Opinion: GM’s Cruise Exit Highlights AVs’ Level of Difficulty

(TNS) — Supremacy in the race to self-drive an electrified auto industry is harder than the masters of Detroit and Silicon Valley figured, proving that what players do is far more important than what they say. General Motors Co. showed as much this week with after pumping $10 billion into it and seeing nothing but more of the same for years to come.

Talk about sunk cost: the capitulation effectively cedes an allegedly multibillion-dollar opportunity to Google parent Alphabet’s Waymo AV unit, Elon Musk’s Tesla Inc. and what one industry analyst calls China EV Inc. That must rankle atop GM because it’s not how the reinvention of the mother of all legacy automakers was supposed to evolve in this allegedly post-industrial age.



Under CEO Mary Barra, GM’s been pushing to reinvent its workforce, restore its product cred and recast its core identity into a next-gen digital automaker deserving a higher share price delivering more value to investors. Mission accomplished — sort of. GM’s robotaxi retreat and redeployment of precious capital feels faintly like a replay of an old, familiar melody in the Detroit automaker's history: in the mid-1990s, reminds Tu Le in his latest Sino Auto Insights newsletter, GM launched a connected vehicle service it still operates called OnStar and fielded for just a few years an EV for the masses dubbed EV1.

"The ideas and the ambitions were spot on," he writes, "but either the bean counters and/or management didn't have the stomachs to see these technologies through. Cruise is likely gonna be another one of those missed opportunities for GM." Cruise's exit from its robotaxi program also is a reminder that all sides of this competitive equation — big tech, startups, legacy autos, the investor class — are finding the technological journey, the financial demands and the regulatory scrutiny far more difficult and far more expensive than they figured when they bet on the inevitability of an electrified auto industry driving itself by .

.. well, soon.

“The announcement is also a black eye for the credibility of GM management that, as recently as last year, told investors the Cruise business could generate $50 billion in annual revenue by 2030,” wrote Garrett Nelson, senior equity analyst at CFRA Research. “We think investors were losing patience with its hefty spending (on) robotaxi development with very little to show for its investment.” Things change, such as who controls the U.

S. regulatory regime. Expect presidential policy-making to soon favor an EV skeptic like President-elect Donald Trump, enamored as he is with a last-century manufacturing caricature powered by gasoline.

Say goodbye to $7,500 tax subsidies on qualifying EVs and hello to tariffs on, say, Mexican-built Ford Mustang Mach-Es — Trump-driven moves that threaten to sap the profitability Detroit needs to fund its EV programs. Add persistent consumer skepticism fueled by still-spotty charging infrastructure and steep EV prices crashing headlong into the technological promise touted by Silicon Valley, Detroit and their legacy rivals. Worse, the capital demands for developing technology outside the wheelhouse of more traditional automakers like GM are totaling too much, especially when there's real money to be made on ICE vehicles in Trump World.

And the fact that Detroit is trying to compete with the most technologically adept, most well-capitalized (read "richest") companies on the planet — for whose market cap $10 billion in sunk capital is almost pocket change — should crystalize the scope of the challenge GM and its legacy rivals face now and into the future. The simple fact is this: the business ecosystems colliding in the electrified AV space, where each regards the other with derision and misunderstanding, misread the complexity of their undertaking. Tech sharpies figured building vehicles to comport with safety regs and enabling them to drive themselves would be comparatively easy, and industry motorheads bet they could fund their technological odyssey into a brave new (and unfamiliar) world with profits earned on full-sized pickups and SUVs.

Both sides miscalculated, misguided in part by fervor from Wall Street, the environmental lobby and a post-pandemic Biden administration. The president and his people believed a green automotive future would be nigh if only the government could offer enough tax subsidies and manufacturing grants to a) realize the vision and b) stymie China's government-backed EV behemoth. Consumer demand? Meh, they'll come around.

Not enough of them have, yet, unsurprisingly preferring what they know. As much as Detroit's automakers want to divorce themselves from their "legacy" past they can't persuasively deny their history, geographic footprint and automotive heritage. And distancing themselves from their core competency in a bid to change the narrative about what they are is not without peril.

GM's not alone in its conundrum. Ford Motor Co. and Volkswagen AG bolted their autonomous vehicle gigs a few years back now.

Apple Inc., the do-no-wrong heaviest of tech heavyweights, bagged its autonomous car that terrified legacy auto executives simply because it would be an Apple product. Musk endured production “hell” with the launch of his Tesla 3, demonstrating that building a car the right way is harder and less profitable than it looks.

The shift to electrification and self-driving vehicles is not a destination whose arrival can be guaranteed — as GM, its industry rivals and Silicon Valley players are learning, sometimes in expensive and humbling ways. It's a journey, and it's just beginning. ©.