General Motors Company (NYSE:GM) Goldman Sachs 2022 Communacopia + Technology Conference September 12, 2022 3:30 PM ET
Company Participants
Mary Barra – Chair and Chief Executive Officer
Kyle Vogt – Chief Executive Officer, Cruise
Conference Call Participants
Mark Delaney – Goldman Sachs
Mark Delaney
Okay, great. We’re going to go ahead and get started. My name is Mark Delaney, and I have the privilege of covering General Motors here at Goldman Sachs. I’m very pleased to have with us today Mary Barra, the CEO and Chair of General Motors; and Kyle Vogt, the CEO of Cruise. We appreciate them taking the time. I’m going to turn it over to Mary to make some opening comments, and we’ll hear from Kyle, and then we’ll get back into Q&A.
Mary Barra
Well, welcome, everybody. It’s great to be here, and I really appreciate the interest in General Motors and Cruise. At General Motors, our vision is to create a world with 0 crashes, 0 emissions and 0 congestion. And our journey to do that, we are committed to an all-electric future, and we believe in an autonomous future. And to deliver this, we believe in 2 fundamental beliefs that, one, we want to provide EVs for everyone and everyone who’s like an EV should have one. And it’s why we’ve been strategically transforming our portfolio to have the right portfolio at the right price points, we’ve been converting factories around the country and, frankly, in North America and around the world. And we’re leveraging our existing manufacturing team who knows how to build high-quality vehicles steeply and on time. And then we’re also investing a tremendous amount in the United States and North America to accomplish our goals.
And the second fundamental belief that we have is that GM is extremely well positioned to lead in this once-in-a-generation transformation. And to do this, GM has made calculated bets and bets that started over 5 years ago, whether it’s investing in Cruise, whether it’s an Ultium, whether it’s investing in an all-new electrical architecture for the vehicles.
And because of this investment and because of our investment in North America, we believe we are better positioned to control our own destiny to ensure that the future jobs are in this country to ensure the cars are built here, but more importantly, the technology necessary for the new way that we’re going to move is developed and owned in the United States.
Now we knew we were going to have to make significant investments in technology to do this. And over the last several years, we’ve also been making sure that we are recruiting the best and the brightest talent to join General Motors. And frankly, when we announced over 1.5 years ago that we were committed to bring all of our light-duty vehicles to be EV vehicles by 2035, we actually saw a dramatic increase in the amount of people who wanted to join GM and be a part of that future and be a part of that mission.
We also, as I mentioned, we made the strategic investments in technology, and I’ll talk a little bit more about Ultium. I’ll talk a little bit more about our software-defined vehicle and then from a Cruise and an autonomous perspective, Kyle will talk to you about that.
One of the other things we’ve really done, though, is really change the company to have more of a mindset to be entrepreneurial, learning from Cruise, our bright — start-up as well and actually really creating a culture that values innovation and values failing fast and trying new things. And that is something that we’ve been able to do. One of the things most people don’t know about General Motors is between 40% and 50% of our technical talent has been with the company for less than 5 years. So it really is a whole new generation that has joined General Motors and is driving this technological transformation.
And so when you look, what have we been able to do from an EV perspective. I hope you can see the lineup of vehicles that we have coming in. These are just a few. We’ll have game-changing electric vehicles and we’ll also have autonomous driving capabilities as well as really enabling the vehicle to be a software-defined platform. And all of this from a General Motors perspective, from an EV, from an AV and from a software perspective, means we’re entering an era of growth for General Motors.
Shortly, you’re going to hear from Kyle who is really leading the transition or the transformation to autonomous driving and has the first autonomous driving — rideshare driving company that is actually charging revenues in a dense urban environment. And you’re going to hear more about how we plan to scale that business. But before we go there, I want to talk a little bit about the investments that we’re making from an EV and a software perspective.
The first major opportunity to transform is something that we started in early ’18, which was developing a purpose-built electric vehicle platform. And again, this work started to come into market at the end of last year with the Hummer. But the Ultium platform is incredibly important because it allows us, regardless of the segment that you’re talking about in the auto industry, it allows you to reimagine that vehicle. You don’t have to make trade-offs for performance because you’re modifying an internal combustion engine platform. It opens everything up from a styling perspective.
And the way that we define Ultium is it can go all the way from a small compact vehicle like the Chevrolet Equinox EV that we revealed to the world last week, all the way up to a super truck like the Hummer EV and even beyond with BrightDrop, our commercial — electric commercial vehicle. So we’re never constrained as to what we want to create off of the Ultium platform. Also, what we’re leveraging at General Motors are our strong brands, our industry-leading customer loyalty, the global scale that we have and the tremendous scale that we have in North America, long-standing and proven expertise in design, engineering and manufacturing and an established distribution and service system that is transforming with us to meet the customer where they’re at.
As a result of this and the investments we made, we are on track to hit our goal of having 1 million EV units by 2025 in North America, also in China. And this will represent a 150% CAGR versus 2021 and is expected to generate about $50 billion in annual revenue. It also puts us well on our path of what we’ve announced to be all electric for our light-duty vehicles by 2035. And over the time as we implement in this decade, our EV portfolio will be profitable. It will cover segments representing 90% of the volume in the — in North America. And some of those are the most affordable segments that we need to have to get mass consumer adoption.
We will have pickups, SUVs and luxury and crossovers for the retail customer, and we’ll also have trucks, delivery vans and other vehicles for the commercial customer where every one — every one of those companies is trying to improve their — make their ESG commitments. So some of these products are available right now. This happens to be the HUMMER truck and the HUMMER SUV is coming later this year. This is the Cadillac LYRIQ, and not only does it really redefine what luxury can be. It also provides a whole new customer experience. Both of these vehicles are available to drive at the conference, and I encourage you to do so because it really will convince you if you aren’t already experienced an electric vehicle, you really aren’t making any trade-offs. It’s instant torque, but the level of refinement on both these vehicles is something I hope you can experience.
And what I’m really excited about is next year with Chevrolet. We start early in the year by launching the Silverado EV. It will be followed by the Chevrolet Blazer EV. And then in the second half of the year, the Equinox EV. And these 3 vehicles represent the biggest segments in the U.S. automotive market — and these will all be coming — again, these are all off the Ultium platform. They all have our software-defined vehicle Ultifi capability. So it really will prevent — present a huge growth opportunity for us and being in the right segments in the market.
As I mentioned, we also have BrightDrop. BrightDrop is a start-up within General Motors. It’s actually headquartered in Palo Alto. We brought in somebody who was an entrepreneur Travis Katz himself from Silicon Valley to really drive that mindset. And we’ve already attracted orders from FedEx, Verizon and Walmart, and we have vehicles out on the streets today, but we really ramp up next year, and we’re on track to produce about 30,000 of these vehicles next year.
And what we’re hearing from these fleet customers is that the BrightDrop van, we actually use design principles, road with many of the drivers and many of the different use cases for these types of vans and really design the vehicle to be friendly for that driver. From some of the pilots that some of our customers have done, they’ve seen an increase, for instance, in 25% more packages being delivered per day, using not only the vehicle, which is really just a different combustion system, but the first mile last mile solutions like the trace unit that you see right in front that really allows and reimagine the way packages are delivered different from today when you see packages all across the street.
And so we’re very excited about this opportunity, not only for big customers like I’ve mentioned, but also for small fleets as well.
To do all this from an EV perspective, we know one of the big conversations is about EV supply chain. And we started this work over a year ago building on what we’ve already done for the EVs that we have to have a scalable, sustainable and resilient North America-based supply chain for — to be able to extract and process the raw materials necessary from a battery perspective. We have a battery cell plant. We have 4 — planned at least 4 for this country and 1 is in the startup phase right now. We have another battery plant coming online next year, one the following year and then one which we haven’t announced in calendar year ’25 as well. And between the vertical integration strategy that we have for all the raw materials as well as our battery plants, we’ll be creating thousands of new jobs in places like California, Ohio, Tennessee, Michigan, Texas and more states we haven’t announced yet.
And I want to point out that this has been our strategy because we believe it was the right thing to do from a long-term perspective to control our own destiny before the President signed IRA into law. And so before the EV tax credits became a reality. And also before California put out their challenge or their laws that they want to see all vehicles be EV by 2035. Again, these are both things we’re very much aligned with but we were ahead in our aspirations from an EV perspective.
Now before I turn it over to Kyle, I want to talk just a minute about the software-defined vehicle. Back in 2019, we rolled out our first vehicle that had what we call our vehicle intelligent platform, and that allows us to do over-the-air updates to all of the modules throughout the vehicle. So that’s been on all vehicles we’ve launched since 2019 and will be on all vehicles going forward. We also looked and said, we want to be able to quickly as we see new opportunities, things we haven’t even imagined yet to create new experiences in the vehicle, leveraging all the information that’s on the vehicle, we created Ultifi, which is a platform that kind of takes it up a level and allows — ultimately be open to third-party application developers to really change the way that the vehicle and the customer interacts with it.
Now because the average age of the vehicle on the road today is over 11 years, and that’s the average age of the vehicle. Think about the opportunity as we get more vehicles with our vehicle intelligence platform and the software-defined vehicle, the revenue not only from the first customer, but from the fifth customer, as they continue and we continue to develop things and they can upgrade their vehicles. We are entering a world where your vehicle will get better over time.
And finally, I’d like to make a couple of comments about Cruise before I turn it over to Kyle. First, we believed in the mission that Kyle is one of the co-founders that Cruise had outlined when we made the acquisition in 2016. At that point in time, Cruise had 40 employees. They now have over 3,000 employees, and they are the first company, as I mentioned, to operate a fully autonomous ride-hailing business in a major U.S. city a dense urban environment. Cruise is also pursuing delivery services. And together, we have said that we could have personal autonomous vehicles available as early mid-decade.
And when you look at our vision to create a world with 0 crashes, 0 emissions and 0 congestion. These technologies like cruise, like Ultium and the software-defined vehicle, these are major steps for us to achieve that. So I’m very excited about the progress Cruise is making under Kyle’s leadership and how our two teams will continue to work to further expand and commercialize Cruise and tap into even more opportunities. As Cruise shares some of the news he’s going to provide today, I hope you’ll understand why we increased our investment in Cruise to an ownership level of 80% and why we’re investing in Cruise about $2 billion annually. Cruise is changing the world. And we really appreciate all the other companies that are invested in Cruise like Microsoft, Walmart, Honda and others. The journey has been exciting so far, but the best is yet to come. So if you want to invest or learn more about any of the technologies I’ve talked about, our ticker for this — all this is GM.
And now I’d like to turn it over to Kyle Vogt, who is the CEO and Co-Founder of Cruise.
Kyle Vogt
All right. Thank you, Mary, and thank you for all the support over the years. I mean that’s been critical to get us where we are today, but certainly where we’re going. So earlier this year, I took the CEO job at Cruise. It’s a lot of fun, but I made a promise, which is to commercialize our product and put it in the hands of real paying customers, and we did exactly that.
Since I took my very first driverless ride, less than a year ago, we’ve spun up what we believe is the largest commercial robotaxi operation in the world. It was the first one in a major U.S. market, and we provided thousands of rides to people in San Francisco, and importantly, there’s no NDAs. Most people post their first right on social media. This transparency is critical to gain consumer trust.
But more importantly, what I’m excited about, people love this product. You can see all the quotes up here. It’s a really fun experience, and people are using it over and over again. To show you what that looks like. This is a composite rendering of all our rides from June of this year. We’ve peaked at over 70 concurrent AVs operating — driverless AVs operating concurrently. We’re probably going to double or triple that by the end of the year. And it’s being used all the time. Through the first half of the year, I’m proud of this stat like our 28-day retention, so people coming back after a month is almost at 50%. And to put that into perspective, that’s almost as good as a mature ride-hailing company today, and we’re only just a few months into this service.
Several people have gone on more than a dozen rides. A few of our people are in the 100 Miler Club, which is a lot, considering San Francisco is only 7 miles wide, a lot of rides. Since our launch just a few months ago, our AVs have cumulated 300,000 driverless miles, and these are high-value urban miles. It’s traffic, congestion, fog, people doing wheelies on bicycles. I think those are segues. These are some of the things we’ve seen during testing and some of these also happen with real paying customers in driverless AVs. And if you saw the mattress in the middle of the road, I was actually in that AV when that happened, but it handled it perfectly smoothly went around the mattress and kept on going.
We’ve also tackled many of the other challenges that come with operating at meaningful scale. And there’s no way to learn this stuff except by doing it, and some of these things are really hard. Things like the nuanced interactions with emergency vehicles and law enforcement officers, dealing with damaged and disabled vehicles and building strong relationships with the community. Maybe not that quite yet, we’ll work on it.
But back to our customers. This thing is only a few months old, but people love it. The necessary your head, like the first version of everything is supposed to stuck. So like why do people like this? And they tell us it’s the privacy of the rides that have been in their own cabin, the comfort, there’s a cool factor. But I think the unspoken thing is it’s a sense of progress towards the future, we’ve been promised for decades. And if you think about it today, probably all of you have an iPhone with 5G in your pocket, but we still have to drive our own cars. It’s refreshing for me and I think for all of us to see that finally starting to change.
And for me, I’ve been working on this a long time off and on, is deeply personal. It’s been my lifelong dream to make driverless cars happen. This one, I took a little kitty car and put a Pentium computer in there with a webcam and wrote some basic code to get it to drive along the yellow line in a parking lot. That’s not impressive by today’s standards, but you got to start somewhere. But now we’ve actually done it. This is my first ride. That was a very special moment for me to see this come to life and seeing other people go on their first ride and experience that child-like joy is what drives us a Cruise.
As for what we’ll be talking about today, there’s a lot of things I could talk about. There’s our breakthroughs in machine learning, our high-resolution radars, next-generation sensors. We’ve got a really cool simulation technology that enables our new market expansion without driving millions of miles. We’ve got flashy tech demo videos but not today. Don’t get me wrong, these are all important pieces of technology and enablers for growth, but I think that the AV industry has finally started to mature. We had to fill this gap in the past. There’s no products out there. So you need to show a demo videos and ride-alongs and other things. But driverless cars are actually here now, so we can skip over that. And at Cruise, we’ve made one that people really want. And so now the challenge for us is to make them ubiquitous, which brings us to our topic for today, growth. We’ve kept this under the radar until today, but we’ve actually been quietly laying the groundwork for scale over the past couple of years. And you may recall, our strategy as to test and deploy in San Francisco first. We’ve been consistent in this view since 2017.
And it’s really paid off because for the first time in 8 years, the technology, the AV technology is no longer the main bottleneck. And while we’ll never be done making the products better, there’s lots we can do to improve. We’re now in a position to grow and to do it very quickly. Here’s what we think that takes, get consumers and to scale this thing up, an amazing experience at a low price available everywhere — amazing experience, low price available everywhere. This is a multiyear vision, but we do actually already have a compelling product today, as you saw, it’s just going to get better and more fun as we continue to iterate on each of these things.
So let’s look at each one of these in a little more detail. Let’s start with the experience. These are some of the reviews we’re getting, and these are rave reviews, like I don’t know if you go out and buy a new blender, something people don’t talk about it the way they talk about their first right and the driverless AV. This is really compelling. It’s really resonating with people. And we’re listening. We’re making changes based on what people want. We’re polishing the rough spots. There are definitely some rough spots, we’ve got to keep working on. But the product gets more better, it gets better every day.
And by going driverless, out of the gate, we fixed a lot of the issues with traditional ride hailing. There’s no more anxiety about getting into a car with a stranger, which is something we hear over and over from women. There’s no more being forced into your drivers, personal life, you’re overhearing their conversations and listening to their music and no worrying about whether if your driver is alert or whether they’re staring at their phone or half sleep, get rid of all those things. But around the corner is something even better. The origin changes the game when it comes to ride-hailing. It’s designed for riders, not drivers. It’s got more leg room in it than an Escalade, and it’s personalized. Your music, your vibe, your space. You can make it your living room, you make it your office or you acquire escape from whatever is stressing me out that day. The point it is your space.
Of course, that video was from our reveal event in January of 2020. The origin is a real vehicle now, and we’re currently testing it on closed courses. It’s actually driving autonomously here. It was an enormous amount of effort to bring up this new vehicle. It’s got an all new sensing and compute platform, which you’ve been hard at work on. It has obviously new doors and screens. It has a low-cost architecture, and it was validated using a stimulation first approach, not millions of miles of testing. I’m really proud of the Cruise and the GM teams who are doing this. And I got to say this stuff just looks awesome. It looks like something out of West world or from Hollywood, but this is the real deal. This almost looks like a simulation, that’s real footage. This to me feels like the future, and this gets us really excited at Cruise.
But again, back to the growth story here. This is critical to achieve massive scale, low price. And the origin helps us get there. It’s got a target of 1 million-mile lifetime, which means if you’re building regular cars, you’ve got to cycle through 4 or 5 of those for every 1 origin we build. And it was designed to have low-cost servicing and cleaning and some of the other parts of the business.
On that note, we’ve been hard at work at driving efficiency in operations. And you may know, we’ve got a world-class team on this, including Gil West, who is the COO of Delta Airlines. He’s our COO. And I love this video, by the way. This is one of our staging sites in San Francisco. Sometimes they go out there and watch this. But all the drivers say these line up one by one and kind of get launched out into the city, and drive around for a few hours serving rides all by themselves known inside. And when they’re done, they come back to home base, pull themselves into the lot park. It’s just really cool to see that all come together.
But what we’re optimizing here is the charging, operating, cleaning and maintaining these large distributed fleets. We’re building off of best practices where they exist and innovating where we see gaps. For example, we built robots that can charge our AVs. These are really low-cost robots that are designed to attach to nearly any charger, keeps costs down. We’ve also built robots to help keep the AVs clean. And you’re going to see robots from us that start to pick up other tasks as well. It’s a key part of our strategy to have the lowest cost structure in the industry.
And our major investments in the core AV technology further reduce costs. You can see we’ve done a lot of work on this over the last few years. We build a lot of our sensors in-house, but we’ve also been building custom chips. The chips are important because they reduce the power consumption substantially, obviously, reducing the amount we spend on electricity and also increase the range of the vehicles, but it also reduces the system costs substantially. And in terms of timing, we’ve already got our custom sensors and the AVs that are out on the road now. Our custom chips go live, first go live in this Gen 7 architecture in 2025.
And at that point, what happens is the origin starts to hit that sweet spot from a cost perspective. And in 2025, with Gen 7 is when personal ownership of one of these AVs like one you could park buy and park in your garage, becomes viable. When you put these together and the price to the customer for a ride-hail service gets below a couple of bucks a mile, that’s already as low as ride-hail companies can go today. The TAM explodes, and that’s another exciting part of this business. for us from a growth standpoint.
Lastly, availability. Our products need available when people want them and where they want to use them. And this is a key part of our growth strategy as well. And I can say personally from firsthand experience, it was a ton of work to get our service to work in that first market in San Francisco. That was probably a 100 out of 100 on the difficulty scale. We’ve been grinding on that for a while. But fortunately, when we look forward to new markets, I think it’s just a 2 or 3 on that scale out of 100. And since I promised I’d say focused on growth and not the tech that enables it, I’ll go through this kind of quickly, but I think it’s important to understand what it takes to do this rapid expansion.
The first is that we built generalizable AI. So the software we wrote in San Francisco is designed to work in other places. And when we checked it out, it pretty much does. The next was low-cost mapping. That’s in the news a lot these days, but we’ve cracked the code on that and eliminated the need for maps that are perfectly up to date. So as an example, when our AVs are driving around the city if they see a new stop light or a new traffic light or it’s been moved from where it is in the map, they can still handle that.
So over time, the map is becoming more of a nice to have rather than the need to have, and I think about it as a difference between being like a first-time tourist driver in a new city versus a local who’s lived there 10 years and knows it really well. Lastly, we’ve done some great work on the regulatory front. It took us 33 months to get all the permits necessary for commercial operation in California. And I think along that way, we built a lot of credibility and trust it might have helped because to get the permits for our next city, it took 3 weeks. So 3 weeks, 33 months.
So the question we should all be asking, I think, is no longer does the tech work, but is my city next? So let’s talk about our schedule and where we’re going. This is the time line we’ve shown before. We spent a ton of time on R&D, as I’ve talked about. But the most critical work to enable growth going forward is either behind us or it’s carefully staged that it’s not in the critical path for expansion. We’ve already commercialized in our first city. And in fact, it’s going pretty well, so well that we’ve decided to pull our schedule forward by about 6 months. And based on reading the headlines, I think that’s the first time an AV company has actually moved their schedule to left. I’m pretty excited about that.
So today, we’re announcing for the first time that in the next 90 days, before the end of 2022, Cruise will be live in 2 more markets, Phoenix and Austin. It will initially be small scale, but driverless and revenue generating with scaled operations to follow next year. And obviously, in Phoenix, we’re building off the partnership we have with Walmart, an investor and partner in Cruise. And as of a few weeks ago — actually a few days ago, we got all the permits necessary for commercial ride-hill and delivery operation in Phoenix. So that business is really getting going.
And often, what I’m really excited about is we’re going from 0 footprint, no maps, no infrastructure on the ground — to our first revenue-generating driverless rides in about 90 days. This is something people thought may take years. It doesn’t.
Beyond those markets, looking forward, we’re going to expand in a very principled way. And generally speaking, each 1 of these new markets has overhead. So if the balance like vehicles coming out of the plant, where do we allocate them to our existing markets or set up new markets and sort of pay that overhead. And you’ll see us — what we’ve orchestrated as a glide path where on one hand, the technology improvements we’re making unlock new markets like new capabilities maybe really harsh weather or other things. And on the other hand, you see us ramping up manufacturing capacity to push vehicles into those markets. And we’ve got a pretty good glide path. And as a result, we don’t expect the number of markets we’re in to ever be a constraint on our growth.
With that in mind, we’re going to ramp up manufacturing quite a bit, which means more AVs and more markets right around the corner. So looking at 2023, next year, things get really interesting on the growth side. There’s going to be thousands of AVs rolling out of General Motors plants, including the first origins, you see some of the footage here. And we’ll be using those to light up in many more markets and to start to generate meaningful revenue in those markets. I got to say, I’m loving seeing this footage. Like this is the unappreciated really hard work that it takes. This is what an AV growth story really looks like. And working with GM, there’s the repeatability, the supplier management, the quality control, all the automation to do this and do it at scale and get it right every time, extremely hard to do, and very impressive. I love watching these videos.
So moving beyond that to 2024 and 2025, the question becomes how quickly can we build AVs? And that’s the #1 thing that influences top line revenue. It’s pretty simple, more AVs, more revenue potential. If you don’t have AVs, you can’t make money and also tied to profitability. Fortunately, as you can see here, that’s something GM knows how to do. And at Cruise, we think of it like a cheat code in a video game. We get a skip forward 10 years. because other companies are struggling to figure out how to build EVs at all or do it reliably and at scale. And we’ve got a partner in GM who can do it like the back of their hand. And as Mary said, GM is fully committed to enable our growth.
And so with those vehicles, we’re going to roll them into new markets and increase our presence in additional and current markets. And as a result, by 2025, Cruise plans to hit $1 billion in annual revenue And more as things go as well as they have recently. And you’re going to see Cruise technologies start to appear in some exciting new ways.
So this is Cruise’s future. I think it’s a very exciting one. It’s a massive business opportunity and certainly a challenging one, but it’s worth it because this is also the beginning of a shift in our society from one where we do work for our cars to one where they work for us from one where transportation is a luxury, the one where it’s available for all. And from one where cars kill 100 people every day in this country, one where we are losing the war against car accidents, the one that prevails. This is our mission, and we will work with urgency to achieve it. Thank you.
Question-and-Answer Session
Q – Mark Delaney
That was really interesting. Thank you, Mary. Thank you, Kyle. Really appreciate all of that. A lot of exciting stuff going on. And — maybe to start, we can do a few questions on Cruise and keep it going on that topic. Maybe we can start with the Cruise Origin, comes out next year. Maybe a little bit more around what that provides relative to what you can do today in terms of technical performance, some of the hardware and maybe center upgrades. Is it more around that? Is it more around cost reduction in vehicle utility? And I’d also love to better understand a little bit more on the collaboration with that product between GM and Cruise
Kyle Vogt
Sure, do you want me to take that?
Mary Barra
Sure.
Kyle Vogt
Okay. Yes. So I mean, we talked about just now the Origin is a game changer, really an experience, cost and capabilities. On the experience, I think the design speaks for itself. On the capability side, we didn’t talk about this too much, but the origin unlocks things like highway speed driving and the ability to handle much more challenging weather, which opens up a lot more markets. And then with the 1 million-mile target lifetime and some of the things we’ve done to optimize serviceability and replacing parts and things like that, it really drives the cost down. So it’s really hitting all 3 of those things.
Mary Barra
And I would just add that, as Kyle said, we can manufacture as many as we’re going to need. And we’re making plans to make sure that the manufacturing capability that is needed is not a constraint as well.
Mark Delaney
That’s great. And the whole AV industry has historically progressed very slowly in terms of commercial operations, even though there’s always been lots of work going on with the technology itself. You’ve now reached a really exciting point of being able to offer paid rides in San Francisco, but it’s still limited in scope. But very exciting to hear about the time frame by year-end that you spoke about with Phoenix and Austin and the target even out to 2025. What’s changed that’s letting you now even pull in targets, right? That’s such a big change versus what we’ve all been accustomed to observing in the industry and what’s giving you that confidence to make these forecasts today?
Kyle Vogt
Yes. I guess, as I mentioned in the last 8 years have been this R&D phase, you got to get the technology to work before you can scale it. And we cross that critical inflection point when we did our first driverless deployment in a major urban market, like that was the point at which this turned from a binary problem, like does the tech exist or does it not to a scaling problem, which is how quickly can we light up new markets, how quickly can we build vehicles. And really, it was that foundational work that we’ve done over the last 8 years, kind of it’s a tip in the iceberg situation. The majority of it is below the surface. And now you’re just seeing the very tip with our service that’s at this point, still just a few months old.
Mark Delaney
Maybe one starting with you, Mary, and perhaps Kyle, you can chime in on this 1 as well. So some of the traditional auto companies have struggled to hire the right people to support this shift to software and services. We’ve seen announcements from the industry that some of the software programs from traditional OEMs have been behind schedule. How do you think GM and Cruise are handling this issue?
Mary Barra
I can start from a GM perspective. We started making the shift probably 6 to 8 years ago of recognizing that the vehicle was becoming a software platform. And as we had natural attrition in our company, we started to make the shift that as people retired, we replaced them with software. As I mentioned earlier, when we made the announcement 1.5 years ago about our commitment to electric vehicles, we did see greater interest in joining the company. But we also had to make changes. We had to really look and we started benchmarking our compensation against the thing or whatever the new acronym company is. And we can meet. So when somebody’s got sitting there with 2 offers, they’re looking and saying I can either be part of kind of changing the world with EVs and supporting the AV progress versus some of the other goals of those companies, and it’s been inspiring and people tell us they’re coming because they want to be part of that mission.
So part of it was a very deliberate of building the capability, making sure we’re competitive to get the best and the brightest talent and then creating a mission has been a big part of it as well.
Kyle Vogt
Yes. And I would just say that behind every great company is a really good team, especially in AV, there’s no single magic algorithm or a piece of hardware or software that’s going to launch a business like this. It’s a brilliant group of hard-working people. And so some of the things we’ve done at Cruise to get all those good people, first of all, launching commercially helped a lot that signaled that this is the company to watch. But we also did our RLO program in partnership with GM, which provided a liquidity mechanism for our employees to help us stay competitive on the compensation front.
We also created Cruise Flex, which was really just formalizing the way we’ve been operating during COVID and basically saying whatever mechanism is going to make you productive. So it’s a high-trust environment, if you can show that you can still get the job done, we’ll let you work wherever you want. And that has helped us stay extremely competitive at this moment in time. When I think a lot of the larger tech companies are kind of fumbling and struggling to figure out how to navigate going forward.
Mark Delaney
Mary, on the EV side, I wanted to ask you on the Inflation Reduction Act, which is pretty substantial legislation that was recently passed in the United States. Does that materially change the time frame for when electric vehicles are at margin parity with internal combustion engine vehicles?
Mary Barra
Well, I think it’s definitely going to help accelerate that, especially for companies like GM because even before IRA was signed into law, we had been working to build batteries in this country because we wanted to control our own destiny. When you think about an electric vehicle, it’s all about the battery. And so we wanted to make sure that not only the manufacturing of it with our joint venture with LG Energy Solution, but also in the technology. And we’re working — we have our own work. We also are working with LG Energy Solutions as well as a number of start-ups, so continuing to drive that.
And so having that here now lines up perfectly with IRA as well as the sourcing strategy that I mentioned where we specifically said because we wanted the resiliency and better control over our entire supply chain after what we’ve lived through over the last 2 years that lined up perfectly with the way IRA is written. It was something we were doing because we thought it was good business, but it positions us, I think, better than most companies to take advantage of it.
Right now, IRA is — the actual regulations are being drafted by treasury. But regardless, we’re well positioned to be able to take advantage of the tax credits because of our plans.
Mark Delaney
GM has a good Level 2 product with Super Cruise and soon will offer Ultra Cruise, does GM plan to make either of those Level 3 at some point, meaning that in some situation the driver doesn’t need to be prepared to take over and if so, when?
Mary Barra
So we see Super Cruise and Ultra Cruise as driver assistance technology. For those of you who have experienced Super Cruise today, we’re watching to make sure you’re paying attention. Otherwise, the system will warn you and eventually shut down. When we get to Ultra Cruise, we believe that will handle 95% of the scenarios that you see in normal driving. But that’s still 5% that’s not there. And that’s why, in our mind, there’s a line between driver assistance which is important and why we work on it because it will lead to safer rides. But Cruise really is the path that we see that will enable — that enables the vehicle to take control from the driver.
Mark Delaney
I’m going to ask 1 more, and then we’ll take a question from the audience. So thank you for your questions, please, and we’ll take one. But for both of you, what is something that you think could surprise the industry or investors in the next year?
Kyle Vogt
Yes, I’ll start, I guess. So after working on self-driving cars for 8 years now, what I’ve seen happen is there’s this pendulum that swings back and forth, extreme optimism and extreme pessimism. And I think we’re more on the extreme pessimism side right now, perhaps moving back the other way. And so as a result, I think people are going to be caught off guard by how quickly AVs go from the first ride that you’ve taken to available pretty much everywhere. So I think fortunately, it’s nice to be in a for a situation, I think, where the things we do are surprising rather than expected or seen as the status quo. But I do see, I think, the pendulum swinging back the other way. But at the moment, I’d say the sentiment seems to be more pessimistic than what I believe is truthful today.
Mary Barra
And I would say similar, I think when people look at General Motors and the EV transformation, we’re right in the middle of, I don’t think they understand the power of Ultium. I don’t think they understand that this — when you get to experience the vehicle off of Ultium, it’s no compromises. And the technology that we have on these vehicles is really every customer that gets in, they’re wowed with our vehicles. And not only because of the dedicated platform of Ultium, but also the portfolio that we’re going to have is going to be faster than virtually anyone because we not only have the manufacturing capacity that exists today, but how quickly we can take a new vehicle. We’ve actually taken almost half of our development time out of doing a new vehicle because of leveraging this common platform.
So I showed you just a few vehicles when we look at the HUMMER that’s — and LYRIQ that are out now, the SUV HUMMER that’s coming, the 3 Chevrolets, but there’s even more vehicles coming in key segments. We’re not just replicating our ICE portfolio. That would be a mistake. What we’re doing is we’re looking at the key segments that are really going to excite people to pick 1 of our vehicles. So that’s where I think people will see the surprise.
It’s pessimistic or for General Motors, it’s a show-me type of situation, we’re going to show you.
Mark Delaney
Great. Maybe we can just squeeze one quick one in from the audience, somebody in front there.
Kyle Vogt
I’ll repeat the question. Yes. So what’s enabling maps — HD Maps for AVs to go from a nice — a need to have to a nice to have?
The big thing is the shift from AV systems that are 100% reliant on the data in the maps like the precise location of every object to 1 where the AV relies more on its own sensors and perception systems to see things like the boundaries between a drivable and undrivable section of the road or the location of a stop sign and track the lights instead of relying purely on memory and driving with its eyes closed, it’s actually paying attention.
And that’s a spectrum for us. As I said, with most things that we do, we stage those necessary technology improvements in a way that they don’t get away — get in the way of our critical path for growth, but not a second sooner. And so we’ve done some of that today to do our first market, and you’ll see that gradually expand as we increase our geographic footprint and get into more and more cities.
Mark Delaney
All right. Well, unfortunately, we’ve run out of time. Mary, I really appreciate you both joining us today.
Mary Barra
Thank you.
Be the first to comment