One of the most groundbreaking innovations in the automotive industry currently is autonomous driving. While various car manufacturers have made strides in self-driving technology, electric vehicle (EV) trailblazer Tesla garners significant attention. The company was set to exhibit progress on its autonomous driving fleet, renowned as the robotaxi, on Aug. 8. However, Tesla CEO Elon Musk abruptly postponed the event to Oct. 10.
Amidst this unfolding saga, ridesharing giant Uber Technologies has thrown some shade at the viability of robotaxi. Recently, Uber disclosed a collaboration with General Motors, a fierce contender to Tesla in both EVs and autonomous driving. Let’s dissect Uber’s new alliance and its potential impact on Tesla investors.
The Uber and General Motors Collaboration
Uber has forged numerous partnerships with car manufacturers aiming to disrupt the autonomous vehicle market. Notably, Uber collaborates closely with Waymo, a subsidiary of Alphabet. In late August, Uber unveiled a partnership with Cruise, a subsidiary of General Motors.
According to the press release, Uber plans to introduce rides featuring Cruise’s autonomous vehicles next year. This move could present Uber app users with the option of choosing a driverless Cruise vehicle over a traditional Uber ride with a human driver.
While this development may seem promising on the surface, one has to question if this is the optimal course for Uber.
Image source: Getty Images.
The Unseen Realities of Cruise
While Cruise boasts funding from big players like SoftBank, Microsoft, Honda, and even Walmart, the company has faced ongoing challenges. Cruise had to halt operations in San Francisco late last year due to safety issues. This incident prompted a voluntary nationwide operations pause. Subsequently, Cruise initiated a vehicle recall program, leading to the resignation of CEO and founder Kyle Vogt.
Unfortunately, Cruise’s troubles persisted in 2024. During General Motors’ second-quarter earnings call, it was revealed that Cruise is delaying production of its next-gen vehicle, Origin. Consequently, GM recorded a $605 million impairment charge associated with Cruise Origin.
Moreover, Cruise incurred operating losses of $458 million in the second quarter and a total of $900 million in the first half of the year. Cruise has proven to be a financial drain for GM, raising doubts about the significance of its pact with Uber.
Implications for Tesla
While Uber can reap benefits from autonomous vehicles by reducing driver commissions, Tesla presents a broader range of applications in large-scale self-driving fleets. For instance, in potential competition with delivery services such as DoorDash and Instacart, Tesla could establish partnerships with various delivery platforms, challenging Uber more directly.
Additionally, autonomous vehicle fleets could serve car rental services. Although both Uber and Tesla stand to gain from alliances with car rental companies, Tesla holds an advantage due to its robust production capabilities. Cruise is yet to demonstrate efficiency in mass-producing vehicles, hindering its market penetration efforts.
As a Tesla investor, the entrance of Uber into the self-driving car arena doesn’t evoke worry. The market size is ample to accommodate multiple players. Given Cruise’s persistent challenges over the years, its partnership with Uber seems more like a survival line than a genuine opportunity. Uber’s collaboration with Cruise is intriguing, but not a major threat to Tesla in my view.
Investment Consideration
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