Photo: Cruise
Cruise recently started commercial service in San Francisco and is gearing up to enter more cities. But the rate at which the company burns through cash is worrying investors, despite the company’s executives being bullish on Cruise’s prospects.
GM had its Q2 earnings call on Tuesday, and its Cruise subsidiary got a special place in the presentation. The robotaxi company admitted an abrupt increase in costs in the second quarter, with expenses hitting $550 million compared to $332 million during the same quarter last year. Operating losses in Q2 topped $605 million, up from $363 million last year. According to Cruise CEO Kyle Vogt, the bad-looking numbers were mainly caused by a headcount increase from revving up Cruise’s robotaxi service.
Vogt described Cruise’s growth strategy as “exponential,” which, considering current financial results, would only mean more cash burn. At a moment when GM itself reported a 40% drop in profits, it would be interesting to see for how long Cruise’s strategy would be sustainable. The company executives avoided providing guidance for Cruise’s 2023 expenditures, which only means that the losses will accelerate.
“I would say we are going to make sure we fund Cruise and the spending is done in such a way that we can gain share and have a leadership position as well, and we have plans that we’re taking the cost out as the technology matures,” said GM CEO Mary Barra during Tuesday’s earnings call. “Obviously, the Origin will be an important part of that, as well.”
Barra thinks the financial prospects will significantly improve by “quickly” scaling the business. The experience that Cruise has gained operating in around 30% of the San Francisco area will allow it to expand to other cities. According to CEP Vogt, they will apply what has worked well in San Francisco to other similar ride-share markets. According to Tech Crunch, the company sits on $1.8 billion in cash at the moment. This might seem a lot until you realize that Cruise spent $868 million in the first half of the year alone to launch the robotaxi service in just one city.
The company not only wants to extend to more cities, but it’s pressing to release their driverless capsule Origin into the market soon. The company started mapping the streets of Dubai for a planned 2023 launch, and other cities are certainly in the plan. It also hit some snags with regulators after an alleged employee warned about Cruise’s chaotic safety culture while a Cruise driverless car was recently involved in a crash.
Vogt described Cruise’s growth strategy as “exponential,” which, considering current financial results, would only mean more cash burn. At a moment when GM itself reported a 40% drop in profits, it would be interesting to see for how long Cruise’s strategy would be sustainable. The company executives avoided providing guidance for Cruise’s 2023 expenditures, which only means that the losses will accelerate.
“I would say we are going to make sure we fund Cruise and the spending is done in such a way that we can gain share and have a leadership position as well, and we have plans that we’re taking the cost out as the technology matures,” said GM CEO Mary Barra during Tuesday’s earnings call. “Obviously, the Origin will be an important part of that, as well.”
Barra thinks the financial prospects will significantly improve by “quickly” scaling the business. The experience that Cruise has gained operating in around 30% of the San Francisco area will allow it to expand to other cities. According to CEP Vogt, they will apply what has worked well in San Francisco to other similar ride-share markets. According to Tech Crunch, the company sits on $1.8 billion in cash at the moment. This might seem a lot until you realize that Cruise spent $868 million in the first half of the year alone to launch the robotaxi service in just one city.
The company not only wants to extend to more cities, but it’s pressing to release their driverless capsule Origin into the market soon. The company started mapping the streets of Dubai for a planned 2023 launch, and other cities are certainly in the plan. It also hit some snags with regulators after an alleged employee warned about Cruise’s chaotic safety culture while a Cruise driverless car was recently involved in a crash.
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