Cruise CEO quits after alleged cover-up
Analysts believe value outlook for the AV sector is still promising despite crisis for market leader
Kyle Vogt, co-founder and CEO of GM’s autonomous vehicle (AV) subsidiary Cruise, has resigned from his position in the fallout from a collision in San Francisco in October in which a pedestrian was seriously injured.
The GM AV operation was recently banned from driverless rides on California’s roads after the state’s Department of Motor Vehicles accused the company of covering up details about its autonomous EV dragging a pedestrian under its wheels.
After the ruling, the company decided to suspend all of its AV operations across the US and says that it has “initiated workstreams in four key areas to identify potential improvements to how we operate”.
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“Cruise is still just getting started, and I believe it has a great future ahead. The folks at Cruise are brilliant, driven, and resilient. They are executing on a solid, multi-year roadmap and an exciting product vision,” Vogt says.
“Cruise’s growth this year has been very rapid. There has been frequent speculation that they were pushing too hard, too fast,” says robotaxi expert and consultant Brad Templeton.
All not lost
But Templeton remains cautiously optimistic. “If they can find good technical and strategic leadership, their current statistics suggest they could deliver,” he says
And GM is, at least in principle, bullish on the value outlook for AV technology, if Cruise can fix its transparency issues “When you look at our growth businesses, especially Cruise and software, we are at an inflection point right now. And [we] see tremendous upside opportunity and growth,” GM CFO Paul Jacobson said at the OEM’s third quarter results call last month, only hours before news broke of Cruise’s San Francisco collision.
The market for true AVs, as opposed to level 2+ driver assistance, is only populated by two major players, Cruise and Google subsidiary Waymo. With a long time-to-market in the sector, as AV firms must await regulatory approval and comprehensively testing of technology, Templeton think there is still a way back for Cruise.
“Waymo is doing a better job, but they should not be without competition. Zoox and Motional hope to be that competition as well, along with several Chinese companies which will have difficulty deploying in the US. There are also a number of startups, and even Tesla has aspirations in spite of being so far behind,” Templeton says.
Michael McGrath, AV author and chairman of electric equipment manufacturing firm National Instruments, also believes that Cruise’s revenue potential is still material, even if its earnings targets will be delayed.
“GM's forecast of $1bn of revenue from Cruise in 2025 will most likely be delayed until 2026, [and] the launch of the Cruise Origin will be postponed until 2024,” McGrath says. “However, its goal of $50bn in revenue from Cruise is still possible.
“Cruise has faced recent setbacks, including suspending operations, layoffs, investigations, and suspending manufacturing of its Origin vehicle. Despite these setbacks, autonomous ridehailing services are still expected to be a very large market, with Cruise potentially leading,” McGrath notes.