General Motors Is Banking On Self-Driving Taxis

Further evidence that the future of the automobile may not include individual ownership. JL

Mike Colias reports in the Wall Street Journal:

General Motors Co. said the robotaxi service it is developing could potentially eclipse the profits it earns in the core automotive business within a decade, an ambitious target based on the company’s strategy of lowering its reliance on manufacturing by providing high-margin services. GM last year earned about a profit margin of 7.5% on its $166 billion in revenue. The company believes driverless-car service will offer 20% to 30% margins and a “total addressable market of several hundreds of billions of dollars.”

General Motors Co. said the robotaxi service it is developing could potentially eclipse the profits it earns in the core automotive business within a decade, an ambitious target based on the company’s strategy of lowering its reliance on manufacturing by providing high-margin services.
GM executives, speaking at an investor conference, said the company aims to run a large-scale fleet of driverless cars in big cities by 2019. GM is among the first major driverless-car developers to attach a timeline to the commercialization of autonomous vehicles, and the 109-year-old auto maker is racing big tech companies and Silicon Valley startups to lead the reinvention of the way people own and operate cars.

GM last year earned about a profit margin of 7.5% on its $166 billion in annual revenue from global car sales. Chief Financial Officer Chuck Stevens said that the company believes a driverless-car service by 2025 will offer 20% to 30% margins and a “total addressable market of several hundreds of billions of dollars.”
Ford Motor Co. has made similarly lofty margin projections related to mobility-related services in the past, but has offered far fewer details and stayed away from specific timetables.
GM’s 2019 forecast is aggressive by most measures.
Alphabet Inc.’s self-driving car effort, called Waymo, has outlined plans for a future autonomous-taxi service but hasn’t said when it would launch. It said this month that it would begin offering demonstration rides to members of the public without a safety operator behind the wheel, which goes against standard procedure in the industry.Uber Technologies Inc. also has signaled plans for a sizable robotaxi fleet, saying it would order up to 24,000 Volvo SUVs to convert to autonomous vehicles in coming years, but it also hasn’t disclosed a timetable for commercial deployment.
Mr. Stevens said GM could offer rides for less than $1 a mile by 2025—down from around $2.50 for driver-based, ride-hailing services today. That could generate profit margins roughly quadruple the profitability of GM’s core car-making business, which generated $12.5 billion in operating profit last year.
But hurdles remain to widespread deployment of autonomous vehicles, including possible regulatory and technical challenges that will arise as autonomous cars co-mingle with human drivers, pedestrians and cyclists.
Morgan Stanley analyst Adam Jonas said in a research note this week that investors may be underestimating the legal, regulatory and “moral/ethical” impediments to putting autonomous vehicles on the road.
“Investors should consider the risk to public safety and reputation that firms pushing the edge of autonomous transport are taking,” Mr. Jonas said.
GM has been testing autonomous Chevrolet Bolt electric cars mainly in San Francisco, where the narrow streets and urban bustle help engineers to improve the system’s performance, the company says. GM has said that by 2019, the mix of radars, sensors, cameras and advanced software will be better than human drivers at navigating traffic even in a busy urban environment.
Still, demonstration rides given by GM to journalists and analysts in San Francisco this week, near the headquarters of the company’s Cruise Automation subsidiary, showed the technology is a ways off. The Chevy was tentative at times, temporarily freezing behind double-parked cars, for example, frustrating nearby drivers.
GM’s shares have rallied in recent months amid buzz from analysts about the company’s advanced technology.