General Motors has lost nearly $5 billion since 2018 in its attempt to build a robot taxi activity in San Francisco. The automaker said it lost $500 million in its Cruise division, in charge of developing self-driving vehicles, during the second quarter of 2022, or more than $5 million a day. The manufacturer has detailed these figures, taken up by Reuterson the occasion of the presentation of its quarterly results on July 26, 2022.
$900 million in losses
Cruise is looking to turn its very expensive R&D around the autonomous vehicle into a lucrative industry. But for now the division of GM accentuates its losses even as it begins to market its product, since they amount to 900 million dollars for the first six months of the year against 600 million dollars over the same period of the year 2021 – at a time when its robot taxi service was not yet commercialized.
This is partly due to higher wage costs to retain its workforce after scrapping IPO plans, GM executives told Reuters. Kyle Vogt, CEO of Cruise, justifies these losses by the need to be aggressive in trying to break into this promising market and take advantage. Cruise is expected to detail his strategy for becoming profitable in September.
GM boss is confident
The boss of General Motors is still confident in the potential of this division. Mary Barra confirmed the forecast that Cruise could generate $50 billion in annual revenue by 2030 from its self-driving technology and related services. “I would say we’re going to make sure that Cruise is funded and that spending is done so that we can gain market share and have a leadership position.added Mary Barra. We have plans to reduce costs as the technology matures.”
Cruise doesn’t have an immediate need for cash since the GM division has $3.7 billion in cash and a $5 billion line of credit from GM’s finance arm to buy from the automaker. its Cruise Origin vehicles. However, Cruise will run out of money in less than two years if she continues to spend so much. As for the question of whether Cruise will have to spend even more money growing it next year, Mary Barra replied that the answer would wait until September.
Profits that depend on permissions
However, as Reuters adds, the profits that may arise from its robot taxi service depend on external factors such as obtaining approval from the authorities to extend the operating hours of its autonomous vehicles as well as the area covered by his department. Note that the NHTSA, the federal agency responsible for road safety, recently opened an investigation into an accident involving a Cruise autonomous vehicle and resulting in minor injuries.
Cruise in February requested permission to deploy up to 2,500 autonomous vehicles without steering wheels or pedals. The application was made public for review last week by NHTSA. This request concerns its Origin vehicle, specially designed for autonomous mobility services, whether transporting people or delivering goods.
Analysts seem skeptical, as Reuters reports. “Can this division (or any other focused on robots or autonomous vehicles) grow without exacerbating its losses?”asks Adam Jonas, an analyst at Morgan Stanley.
Several companies in autonomous vehicles have seen their valuations drop lately. The actions d’Aurora Innovation dropped by 80% compared to last year. Likewise, shares by TuSimple have lost 70% of their value. Some manufacturers, like Fordhave reduced their investment or have approached partners to share the costs.
This promising industry is struggling to show concrete results. Investors who thought they would have a return on investment are still waiting for some service to be deployed on a large scale. Tesla has always dangled updates to its Autopilot Advanced Driver Assistance System (ADAS) to allow its electric cars to drive autonomously. But the manufacturer is slow to keep its promises, and it is not the only one.