When Kyle Vogt was around 15 years old, with a learner’s permit, he drove with his dad on a “straight, boring road” through western Kansas on a 10 hour road trip to Las Vegas to see the robot combat competition show BattleBots. Obsessed with robots and engineering, Vogt wondered if there was a way to hook webcams and circuits to the dashboard of the car to let the car drive itself. Inspired, Vogt came back home and built a self-driving car that could glide through a parking lot by connecting a webcam and a Pentium 233 computer.
Fast forward to now: Vogt, who also co-founded Twitch, has recently been put back at the helm of Cruise, the self-driving car company he co-founded (as an adult) and sold to General Motors in 2016 for more than $1 billion. It’s one of the top players in the autonomous vehicle scene alongside Waymo, Zoox, Pony.AI and others.
According to California DMV data for the past year, Cruise was second only to Waymo, owned by Google’s parent company Alphabet, for the highest total number of driverless miles on public roads. Because most self-driving car outfits run their tests in California, industry watchers often turn to this data to understand company performance in regards to both technology and commercialization.
“What's more important at this stage is each of the companies in this field showing their ability to safely deploy this technology and start to commercialize it,” Glidehouse analyst Sam Abuelsamid said. “Start to generate some revenue and eventually scale that up to more markets.”
Vogt, Cruise’s original CEO, formally stepped up in March to replace the company’s last chief executive, Dan Ammann, the former GM president who had been in charge at Cruise since 2019 but left abruptly in December. (Ammann for his part is starting a new job at ExxonMobil.)
Ammann’s departure, which shocked both Cruise employees and other industry players, was not explained by Cruise or GM at the time. But analysts said the reappointment of Vogt was not surprising, given what Cruise needs to do next.
“If you put somebody else in there, there will be a high learning experience, even if they came from GM,” said auto tech consultant Egil Juliussen. “It's an easy decision.”
Stability and consistency for commercialization
In November 2021, Vogt released a video of his first-ever ride in one of Cruise’s robotaxis. “It’s hard to explain, but without someone sitting in the driver’s seat, the AV comes to life in a different way - almost like it has its own personality,” he tweeted at the time.
But it’s a long journey from the first ride to the mainstream adoption that will make GM’s investment in the autonomous vehicle company pay off.
Before commercialization, a critical step is building consumer trust in the technology, said Abuelsamid.
“If people don't trust the technology, they're not going to use it. And if they don't use it, you're never going to make money on it,'' he said.
“If people don't trust the technology, they're not going to use it. And if they don't use it, you're never going to make money on it."
Another major roadblock is with what Juliussen described as the “edge case,” where the software is facing new and unknown driving conditions. And another obstacle to overcome is the cost of hardware, which must come down as the industry matures, according to Juliussen.
Employing someone new, both analysts pointed out, could be a distraction for Cruise in tackling these issues.
“[T]hey probably felt that the stability and consistency of having Kyle resume the CEO role was probably the best thing for the company,” Abuelsamid said.
Going public, or not
Though neither GM nor Ammann gave a reason for his sudden departure from the company, unnamed sources told Bloomberg that he was dismissed by GM CEO Mary Barra. The key points of disagreement were said to include Amman’s view that the company should initially focus exclusively on robotaxis and that it should go public sooner rather than later.
Ammann may not have been alone in pushing Cruise to IPO early. On March 18, GM increased its share of Cruise to 80% by purchasing SoftBank’s stake. The lower valuation of $19 billion involved, compared to a previous $30 billion valuation, could convey a cautious note, Deutsche Bank analyst Emmanuel Rosner wrote in a research note, suggesting that Softbank disagreed with GM regarding the IPO timing.
But as Juliussen pointed out, the advantage of Cruise having GM as its parent company is that the company does not need an IPO to get funding – even though it may be years before autonomous vehicle companies will see profits.
Still, an IPO is not without its benefits and for self-driving car makers, even those with enough funds to invest in new technology. The advantage would come in hiring, where stock can be a useful incentive.
The race for talent among autonomous vehicle companies has definitely already begun. For example, Zoox, which is owned by Amazon, is currently looking to fill around 420 jobs, up from around 210 at the same point in 2021, according to data collected by our parent company Thinknum Alternative Data.
The same day that GM purchased SoftBank’s shares, Cruise introduced an equity program that offers to buy back employees’ shares quarterly. Acknowledging that public companies can have the upper hand in making offers, Vogt introduced the program as a way to retain and attract talent while remaining private. Deutsche Bank’s Rosner said the program could be an important step in making Cruise a leader in talent acquisition, even though it would be an up to $1.5 billion cash layout for GM this year and up to $4 billion over the next couple of years.
The next steps
Both Cruise and its competitors appear poised to enter a new phase. Cruise received permission to charge passengers for its robotaxis service in San Francisco in February, shortly after Waymo got approved in the same month. Meanwhile, Pony.ai and Baidu have been charging customers for robotaxi services in Beijing, China.
Cruise also hit a major milestone last December, getting permission to operate its Robotaxis without a safety driver, while Waymo just got its approval to run driverless in late March.
But even as self-driving taxis grab headlines, analysts will also be closely watching how the autonomous vehicle companies are faring when it comes to deliveries.
Automated delivery service is less complex to provide and has lower costs. Delivery vehicles can also feed running data to robotaxis as training data. Cruise has its own delivery arm, which has been running experiments in Phoenix, Arizona for over a year now in partnership with Walmart.
Abuelsamid said although robotaxis get the most attention, the delivery business is more likely to be the primary business for most companies initially. It can also help with the important task of building trust among customers towards the technology.
“After seeing these things driving around making deliveries for several years, then they might be more inclined to ride in these vehicles,” Abuelsamid said.
