GM Cruise and Lidar Robotaxi’s Business Model Is Go Through $100 Billion in Losses to Try to Reach Profitable Scale

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GM’s Cruise robotaxi service has expanded from 70 to 300 robotaxis operating in San Francisco and will soon expand to Phoenix, Los Angeles, Austin and Dubai. GM Cruise had increasing losses of $561 million in the first quarter of 2023. This will be over $2 billion in losses in 2023. GM Cruise will having increasing billions in net losses until they reach profitable scale. IF GM Cruise grows revenue by 1000 to 2000 times (100,000% to 200,000%) by 2030 and achieves operational and financial efficiency then it would become very profitable. Robotaxi’s must continue to undercut Uber, taxi and public transit pricing to get the market share. This will take perhaps $100 billion or much more cumulative losses to finally reach profitability.

Waymo financials is in Google Other Bets and were a lot of the Other Bet losses of $4.8 billion in 2020 and $5.2 billion in 2021 and $6B in 2022. Morgan Stanley analysts valued Waymo at $175 billion in 2018, $105 billion in Sept 2019 and the Waymo valuation estimate in 2023 is $30 billion. Waymo has raised a total of $5.5B in funding over 3 rounds after being getting some non-Google investment. In July 2020 Waymo and Stellantis announced an expansion of their partnership, including the development of level 4 autonomous Ram ProMaster delivery vehicles. Google Other Bets are Access, Calico, CapitalG, GV, Nest, Verily, Waymo and X. Waymo has about 2500-3000 employees which is more than the 1500-2000 Cruise employees. Waymo probably has about $2-3 billion per year in losses for the past 5-6 years.

McKinsey says OEMs and start-ups have invested $106 billion in autonomous-driving capabilities from 2010-2021. Much of this funding has gone toward enhancing advanced driver-assistance systems (ADASs), which handle braking, object detection, and other critical vehicle functions.

GM Cruise will have an annual net loss of $2 to 3 billion in 2023 and will likely surpass the ten billion per year losses that Uber had in 2021 before Uber crossed over into profitability.

Here we will go over the current Cruise business and business plan and compare it to Uber and look at GM Cruise plans to about 2030.

Revenue from 300 robotaxis is about $5 to 20 million per year. Cruise is driving about 1 to 2 million miles per quarter. Reports have indicated that Cruise robotaxis in San Francisco currently have less than 10% utilization. This means only 10% of miles are paid. Eventually, this could rise to near 50% utilization.

Cruise charges a base fee of $5 and a $0.90 per mile and $0.40 per-minute rate. Fares also include a 1.5% city tax and are calculated using the estimated time and distance of the fastest, most optimal route. This is about $12 for a 2.6 mile trip and $18 for a 5.2 mile trip. The San Francisco Transportation Network Company (SFCTA) reports the average robotaxi trip in San Francisco is 2.6 miles. The trips should get longer on average as the area of operation expands.

Cruise is currently charging customers about 20% lower prices than Uber for the same trips.

Ridehail vehicles should be able to eventually average around 26 to 29 trips per day in San Francisco and perhaps other cities. The number of trips for Cruise is still much lower. They could reach between 16 trips per day with the expanded service area and expanded fleet for the second half of 2023. 25 paid trips at 2.6 miles per trip per day would be 100 paid miles per day. This would be $300 per day per robotaxi. This would be about $100k per vehicle per year in revenue.

GM Cruise plans to reach $1 billion per year in revenue in 2025. This would be 100 times more than the potential revenue runrate in Q4 2023.

This would need about a global GM Cruise fleet of 10,000 robotaxis. This is 30 times more robotaxis and the number of paid miles would need to increase by 100 times. This will mean about 80,000 Lidar units and 80,000 millimeter radar. This would be all of the available Lidar units available for robotaxi in 2022. However, the major Lidar companies are expanding and will probably be able support Cruise, Apollo, Waymo and the other major global robotaxi companies reaching a combined 50,000 to 100,000 robotaxi in 2025-2026.

If Cruise gets 500 self driving cars operating for the fourth quarter in San Francisco making 16 trips per day then they will make
500 robotaxi
* 16 trips per day
* 90 days in quarter
* $12 per trip.
$8.6 million per quarter.
This would be 8000 trips per day versus about 2500 trips per day in first half of the year (2023). This is about ten thousand times fewer trips than Uber.

If Cruise gets to 10000 self driving cars operating for in 2025-2027 in about ten cities making 25 trips per day then they will make
10000 robotaxi
* 20 trips per day
* 90 days in quarter
* $14 per trip.
$252 million per quarter.

This would be 200000 trips per day versus about 2500 trips per day in first half of the year (2023). This would still be over 100 times fewer trips than Uber did in Q2 2023.

GM Cruise costs would increase. 9700 more robotaxis would cost about $1 billion. In 2023, Cruise has about 2000 employees developing and supporting the software, hardware and operating the vehicles. They do not have permission to operate without a safety driver in many locations and they need people to move robotaxis that get stuck or have problems.

Uber has a staff of 32000 in 2022-23. Six million Uber drivers are not Uber staff.

Uber Versus GM Cruise Quarterly Miles and Revenue

In Q2 2023, Uber booked $33 billion in a quarter and the drivers and couriers make about $15 billion and the company makes $9 billion and partners make $9 billion. This about 10 billion trips per year, 2.3 billion trips in the quarter or about 25 million trips per day.

Uber doubled its booking dollars from 2019 to 2023. Uber more than tripled from 2016 to 2019.For FY 2014, Uber booked $2.932 billion (almost $3 billion). In Q1 2015, Uber booked $1.5 billion.

In theory, GM Cruise booking revenue at half of Uber would mean the same profits. GM Cruise would not pay drivers and theoretically can keep operational support staff at a fraction of the cost of drivers. GM Cruise at $1.5 billion per year in revenue would be equal to Uber in 2014.

GM Cruise might crossover to profitability in the range of $25 to 70 billion per year in revenue. GM Cruise plans to reach $50 billion per year in revenue in 2030. This would require 500,000 robotaxis and 4 million Lidar units. Global lidar production would need to increase about one hundred times. The robotaxi fleet would cost $25-50 billion for the vehicles. The annual operating costs would increase from the $2.5 billion per year in 2023.

In order for Cruise and the other robotaxi companies to take market share at scale from Uber and Lyft then they will need to offer both a better service and a discount on costs. They will need to offer more than the current 20% discount versus Uber pricing. Cruise will need to operate vehicles for more miles, more paid miles to reduce costs per mile and have the support staff become far lower than the displaced cost per unneeded human driver. Supporting strong growth will likely mean undercutting Uber pricing by 30-50%.

Until Cruise and other robotaxi reach significant scale, they will make less than Uber on in-vehicle advertising.

GM Cruise, Waymo and Apollo will lose more than the $2 billion per year in losses as they scale to the $25-70 billion per year in revenue needed to achieve profitability. Like Uber, they will lose money for years until they reach profitability. The hope and plan is to reach this around 2030.

Uber Gross Bookings grew 16% year-over-year (“YoY”) to $33.6 billion, or 18% on a constant currency basis. Uber Mobility Gross Bookings of $16.7 billion (+25% YoY or +28% YoY constant currency) and Uber Eats and other delivery Gross Bookings of $15.6 billion (+12% YoY or +14% YoY constant currency).

Uber Trips during the quarter grew 22% YoY to 2.3 billion, or approximately 25 million trips per day on average.

Uber company Revenue grew 14% YoY to $9.2 billion, or 17% on a constant currency basis. Uber Drivers and couriers earned an aggregate $15.1 billion (including tips) during the second quarter of 2023, with earnings up 17% YoY, or 19% on a constant currency basis.

Uber Income from operations was $326 million, up $1.0 billion YoY and $588 million quarter-over-quarter (“QoQ”).

Net income attributable to Uber Technologies, Inc. was $394 million, which includes a $386 million benefit (pre-tax) primarily due to net unrealized gains related to the revaluation of Uber’s equity investments.

In March, 2023, Cruise was forced to recall 300 Cruise AV units following a crash with a city bus in San Francisco.

GM is targeting $1 billion in revenues by 2025 as it plans to ramp up expansion plans in 2023. However, this will not mean profitability in 2025 when Cruise reaches $1 billion per year in revenue. Cruise will at least to have to reach $25 billion per year in revenue to reach profitability. This is especially true if Cruise follows the plan of rapid expansion and spending tens of billions each year on expansion. Cruise had about 300 autonomous vehicles at the end of 2022 and in mid-2023 they have about 400 now with about 3000 operating a paid commercial service in San Francisco.

Software and programmer developer costs will increase form $2 billion per year to $5 billion per year or more. The robotaxi software will have to work flawlessly in over two hundred cities.

The various scaling challenges:
The software will have to work better in hundreds of cities.
Any operational issues and costs like maintaining hyperaccurate and real time updated maps will have to be maintained.
The larger robotaxi fleet will have to be maintained.
The supply of Lidar and other sensors will have to be secured and the supply does not yet exist for the planned scale.
Market share will have to be taken from existing providers and will have to taken from other robotaxi competitors.
There will only be two main robotaxi companies for each region. One for North America and one for China and perhaps one for Europe and another for the rest of the world.

The robotaxi system will have to work for all of the desired cities and become profitable and dominant market share is needed. All supply chain and regulatory hurdles must be overcome.

Tesla FSD and advanced driver assist has a different business model that is already profitable. Tesla’s FSD business model and future robotaxi plans can further reduce market and profits for pure robotaxi companies.

5 thoughts on “GM Cruise and Lidar Robotaxi’s Business Model Is Go Through $100 Billion in Losses to Try to Reach Profitable Scale”

  1. Brian’s obsession with lidar is weird.

    In 2017 Cruise acquired a LiDAR company called Strobe. Vogt wrote that “Strobe’s new chip-scale LIDAR technology will significantly enhance the capabilities of our self-driving cars. But perhaps more importantly, by collapsing the entire sensor down to a single chip, we’ll reduce the cost of each LIDAR on our self-driving cars by 99%.” – therobotreport

    Waymo builds their own lidars.

    It’s like when everybody decided EVs would not scale because they needed too much cobalt. Instead, they just stopped using cobalt. Tech moves fast.

  2. Cruise should recover the $100 billion of losses and then become very profitable when, by about 2030, they have a million robotaxis fleet.

  3. Analysis estimates adding 9,700 vehicles will cost $1 billion, which is around $100k per vehicle. However, the cost could change significantly as production scales up. Are there is no reason why both crews are way more won’t partner up with ride sharing companies. They currently have operational robo taxis whereas Tesla does not.

  4. FSD only makes money because they defraud the customer ,and fool the government.It is NOT FSD. Cruise is .
    You are correct Cruise will lose money, but GM makes money, and GM will lose less each year, while exponentially expanding.
    longer hours a day, longer routes, more cities. Cruise will introduce Origen, allowing more revenue per mile.
    Here in Las Vegas,I saw a robotaxi on the crowded freeway.
    These will reduce people buying EV’s in California,Tesla’s primary market.

    • Hi Paul – Do you recall which company logo was on the robo-taxi you saw? I was aware of Zoosk (very robo bus looking thing) and Motional (Lidar equipped Hundai) were going to be operating in Vegas, but I didn’t know either was approved for or capable of freeway operation. Thanks for posting!

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