Cruise plans to have 'tens of thousands' of Origin AVs on roads in coming years

·8 min read

Cruise expects to leap from a limited commercial robotaxi and delivery service that will start in earnest in 2022 to a business of "tens of thousands" of its purpose-built Origin AVs on the road over the next few years.

The eye-popping projections will be reached, according to CEO Dan Ammann, through a combination of regulatory approvals, capital from investors and a $5 billion credit line from GM Financial and technological breakthroughs, including a 90% reduction in compute costs over the next four years.

"Over the next 12 to 24 months, you will be able to push a button and get a ride with a very short ETA in a couple of major cities in the United States," said Ammann. "If you look at the next three to four years, we will be deployed in multiple cities, multiple markets around the U.S."

These are seriously bold claims, but the company appears to be laying down some of the groundwork to back them up. Just last week, Cruise received its driverless deployment permit, which allows the company to begin charging for autonomous services, from the California Department of Motor Vehicles. It just needs one more permit from the California Public Utilities Commission to operate a commercial robotaxi service in San Francisco. Cruise says that reality is only months away.

The $5 billion line of credit from GM Financial, which Cruise secured this summer, will be used to pay for the production of the Origin without having to give away more equity to investors. Separately, GM has invested a total of $6 billion in Cruise, including the initial acquisition cost, operating costs for 2015 to 2016, and further investments, according to the company.

The question is whether all this is enough to help Cruise scale up into the thousands of vehicles at a lower cost per mile than a human driver service over the next half a decade.

Cruise laid out its plan to go from a limited commercial AV service to tens of thousands of vehicles in a short span during GM's Investor Event on Wednesday. Let's dive into the claims.

From product-market fit to rapid scaleup

Ammann broke down Cruise's path to market into three phases. The first was the R&D phase, which took the company to the beginning of driverless testing at the end of last year and into this year. Phase two, which will begin next year, will be early commercialization via the retrofitted Chevy Bolt EV-based fleet of Cruise vehicles, which are currently on the roads in San Francisco and Phoenix, Arizona. During this time, Cruise wants to demonstrate product-market fit with a minimum viable product.

Phase three, the "rapid scaling phase," begins in 2023, when production of the Cruise Origin will begin at GM's Zero Assembly Plant, a factory dedicated to the production of electric vehicles.

"In that first year, we'll be building what can be measured in thousands, and in 2024 we'll be thinking about things measured in tens of thousands," said Ammann.

Having GM as a backer for OEM-level production of vehicles will be a huge advantage for Cruise, said the CEO. The Origin will be built off the same Ultium platform that GM has built to support a wide range of products across its brands, which should enable faster production.

The company also invested in the technology and software tools needed to ramp up the rate of improvement of Origin's autonomous system, which is ultimately a platform that allows AI and robotics to develop together in a closed-loop system.

Part of that investment went into Cruise's simulation software, through which the Origin will largely be validated. It's already begun virtual autonomous testing, even though it has not gone out onto public roads yet.

"The goal in the medium to longer term for everybody working on this is to get to low-cost generalized autonomy," said Ammann. "We want fully autonomous driving, we want it to work everywhere and we want it to be really inexpensive."

Throwing obvious shade at Tesla, Ammann said that while some companies are trying to solve the autonomy problem by working their way up from a low-cost Level 2 autonomous system, which translates to an advanced driver assistance system, Cruise's approach is to solve the hardest problem first: getting the human out of the loop and doing so in one of the most complex driving environments – downtown San Francisco.

Driving costs down with technological advancements

It might seem counterproductive, but Cruise says it has thrown a lot of money into the compute power of the Origin to get it to a place where it'll be able to commercialize and scale profitably.

"Even though the technology carries a higher cost, we're able to amortize that cost over a high-utilization fleet, high-mileage vehicle, and do that at a compelling cost point," said Ammann. "The cost advantage of the Origin relative to a retrofitted vehicle, even including a Bolt AV, is about 60% to 70% lower cost per mile."

That said, Cruise has plans to bring down the cost of that compute power over the next four generations by 90%. One way to do this is to start manufacturing custom silicon, which Cruise says will help it both scale compute use and cut costs. Ammann didn't go into detail about what it will use the silicon for -- a tidbit that will be touched upon further at the company's "Under the Hood" recruitment event in November -- but at the very least, the company is signaling a move toward vertical integration.

Considering the damage the semiconductor shortage has done to GM's production lines and the fact GM has just announced a supplier agreement with Wolfspeed to provide silicon carbide semiconductors for GM's EV program, it's probably safe to say Cruise has put chips on the menu. Others in the industry, like Tesla, are also securing the supplies and production of their own silicon chips.

Cheaper than a human by nature

The Origin is purpose-built to provide excellent customer service at a low cost for both ride-hail and delivery, said Ammann. The vehicle itself is only as long as a Chevy Cruze, but the inside will be optimized to provide plenty of space to make for a pleasant ride-hail experience. It'll also be able to convert from passenger mode to delivery mode, complete with a delivery unit that can slide in and out multiple times within a 24-hour operating cycle to make the most use of each vehicle.

Cruise thinks within just a few years, its Origin will be able to outstrip Uber and Lyft with cheaper prices and higher revenues. In some cities, Uber and Lyft prices are up almost 80% from pre-pandemic prices, but the companies are still "not materially profitable today," said Ammann. That's due to their business model, he claimed. In San Francisco today, a rider is paying about $5 per mile, three-quarters of which probably goes to the driver and the rest gets spent on funding expenses and other costs, which results in companies just breaking even.

"There are two fundamental differences in our model, the first being that we don't split the revenue -- we get all the revenue," said Ammann. "Because we have a lower cost structure, we're able to charge less and make a profit. It's as simple as that."

Can Cruise scale as rapidly as it hopes?

Cruise didn't share its revenue projections, but it did compare itself to other companies that have brought breakthrough products to very large markets and within a decade or so have gotten to "say $50 billion in revenue." Ammann did say that Cruise conservatively expects to make about $100,000 in revenue per vehicle per year.

The company plans to own everything to do with its services, from the vehicles and autonomous software to the ride-hailing app and customer service. It hopes that by bringing more services in-house, it'll be able to scale quickly and save money in the long run through constantly improving software that will allow it to begin to ditch sensors along the way.

Ammann even went so far as to say that it'll be able to get its autonomous system's cost curve so far down that it'll be at a price point where it can be deployed into retail vehicles.

"You can go to your local dealer and buy a car that has Cruise L4 system capability inside of it, and with a partnership with GM, that obviously gives us a huge opportunity to turn that into a reality, and to do that at a really large scale," he said.

That reality is likely many, many years off, but Cruise isn't shy about dreaming big.

"When you look out eight to 10 years from now, I think we'll look back and we'll see that we've started to actually bend the curve on road safety in the United States and around the world," he said. "Cities will be given back to the humans ... our cities will be cleaner and less congested. And people will have access to transportation that don't have access to transportation today."

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