General Motors abandoned its ambitious and costly Cruise robotaxi development on Tuesday and several analysts reacted favorably on Wednesday. Still, GM stock undercut a key level. Tesla hit a new high amid optimism about self-driving cars.
The Detroit automaker said it would no longer fund a driverless ride-hailing service. It cited robotaxi competition, capital allocation priorities, and the time and resources to scale the business. Cruise has faced several setbacks, while Alphabet-owned Waymo already offers more than 150,000 paid trips each week. Tesla aims to launch a robotaxi service next year.
Instead, GM said it will absorb the Cruise robotaxi unit into its broader technology team. And it will focus on developing advanced driver assistance systems for use in personal vehicles.
General Motors, which spends about $2 billion on Cruise annually, said it expects to slash those costs by more than half. It has lavished more than $10 billion on robotaxi development already.
U.S. car sales remain below pre-pandemic levels, though coming in better than expected in 2024.
Cruise Exit May Boost GM Earnings, Buybacks
"While it's unclear whether the 2025 guidance has changed, we believe the decision should be well-received by investors," Deutsche Bank analysts wrote in a note to clients on Wednesday. They expect the company to "have more dry powder for its already aggressive share buyback ambitions," which include a new $6 billion authorization after an accelerated $10 billion repurchase program ended in June.
For 2025, GM has guided roughly flat earnings before interest and taxes.
On Wednesday, Morgan Stanley analyst Adam Jonas said GM's Cruise about-face "continues a streak of proactive moves to address struggling units." He added that it could reduce earnings volatility.
Reset For Tesla Vs. Waymo Robotaxi Race
Moreover, Jonas expects investors to appreciate lower Cruise costs when "better capitalized" rivals Tesla and Waymo are pushing the "robotaxi market into the next era." Those rivals stand to gain from GM's exit.
Since September, GM has made several other moves to improve execution and profitability. The moves include scaling back its EV battery plans and restructuring its money-losing China operations.
Citing those collective actions including the Cruise exit, Jonas set a new $54 price target on GM stock, almost in line with the current share price. He has an equal weight rating on shares.
Analyst Tom Narayan of RBC Capital Markets said General Motors continues to focus capital allocation on its core competency. He said the Cruise decision is company-specific and not related to "robotaxis in general being a bad business."
GM Stock, Ford Stock, Robotaxi Stocks
Shares of General Motors fell 1.4% on the stock market today, slicing below the 50-day moving average.
Starting in late November, President-elect Donald Trump's new tariff threat on Mexico and Canada has weighed on GM stock and Ford Motor. GM stock has now given up much of the gains from its earnings cup-with-handle breakout in early September.
Ford stock slid on Wednesday. Shares of Tesla and Google popped. Uber fell for a third day amid mounting robotaxi fears.
Tesla stock jumped nearly 6% on Wednesday to an all-time high.
TSLA stock has rocketed more than 60% since Donald Trump's U.S. election win. Investors seem to be hoping that the Trump administration will ease the regulatory path for autonomous or self-driving vehicles. Analysts warn that many hurdles remain for the planned Tesla Robotaxi service.
In rosier times before the pandemic, automakers envisaged a $3 trillion robotaxi market in decades to come. General Motors was even said to be mulling a Cruise IPO.
Please follow Aparna Narayanan on X @IBD_Aparna for more coverage.
