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The challenges of developing an autonomous fleet have put another corporate victim into the barriers and out of the race.
GM’s (GM) Cruise robotaxi business is out.
An admission that billions of dollars and years of toiling aren’t enough to sustain what is still a commercial fantasy. But where an old-school car company has faltered, a sprawling tech giant (Alphabet) and an EV company with ascendent political backing (Tesla) are going all in.
In racing terms, the stage race is ongoing and we’ve finished the first stage. We’re starting to see some winners like Waymo and some losers like Cruise.
Cruise isn’t even the first major player to bow out of the race to develop a robotaxi business. Ford (F) ended its Argo AI self-driving venture two years ago. And Apple (AAPL), wavering between building an autonomous fleet or merely a new EV, scrapped its decade-long car project altogether earlier this year.
At first glance, Cruise’s demise looks like a boon to its robotaxi rival, Waymo, Google’s (GOOG, GOOGL) sister company. And great news for Elon Musk’s Tesla (TSLA), which is planning to spin out its own robotaxi by 2027. But there’s a doubled-edged dynamic at play.
On the one hand, there’s now one fewer competitor around. On the other hand, the end of Cruise is also more evidence that even established players can’t hack it.
GM’s market cap is very different from Alphabet’s and Tesla’s. Maybe their trillion-dollar valuations give them the resources and time to tinker that GM decided it didn’t have. But it’s not an encouraging signal.
It may seem that Cruise’s downfall was tied up in the particular tragedy of the high-profile pedestrian accident last year, leading the company to temporarily halt its service, from which it never really recovered. While that’s strictly true, the particulars of the incident can be generalized and applied to any autonomous contender: There are massive investment costs and huge risks to pushing the technological frontier.
If it’s still unclear whether this is the type of market where many players can thrive — perhaps catering to the different segments of a big country with lots of different cars — the end of Cruise, as well as Uber’s reliance on fickle partnerships, hints at something closer to one or two players that win and take all.
