General Motors Pauses Production of Cruise Vehicles

by Warren Seah

General Motors’ autonomous taxi subsidiary, Cruise, has encountered some setbacks in recent times. Following a safety incident, its license to operate in California was suspended, and as a result, GM has made the decision to temporarily halt the production of Cruise vehicles. However, this pause does not reflect a major shift in strategy, as GM remains fully committed to the success of Cruise in the long term.

According to a statement from GM, they are currently completing production on a limited number of pre-commercial vehicles and will subsequently pause production. This move comes as no surprise, considering Cruise’s recent license suspension after an incident involving a traditional car and a pedestrian near a Cruise taxi. The pedestrian was struck by the car but was thankfully stopped as the Cruise taxi came to a halt.

It is important to note that GM’s decision to pause production does not imply a lack of belief in self-driving technology. On the contrary, GM is confident that autonomous vehicles will revolutionize transportation worldwide. When asked about the production pause, GM stated, “We believe autonomous vehicles will transform the way people move around the world, and the Origin is an important part of the AV journey.”

Cruise’s fully autonomous robotaxi is aptly named “Origin.” While the temporary production halt may raise concerns, GM’s commitment to self-driving technology remains steadfast. This pause serves as a brief intermission as they work towards achieving their vision for the future of transportation.

The Future of GM: Software and Services Driving Sales

General Motors (GM) sets its sights on a bold future as it anticipates software and services to become a major revenue contributor. By 2030, GM estimates that these sectors could generate a staggering $80 billion in sales. Of this total, the lion’s share is expected to come from self-driving technologies, highlighting the growing importance of autonomous vehicles in GM’s long-term strategy.

To put this projection into perspective, GM is projected to achieve approximately $165 billion in sales by 2023. What’s even more remarkable is that the revenue from software and services is anticipated to surpass GM’s average profit margin from selling cars. This points to the immense potential and profitability that lies within these digital offerings.

Despite the immense potential in software and services, Cruise, GM’s autonomous vehicle subsidiary, has yet to turn a profit. In the third quarter, Cruise recorded $25 million in sales but reported an operating loss of $807 million. To achieve profitability, a significant increase in the number of taxis on the road across multiple cities is necessary. By expanding their presence, Cruise can scale its operations and generate sustainable profits.

The vehicles for Cruise are manufactured at Factory Zero, located in the Michigan cities of Detroit and Hamtramck. This facility is also responsible for producing other electric vehicles such as the GMC Hummer EV and the electric Chevy Silverado pickup truck. As GM seeks to lead the market in electric and autonomous vehicles, Factory Zero plays a crucial role in supporting their innovative vision.

Despite encountering setbacks such as the recent Cruise license suspension, GM’s stock performance remains relatively stable. Investors remain confident in the company’s growth trajectory, believing that the accident had little impact on long-term prospects. However, it is worth noting that GM’s stake in Cruise is undervalued compared to other industry players. While GM trades at 4.4 times estimated 2024 earnings, Ford Motor, which does not possess a robotaxi service, trades at 5.9 times.

In premarket trading on Tuesday, GM stock experienced a slight dip of 0.7%. Simultaneously, S&P 500 and Dow Jones Industrial Average futures were both down approximately 0.3%.

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