2024-02-24 08:43:47 ET
Summary
- In the last few months, GM’s Cruise has suffered massive challenges after a pedestrian accident caused the company to withdraw its robotaxis nationwide.
- There is a big barrier to entry in the self-driving industry and big three tech companies - Tesla, Google, and Amazon - will likely grab majority of the market share.
- Tesla has a big advantage in this industry as it is vertically integrated and can easily modify sensors and car designs according to new rules and customer demand.
- GM lost over $3 billion on Cruise in 2023, which shows the massive investment required to enter this industry.
- Consolidation in this industry can improve the long-term revenue growth runway and give Tesla a much-needed high-margin business.
Tesla (TSLA) has been given a big boost in recent months which has been ignored by Wall Street. Another major player in the self-driving industry has faced a barrage of safety concerns and will likely scale down its ambitions. GM's (GM) Cruise had received approval in August to start its round-the-clock robotaxi service in San Francisco. After a pedestrian accident and a few other issues, the company has decided to withdraw all 950 robotaxis nationwide. GM lost more than $3 billion on Cruise in 2023. Bloomberg has reported that Cruise is planning to resume robotaxi testing after suspension. However, after earlier layoffs and the exit of key executives, it is unlikely that Cruise will manage to regain its position in this segment. Tesla is facing cost pressures due to the rise of Chinese automakers and having a strong market share in autonomous driving should help the company improve margins and create differentiation. Mercedes and Baidu are trying to build their own autonomous driving capabilities but they face issues very similar to GM....
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Tesla Gets A Boost As GM's Cruise Crashes