Cruise expects to make the leap from a limited commercial robottaxi and delivery service starting in 2022 to a business of “tens of thousands” of its purpose-built Genesis AV on the road over the next few years.
According to CEO Dan Amman, through a combination of regulatory approval, capital from investors and a $5 billion line of credit from GM financial and technological breakthroughs, including a 90% reduction in computation costs over the next four years, eye-popping estimates will be reached. . years.
“In the next 12 to 24 months, you’ll be able to push a button and ride in some of the major cities in the United States with a very low ETA,” Amman said. “If you look at the next three to four years, we will be positioned in many cities, many markets in the US”
These are seriously bold claims, but it appears the company is laying some groundwork to back them up. Just last week, Cruise received its driverless deployment permit, which allows the company to start charging for autonomous services from the California Department of Motor Vehicles. It needs just one more permit from the California Public Utilities Commission to operate a commercial robotic taxi service in San Francisco. Cruz says the reality is only a few months away.
A $5 billion line of credit from GM Financial, which Cruise secured this summer, will be used to pay for production of the original without giving investors more equity. Separately, GM has invested a total of $6 billion in Cruise, which includes initial acquisition costs, operating costs for 2015 to 2016, and further investments, according to the company.
The question is whether all of this is enough to help increase Cruise to thousands of vehicles over the next half decade at a cost per mile less than human driver service.
Cruise laid out its plan during GM’s investor event on Wednesday to go from a limited commercial AV service to thousands of vehicles in less time. Let’s dive into the claims.
From Product-Market Fit to Rapid Scaleup
Amman breaks down Cruise’s path to market in three stages. The first was the R&D phase, which took the company late last year and into the beginning of driverless testing later this year. Phase two, which will begin next year, will be initial commercialization through a retrofitted Chevy Bolt EV-based fleet of Cruise vehicles, which are currently on roads in San Francisco and Phoenix, Arizona. During this time, Cruise seeks to demonstrate product-market fit with the minimum viable product.
Phase three, the “rapid-scaling phase”, begins in 2023, when production of the Cruise Genesis will begin at GM’s Zero Assembly Plant, a factory dedicated to producing electric vehicles.
“In that first year, we’ll be building what can be measured in the thousands, and in 2024 we’ll be building something that can be measured in the tens of thousands,” Amman said.
The CEO said that having GM for OEM-level production of vehicles would be a huge advantage for Cruise. The Origin will be built from the same Altium platform that GM has built to support a wider range of products across its brands, which should enable faster production.
The company also invested in the technology and software tools needed to increase the rate of improvement of Origin’s autonomous system, which is ultimately a platform that allows AI and robotics to grow together in a closed-loop system.
Part of that investment went into Cruise’s simulation software, through which the original would be validated seamlessly. It has already started virtual autonomous testing, even though it hasn’t hit public roads yet.
“The goal in the medium to long term for everyone working on this is to achieve low-cost generalized autonomy,” Amman said. “We want fully autonomous driving, we want it to work everywhere and we want it to be really affordable.”
Throwing a clear shade at Tesla, Ammann said some companies are trying to solve the autonomy problem by making their way from a low-cost Level 2 autonomous system, which translates into an advanced driver assistance system, Cruise’s approach. The hardest to solve is problem first: getting the human out of the loop and doing so in one of the most complex driving environments – Downtown San Francisco.
Driving cost reduction with technological advancement
It may sound counterintuitive, but Cruise says it has thrown a lot of money into Genesis’s computing power to get it to a place where it can commercialize and scale for a profit.
“Even though the technology has a high cost, we are able to amortize that cost on a high-use fleet, high-mileage vehicle, and do so at a compelling cost point,” Ammann said. “The cost advantage of Genesis, relative to a retrofitted vehicle, including the Bolt AV, is about 60% to 70% lower cost per mile.”
That said, Cruise plans to reduce the cost of that compute power by 90% over the next four generations. One way to do this is to start manufacturing custom silicone, which Cruz says will help both scale use and cut costs. Ammann didn’t elaborate on what it would use the silicon for — a bid that will be touched on further in the company’s “under the hood” recruitment program in November — but at the very least, the company could signal a move. has been vertical integration.
Considering the damage the semiconductor shortage has caused to GM’s production lines and the fact that GM has announced a supplier agreement with Wolfspeed to provide silicon carbide semiconductors for GM’s EV program, it might say that. Safe that Cruz has put chips on the menu. others in the industry, such as Tesla, The supply and production of our own silicon chips are also secured.
cheaper than humans by nature
Amman said Origin has been built with the aim of providing excellent customer service at affordable prices for both ride-ola and delivery. The vehicle itself is as tall as the Chevy Cruze, but the inside will be optimized to provide ample room for a pleasant ride-hail experience. It will also be able to change from passenger mode to delivery mode with a delivery unit that can slide in and out multiple times within a 24-hour operating cycle to make the most of each vehicle.
Cruise thinks that in just a few years, its Genesis will be able to outpace Uber and Lyft with cheaper prices and higher revenue. In some cities, Uber and Lyft prices up nearly 80% from pre-pandemic prices, but companies are still “not materially profitable today,” Ammann said. This is because of their business model, he claimed. In San Francisco today, a rider is paying about $5 per mile, of which probably three-quarters goes to the driver and the rest goes to funding expenses and other costs that result in companies just breaking up.
“There are two fundamental differences in our model, the first is that we don’t split the revenue – we get the entire revenue,” Amman said. “Since we have a low-cost structure, we are able to charge less and make a profit. It’s that simple.”
Can Cruise scale as fast as he hopes?
Cruise didn’t share its revenue projections, but it compared itself to other companies that have brought breakthrough products to much larger markets and have “say $50 billion in revenue within a decade.” Amman said that Cruise traditionally expects to earn about $100,000 in revenue per vehicle per year.
The company plans to do everything with its services, from vehicles and autonomous software to ride-hailing apps and customer service. It hopes that by bringing more services in-house, it will be able to scale faster and save money in the long run through continuously improving software that will allow it to eliminate sensors along the way.
Amman has even gone so far as to say that it will be able to slide the cost curve of its autonomous system down enough that it will be at a price point where it can be deployed in retail vehicles.
“You can go to your local dealer and buy a car that has Cruze L4 system capability, and with the partnership with GM, this clearly gives us a huge opportunity to turn this into a reality and really do that.” Gives in a big way,” he said.
That reality is likely to wear off for many years to come, but Cruise doesn’t shy away from dreaming big.
“When you look at eight to 10 years from now, I think we will look back and we will see that we have really started to turn the curve on road safety in the United States and around the world,” he said. “CHumans will be returned… Our cities will be cleaner and less crowded. And people will have access to transport who do not have access to transport today.”