General Motors Co. (GM), whose GM Cruise autonomous driving division was recently valued at $19 billion, is uniquely positioned to prosper in a possible future world where self-driving cars summoned through ride-hailing services replaces private-car ownership. But for that world to become a future reality, the cost of robotaxis will need to drop below that of private ownership, a difficult challenge that presents a massive opportunity, argues UBS analyst Colin Langan. GM may be one automaker best able to confront that challenge, according to a recent story by Barron’s.
GM's Robotaxi Cost Challenge
- GM’s Cruise valued at $19 billion (37% of GM’s total market cap);
- Cost of private car ownership: 72 cents per mile;
- Cost of robotaxis: from $1.58 to $6.01 per mile;
- Robotaxis less costly in big cities.
Source: Ashley Nunes, Colin Langan, Barron’s
What It Means for Investors
As the largest automaker in the U.S., GM has had decades of experience mass-producing cars at low costs and is one of the industry leader’s in the production of electric vehicles. Both of those factors will be key to its success in offering a robotaxi service at a price point attractive enough for drivers to opt out of owning and driving their own cars.
The current cost of private car ownership is about 72 cents per mile. Ashley Nunes, professor and researcher at the Massachusetts Institute of Technology, puts the current cost of robotaxis at much higher levels, between anywhere from $1.58 to $6.01 per mile.
Langan noted that it is in rural markets where getting the costs of robotaxis below that of private ownership will be especially challenging due to the lower utilization rates and where drivers place less value on freeing up time spent on driving. That all changes when it comes to big cities. Langan’s analysis puts the per-mile cost of robotaxis in New York City at less than half the cost of car ownership.
While not as big as NYC, San Francisco is big enough and it is there that GM has built one of the largest electric-vehicle charging stations in the U.S. to complement its ride-hailing platform. Having long had its sights on launching a robotaxi service in 2019, the automaker is currently working on overcoming regulatory hurdles. It will also have to overcome steep competition from rivals like Alphabet Inc. (GOOGL), Tesla Inc. (TSLA), and Aptiv PLC (APTV).