By Bloomberg
General Motors Co.’s Cruise LLC autonomous vehicle unit will tell investors this week that it sees a path for its ride-hailing business to reach $50 billion in revenue as it ramps up over the next couple of years, people familiar with the matter said. GM’s shares jumped the most in nearly three months.
Cruise Chief Executive Officer Dan Ammann is expected to say that the company plans to charge for rides as soon as next year and could expand in 2023 if Cruise gets the green light from California regulators.
The operation will take a starring role as GM makes a case to investors on Oct. 6 and 7 that its push into electric vehicles, self-driving software and connected technologies will soon start increasing the automaker’s revenue, said the people, who asked not to be named because the details haven’t been revealed.
Charging for self-driving vehicle services would be a significant step for Cruise and other companies that have spent billions trying to get their technology ready and regulatory permission to run cars without a human safety driver. Technological progress and establishing approvals for robotic driving have taken longer than anticipated, making revenue elusive for startups. Cruise had to back off plans to deploy robotaxis in 2019 because it needed more time for performance and safety checks.
The shares climbed 3.6% to $55.04 at 9:36 a.m. Monday in New York after gaining as much as 4.4%, the most intraday since July 9. GM had advanced 28% this year through Oct. 1 while the S&P 500 rose 16%.
Cruise, in which GM has a majority stake, hopes to start charging for rides next year with a modified version of the Chevrolet Bolt electric car. Ammann is expected to say that if California Public Utility Commission approvals are obtained, the company could start offering shared ride services in 2023 with its Origin autonomous shuttle. It will be built alongside the Hummer EV and electric Chevrolet Silverado pickup in GM’s Detroit-Hamtramck plant.
Ammann is expected to show how Cruise can increase revenue to $50 billion or more and provide analysts with details on cost per mile to consumers. The presentation will show how some big-name companies took years to get to that kind of revenue, the people said.
GM has said that Cruise had $55 million in revenue in the first half. The company charges for delivery services in Phoenix and gets some licensing revenue from Honda Motor Co. GM reported a $561 million first-half loss attributable to Cruise.
A GM spokesman declined to comment on the Cruise presentation.
GM’s presentation will include updates on the automaker’s electric vehicle plans, its SuperCruise driver-assistance feature and how the company will use its Ultify software platform to generate more revenue from app-based services in cars.
This week’s presentation won’t just focus on GM’s plans and technology, the emphasis will be on how the automaker plans to start increasing revenue and profit with new vehicles and business lines. After paring the size of the core auto business overseas, Chief Executive Officer Mary Barra will lay out a road to growth.
Investor Praise
Barra’s technology investments have been pushing up GM shares this year. Activist investor Engine No. 1, which has said it invests in companies that have a positive impact on workers, communities and the environment, disclosed Monday that its stake in GM is passive. The fund praised Barra’s move into electric drive technology.
“GM’s goal to go 100% electric by 2035 signals one of the largest transformations in the history of the auto industry and creates an opportunity to re-center the battery supply chain in America,” Chris James, founder of Engine No. 1, said in an emailed statement. “The company’s early lead on battery technology, along with Mary Barra and the board’s leadership, creates tremendous advantages.”
Part of GM’s investor presentation will show how services like SuperCruise can bring in recurring subscription revenue.
Cruise plans eventually to expand its offerings beyond San Francisco with four- to six-passenger Origins but needs permission from the National Highway Traffic and Safety Administration to put the shuttle on public roads. The vehicle needs a government exemption because it has no steering wheel or manual controls. The company is working toward submitting a permit application with the agency.
The timing for the planned announcement on fares makes sense for Cruise. The California Department of Motor Vehicles last week gave the company a permit to charge fees for autonomous vehicle services. That means Cruise can operate delivery services for a fee using its self-driving cars without a safety driver. All autonomous vehicle operators need approval from the Public Utility Commission to charge passengers for rides in the state.
Alphabet Inc.’s Waymo self-driving vehicle unit is collecting fares in the Phoenix area and has a permit to operate autonomous vehicles with a safety driver in parts of San Francisco and San Mateo counties, the California DMV said last week.
With its permit, Cruise may operate vehicles on public roads in San Francisco between 10 p.m. and 6 a.m. at a top speed limit of 30 miles per hour and can drive in light rain and light fog. Cruise received permission to test autonomous vehicles on public roads with a safety driver in 2015 and without a driver in October 2020.
The company raised $2 billion from GM and Microsoft Corp. in January and brought in billions of dollars in previous investment rounds from SoftBank Vision Fund, Honda Motor Co. and T. Rowe Price Group Inc.
Cruise announced a deal to offer rides in Dubai in 2023. The company also acquired startup Voyage in March in an effort to bring in tech talent.
Ammann was president of GM and went to Cruise to prepare self-driving technology for commercialization. Since then, he has been expanding the company by hiring more technology experts. Earlier this year, he named former Delta Air Lines Inc. executive Gil West as chief operating officer.
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