On December 10, General Motors (GM) made a significant announcement that sent ripples through the automotive and technology sectorsAfter nearly a decade of investment that exceeded $10 billion into autonomous taxi services via their subsidiary Cruise, GM has decided to cease funding for the Cruise projectThe reasons cited were the excessive time and costs to scale the business, alongside intensifying competition in the marketGM's pivot towards developing autonomous technologies for personal vehicles has left many investors scratching their heads.

This sudden withdrawal from the RoboTaxi market raises an important question: why would a company, after investing so heavily, choose to abandon such a potentially lucrative area? And how should we interpret the current landscape of RoboTaxi competition?

The ownership structure and investment relationships surrounding Cruise are complex

GM has poured resources into Cruise since its acquisition in 2016, with investments surpassing $10 billionThis decision to abandon RoboTaxi services is akin to a painful yet necessary severance.

Tech giant Microsoft had also been drawn into the Cruise circle, investing in 2021. Following GM's announcement, Microsoft projected an impairment expense of approximately $800 million related to its Cruise investment in its second fiscal quarter ending December 2024. This figure wasn't included in the earnings guidance provided on October 30, meaning Microsoft foresees a $0.09 hit to its diluted earnings per share as a result of accounting adjustments.

In 2021, Cruise secured $2 billion in funding, with Microsoft’s investment among others from Honda, SoftBank, and WalmartHowever, GM's stake was dominant, accounting for more than 90% of Cruise's equity, which elevated Cruise's valuation to a staggering $30 billion at the time

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The collaboration between Microsoft and GM included permissions for Cruise's on-demand ride service to leverage Microsoft's cloud and edge computing solutions, strengthening their partnership.

However, as GM repositions its focus, Honda, which owned a minor stake in Cruise, stated it would also pull its planned funding from a joint venture aimed at deploying RoboTaxi services in JapanThis retreat illustrates the broader implications of GM's decision which ripple across its partners and affiliates.

GM is not alone in this retreat from the autonomous driving dreamIn recent years, numerous companies have entered and exited the RoboTaxi fieldFord, another long-standing American automaker, formerly invested in Argo AI—a company that, despite support from tech leaders like Google and Uber, succumbed to the pressures of a daunting market and folded in 2022. At the time of Argo AI's demise, Ford's CFO pointed out that full autonomy would require substantial investments of time and resources before yielding returns, further citing regulatory and legal challenges that renders the venture even less appealing.

The shift following the abandonment of Argo AI saw Ford and Volkswagen redirect their resources toward advanced driver-assistance systems (ADAS). In light of GM's recent shift, this trend is becoming quite evident.

Furthermore, Apple recently announced the cessation of its Titan autonomous vehicle project, reallocating resources toward generative AI, showcasing a broader industry trend of scaling back on fully autonomous driving projects.

Waymo's specific financial details remain undisclosed; however, Google did reveal that new investments—like Waymo—recorded $388 million in revenue for Q3, reflecting a year-over-year growth of 30.64%. This segment, however, still suffers substantial operational losses of $1.116 billion.

Meanwhile, Tesla unveiled its Cybercab at a mid-October event, presenting an entirely autonomous taxi devoid of steering wheels and conventional controls at a potential base cost of $30,000. Set to rival Waymo, the Cybercab is expected to hit the market by 2026.

Amazon, placing itself beneath Elon Musk in the billionaire hierarchy, exhibits ambitions within the RoboTaxi domain through its investment in Zoox, an autonomous startup that commenced testing their robot taxis in San Francisco last month, aiming to compete directly with Tesla's Cybercab.

The emergence of self-driving taxis is gradually usurping market shares from traditional ride-hailing platforms like Uber and Lyft

In 2020, Uber abandoned its own autonomous driving attempts, opting instead to partner with Waymo for a joint venture expected to launch self-driving cars in early 2025 in Austin and Atlanta.

Lyft also exited the RoboTaxi space in 2021 but has announced partnerships in November to explore related opportunitiesThis includes collaborations with Mobileye, a subsidiary of Intel specializing in autonomous driving solutions, alongside a venture with May Mobility, focusing on deploying autonomous vehicles through Lyft’s platform starting in 2025. Lastly, they've aligned with Nexar, a traffic AI application company, for data-sharing initiatives aimed at enhancing self-driving technologies.

Both ride-hailing giants recognize the heavy resource demands and costs associated with developing autonomous vehiclesConsequently, they opt for joint ventures rather than going solo, clearly delineating the market pressures they face from rising RoboTaxi competition.

Meanwhile, China's autonomous taxi sector is thriving

Baidu's RoboTaxi service, dubbed Luobo Kuaipao, facilitated nearly 988,000 autonomous ride requests in Q3 2024—a 20% increase from the previous yearBy Q2 of 2024, the service had almost achieved complete operation of fully autonomous sedans in Wuhan, representing a remarkable statistic where autonomous rides commanded over 70% of nationwide ordersBy October, this percentage soared to 80%.

Baidu's founder and CEO, Robin Li, revealed that RoboTaxi operations achieved complete autonomy in Chongqing as of OctoberTheir vehicle, the RT6, costs less than $30,000 and has commenced public road operations in multiple cities, presenting a formidable challenge to Tesla’s Cybercab.

Moreover, on December 11, GAC Aion convened with Pony.ai to sign a strategic cooperation agreement regarding RoboTaxi initiatives, seeking to foster competitive, commercially viable autonomous vehicles geared for mass production