Cruise suspension a gift for Waymo in robotaxi wars
California’s suspension of Cruise’s autonomous vehicle testing gives rival Waymo an opportunity to gain an edge in the selfdriving car wars, analysts told the Chronicle. It also comes as Cruise’s parent company, General Motors, hemorrhages cash amid widespread auto worker strikes, while also investing heavily in self-driving and electric vehicles.
“This was a gut punch for Cruise while Waymo is in a strong position to gain market and mind share,” said Dan Ives, senior equity analyst at Wedbush Securities. “It’s an important time ahead for these nextgen disruptive tech players to establish leadership in this arms race.”
Cruise’s costly ambitions and strike-related disruptions were acknowledged by General Motors executives on an earnings call Tuesday that took place just as the suspension was announced. Chief Financial Officer Paul Jacobson said the company was “delivering strong results in the face of several challenges,” as it reported $44 billion in revenue, topping analyst forecasts.
General Motors lost an enormous $1.9 billion on Cruise expenses between January and September, including $732 million in losses in the third quarter, General Motors said on Tuesday. The 2023 losses to date are almost twice as much as the $1 billion that General Motors spent to buy Cruise back in 2016, and the third quarter loss was up 47% from a year earlier.
“We do believe that Cruise has tremendous opportunity to grow and expand. Safety will be our gating factor as we do that, and continuing to work with the cities that we’re deploying in. So, we’ll have more to say about that at a later date. But rest assured we do have funding plans that will support Cruise’s expansion,” said CEO Mary Barra.
Cruise expenses in 2023 have dwarfed General Motors’ $800 million in operating losses from the United Auto Workers strike to date, though analysts said losses could climb to billions of dollars if the strikes don’t stop. General Motors estimates it’s now losing $400 million each week after 5,000 workers walked off on Tuesday in Arlington, Texas, at the company’s biggest plant.
Cruise’s suspension is indefinite, with no clear timeline for a resolution. While Cruise can still use human drivers to test its cars, it cannot leave them unpiloted throughout the state.
“I don’t want to speculate as to how long it can take (to resolve the suspension) but with the government I imagine nothing moves fast. Given Cruise can’t operate in the state it’s certainly beneficial to any autonomous vehicle rivals such as Waymo,” said David Whiston, an equity strategist covering U.S. autos at Morningstar. “Waymo just has to ensure the same thing doesn’t happen to them.”
Cruise was accused of withholding video footage of a San Francisco incident earlier this month where a pedestrian was hit by a human-driven car and then run over by a Cruise autonomous car, which state regulators say then began moving. Cruise denies withholding footage.
Cruise is looking to start self-driving taxi service in Tokyo by 2026 in partnership with local giant Honda, which has a minority stake in the company. It continues to operate in Austin, Texas; Houston; Phoenix; and Miami, but the suspension disrupted Cruise’s plans to ramp up testing in Los Angeles, one of the biggest markets in the country.
“We believe that uncertainty about the cost of a future labor deal, ongoing losses tied to both electric vehicles and autonomous vehicles, and potential price-mix normalization going forward, are weighing on the stock” for General Motors, said Goldman Sachs analysts in a research note Tuesday. “Even with General Motors now needing a safety driver to test in S.F., our preliminary view on the DMV (suspension) news is that its autonomous vehicle development can continue. We maintain our Buy rating on the stock.”
Cruise isn’t just competing with Waymo, which is a division of Google parent Alphabet. Amazon’s Zoox and Apple are also working on self-driving cars and have been testing them in California and elsewhere.
For General Motors, the auto worker strike has more immediate financial peril than Cruise’s California challenges. But both represent major hurdles for the biggest U.S. automaker.
“The key factor as to who will blink first in the strike is if management will be willing to take on massive debt to try and outlast the union,” Whiston wrote in a research note Tuesday.