Most Wall Street analysts believe that it is necessary for the traditional U.S. car giant General Motors (GM.US) to withdraw from its self-driving taxi business Cruise, emphasizing that General Motors' latest development is a positive catalyst for long-term shareholder value and the long-term trend of General Motors' stock price. But GM's decision to withdraw from a business that the company had been extremely optimistic about still disappointed some investors because GM had touted that its self-driving business based on driverless mode, known as Robotaxi, could generate up to $50 billion in revenue by 2030.
General Motors Co., one of the largest U.S. automakers, decided on Tuesday to formally terminate and withdraw from its Cruise business after evaluating the continued investment needed to compete in autonomous taxis, executives said, adding that they planned to integrate Cruise's talent pool into GM's research and development headquarters to continue developing GM's proprietary driver assistance systems and self-driving systems.
"We view this news as an important step in the right direction for General Motors, as we believe investors have completely lost patience with its huge expenditures (approximately $10 billion) related to self-driving taxi development, as its investment has yielded little results," wrote analyst Garrett Nelson from Wall Street investment firm CFRA Research.
After announcing the news on Tuesday, General Motors' stock price rose by more than 3% in after-hours trading that day, but gave up the gains during regular trading hours on Wednesday. As of Wednesday, U.S. stocks closed down 1.3%, reflecting that the market is still pricing in the negative impact on General Motors' short-term fundamentals after divesting its self-driving taxi business.
Nelson, an analyst at CFRA Research, said that this news "has a negative impact on the credibility of General Motors management. Just last year, GM management vowed to tell investors that by 2030, the Cruise self-driving taxi business is expected to generate $50 billion in annual revenue."
General Motors CEO Mary Barra told reporters late Wednesday night why the automaker had been so bullish on Cruise. “We really felt at the time that our vehicle was going to go faster than we thought and be in the form of a self-driving taxi,” Barra said. “We really didn’t have the right relationship with the regulators, and there was definitely a regulatory element to that,” she added.
In October 2023, a major crash occurred in San Francisco. Cruise, a self-driving taxi that was in trial operation, hit a pedestrian, causing the pedestrian to be seriously injured. After the accident, Cruise came under scrutiny across the United States. Last month, GM's Cruise unit admitted filing a false report to influence a federal investigation and agreed to pay a $500,000 criminal fine as part of a deferred prosecution agreement with the U.S. Department of Justice.
GM's share price performance has far outperformed its traditional rivals so far this year. Its shares are up 45% in 2024, while Ford's shares are down 14% and Stellantis' shares are down 37%. However, if compared with the electric vehicle leader Tesla (TSLA.US), General Motors' stock price appears to be very inferior. Catalyzed by the extremely optimistic bullish atmosphere brought about by Trump's victory, Tesla's stock price has soared by more than 70% this year, with almost all of the gains concentrated after November.
"I hope you see that we are being proactive and making the right decisions," Barra said in response to a reporter's question. In addition, the traditional U.S. automaker faces turbulent demand for electric vehicles, a changing course for autonomous driving technology, and possible EV subsidy cuts under the incoming Trump administration.
GM has recently significantly scaled back its plans for electric vehicles, selling a stake in a joint venture battery plant and recording a $5 billion loss in its China market business during the restructuring process. General Motors is now doubling down on its core business of making gasoline-powered pickup trucks and other large, gas-powered vehicles.
Wall Street analysts generally say that Cruise's competitors, including Alphabet's (GOOGL.US) Waymo and Tesla (TSLA.US), are more well-funded and have a much clearer self-driving taxi development path than General Motors, and they may have the industry's top self-driving technology. Although Waymo is expanding its self-driving taxi-hailing service, it is still losing billions of dollars every year.
Barclays Bank pointed out in a report that Google's parent company Alphabet has an annual net profit of more than US$100 billion, which can absorb the costs related to Waymo's development. Tesla's globally popular electric vehicle models are called "profit machines" and provide strong support for Tesla's innovative development. However, General Motors' profits are expected to only reach $14 billion to $15 billion in 2024. "Looking at Waymo's situation, the self-driving taxi business is best owned by entities with deep pockets."
In addition, Barra said that General Motors' future in the Chinese market is still very optimistic. With the product portfolio of Buick and Cadillac, General Motors continues to make profits in China.
She also discussed Tesla CEO Elon Musk and the next U.S. President Donald Trump, saying she hopes the two can help establish a federal autonomous regulatory framework.
"I think a regulatory framework at the federal level will make it more efficient for everyone. I think there's significant opportunity here," Barra said in an interview.
Barra will be interacting with Trump again for some time to come, and Trump has publicly criticized her in the past, largely over GM layoffs and plant closings stateside. Barra said she hopes President-elect Trump will openly discuss with automakers how some of his proposed policies, such as eliminating tax credits for electric vehicles or increasing tariffs on Mexico and Canada, would affect U.S. automakers.
American technology giant Microsoft (MSFT.US), which has invested in Cruise, said on Wednesday local time that it expected to accrue approximately US$800 million in impairment charges in the second quarter of fiscal 2025 due to General Motors' decision to shut down Cruise.