Automotive Blogs

Cruise: The Case for

by Roger Lanctot | Jan 26, 2020

On this Saturday, with the defense of the President of the United States getting underway in the U.S. Senate, it is worth considering the case for General Motors’ new self-driving Cruise Origin and its prospective driverless ride hailing service. The Cruise Origin was rolled out this week along with the company’s announced plans to launch mass production of the vehicle along with the ride hailing service – dates to be announced.

Like the prospects for the case presented by House Democrats for the impeachment of the President, the case for a Cruise Origin-based driverless ride hailing service and mass production looks a little wobbly. Let’s take a closer look.

I take up the Cruise Origin case because I stumbled across Cruise CEO Dan Ammann’s “The Cruise Origin Story” on Medium:

Reading Ammann’s blog, it occurred to me that it was worth considering all of the arguments for or at least the merits of the Cruise Origin proposition. I wanted to determine whether it really was a compelling story or, more specifically, a transportation breakthrough capable of overcoming existing people moving challenges or shortcomings in San Francisco – its base of operations – or anywhere.

Breaking down the merits as described by Ammann, I have derived the following qualities of Cruise Origin that might recommend the vehicle as a solution to many of the things that bedevil transportation consumers:

  1. More space for passengers – i.e. no pedals, steering wheel, knobs, mirrors, internal combustion engine, fuel tank, driver;
  2. Clean – electrified powertrain;
  3. Doors don’t hinge outward. They slide open, bikers are safer;
  4. Entry is low to the ground and large for easy entry/exit;
  5. Seats (4) have extra legroom and passengers face each other;
  6. Consistent user experience – due to vertical integration from vehicle to app (it is not clear whether Cruise, like GM’s Maven service, will have its own customer service or rely on OnStar’s call center and support resources);
  7. Avoids risk of using human-based ride hailing service and getting “compact car that smells like Mountain Dew and Pine-Sol, driven by someone who’s been up since 4 a.m. – or it’s 4 a.m. and you might get nothing;”
  8. Safety – all-around sensors/vision – capable of functioning at night or in rainy or foggy conditions
  9. Redundancy of sensing, compute, networking, power vs. potentially unreliable backup human driver;
  10. Modular and upgradeable;
  11. Based on technology currently being used to operate a service/fleet for Cruise employees – 1M miles recorded;
  12. Capable of anticipating other drivers’ behaviors, and getting better;
  13. A better experience at a lower price than what you pay to get around today.

All of that sounds and sounded great to me. Except, one thing bothered me: The attempt by Ammann to summarize the weaknesses of existing ride hailing services as revolving around potentially crappy cars with smelly interiors or lacking dead of night availability.

Those aren’t the arguments against ride hailing that are going to gain any traction. Uber, Lyft, Via and their global kin are universally massively less expensive to use and more convenient than taxis. Using these services is quite simply a no-brainer. (The economic proposition for drivers is a bit more challenging.)

The complaints from passengers regarding Uber or Lyft etc. tend to revolve around small things – like drivers that cancel or don’t show up, or app failures that get the location of the pickup wrong, or, yes, sure, a crappy, smelly car or a driver with limited English. (This is to say nothing of the rare circumstances of drivers assaulting passengers – or vice versa.)

But that Uber or Lyft etc. driver, with his potentially smelly car, can talk to me to make sure I am waiting on the proper side of the road for the pickup. And I am guaranteed to be facing the direction of travel and can even engage the driver to make sure I am dropped off at a preferred spot.

This is not where I found the fatal flaw in the Ammann argument, though. The fatal flaw lies in his conclusion (from Ammann's blog on Medium):

“So, we’ve done some math.

“Today’s cars sit parked 95% of the time, racking up expensive parking fees while depreciating in value. They need a driver. They break down relatively easily. And if they make it 150,000 miles, well, lucky you.

“The Cruise Origin, on the other hand, will spend most of its life in motion, working 10 times harder than your average car, day in and day out. It’s engineered to include everything you need and nothing you don’t. It doesn’t require a driver, of course. Because it’s modular, it will have a lifespan of over 1M miles — six times more than the average car. And since GM has committed to producing millions of electric vehicles, we’ll build it for roughly half the cost of what a conventional electric SUV costs today.

“All told, the average San Franciscan household driving themselves or using ridesharing, will, on average, see up to $5,000 back in their pocket every year.

“At the same time, we’ll have fewer cars clogging our roads, fewer cars piled up in our parking lots, and fewer cars going to the scrap heap.

“Origin means beginning. Or in this case, a new beginning for transportation — one with no more tradeoffs.

“What’s good for you is good for the world.”

This is an eloquent and touching testament to the virtues of a shared transportation experience. It reflects all of the internal decision making that must have taken place at GM/Cruise regarding cost of production and operation as well as the implications for vehicle ownership.

But San Franciscans that own vehicles are not likely to ditch those vehicles in order to use Cruise Origin. If you own a vehicle in San Francisco today it is most likely that you are using your vehicle to commute to the suburbs or for other long trips outside the city.

Ammann’s case for Cruise Origin appears to be targeted at vehicle owners along with dis-satisfied Uber/Lyft/Via users. Cruise is starting its life with two strikes against it. Strategy Analytics’ own research has found a relatively high level of satisfaction with ride hailing services – i.e. these users are not seeking alternatives. They have found their happy the back seat of an Uber of Lyft.

Meanwhile, vehicle owners in cities are willing to suffer the burdens of vehicle ownership (insurance, parking, etc.) because they have a need to travel outside the city. Cruise Origin has yet to offer an extra-urban value proposition.

And the prospect of Cruise Origin vehicles roaming the city at all hours with or without passengers – as suggested by Ammann – is hardly an attractive proposition for San Francisco’s already crowded streets. There are thousands of Uber/Lyft/Via and taxi drivers already operating in San Francisco. To compete, is Cruise Origin (already burning $250M/quarter) going to subsidize its service further fueling the downward financial spiral for existing operators?

So let’s be clear. The Cruise Origin is an engineering marvel – technically and cosmetically pleasing. But the business model is a bust.

There is one more thing. For all of his glorification of Cruise Origin technology and its value proposition, Ammann continues to withhold technical details of the self-driving platform operating within the vehicle. Ammann and GM CEO Mary Barra have made much of the challenge of operating a self-driving vehicle on the chaotic streets of San Francisco. It would be good to know in more detail how Cruise Origin is overcoming that chaos.

It’s worth noting House Intelligence Committee Chairman Adam Schiff’s admonition to his Senate colleagues on Friday: “Give America a fair trial. She’s worth it.” Like these moving words, Ammann’s plea: “What’s good for you is good for the world.” …may not be enough.

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