge in the automotive industry. Early on, it was poised to succeed. In 2020, Cruise received approval to test fully driverless cars, known as Level 4 autonomous driving. Additionally, in 2023, GM CEO Mary Barra said that Cruise could generate $50 billion in annual revenue by 2030. The margins on self-driving car subscriptions would have presumably been much higher than manufacturing, given the capex requirements of the latter, and winning self-driving could have propelled General Motors ahead of its competition.
But instead, Cruise faltered. Meanwhile, competitors like Waymo continued to execute, with the Google subsidiary noting earlier this month that it was now providing more than 150K robotaxi trips per week across Phoenix, Los Angeles, San Francisco, and Austin. It also reported that it was about to expand its operations to Miami.
Investors have taken notice of Waymo’s progress, and Alphabet’s autonomous driving division was valued at $45 billion in a November fundraise, putting it in the same ballpark as General Motors’ entire business. With Waymo’s market share in Los Angeles now equal to Lyft and gaining on Uber, Google is beginning to look like a not-so-darkhorse candidate to win the autonomous race.
Important Disclosures
This material has been distributed solely for informational and educational purposes only and is not a solicitation or an offer to buy any security or to participate in any trading strategy. All material presented is compiled from sources believed to be reliable, but accuracy, adequacy, or completeness cannot be guaranteed, and Contrary LLC (Contrary LLC, together with its affiliates, “Contrary”) makes no representation as to its accuracy, adequacy, or completeness.
The information herein is based on Contrary beliefs, as well as certain assumptions regarding future events based on information available to Contrary on a formal and informal basis as of the date of this publication. The material may include projections or other forward-looking statements regarding future events, targets or expectations. Past performance of a company is no guarantee of future results. There is no guarantee that any opinions, forecasts, projections, risk assumptions, or commentary discussed herein will be realized. Actual experience may not reflect all of these opinions, forecasts, projections, risk assumptions, or commentary.
Contrary shall have no responsibility for: (i) determining that any opinions, forecasts, projections, risk assumptions, or commentary discussed herein is suitable for any particular reader; (ii) monitoring whether any opinions, forecasts, projections, risk assumptions, or commentary discussed herein continues to be suitable for any reader; or (iii) tailoring any opinions, forecasts, projections, risk assumptions, or commentary discussed herein to any particular reader’s objectives, guidelines, or restrictions. Receipt of this material does not, by itself, imply that Contrary has an advisory agreement, oral or otherwise, with any reader.
Contrary is registered with the Securities and Exchange Commission as an investment adviser under the Investment Advisers Act of 1940. The registration of Contrary in no way implies a certain level of skill or expertise or that the SEC has endorsed Contrary. Investment decisions for Contrary clients are made by Contrary. Please note that, although Contrary manages assets on behalf of Contrary clients, Contrary clients may take any position (whether positive or negative) with respect to the company described in this material. The information provided in this material does not represent any investment strategy that Contrary manages on behalf of, or recommends to, its clients.
Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, company or product made reference to directly or indirectly in this material, will be profitable, equal any corresponding indicated performance level(s), or be suitable for your portfolio. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Investors should seek financial advice regarding the appropriateness of investing in any security of the company discussed in this presentation.
Please see www.contrary.com/legal for additional important information.
