5 Reasons GM's Cruise Could Win the Autonomous Driving Race

Cruise from General Motors (GM -0.17%) has the potential to emerge as a leader in autonomous vehicles, putting it ahead of Tesla and other competitors. In this Backstage Pass clip from "The AI/ML Show" recorded on Jan. 12, Motley Fool contributors Jamie Louko and Toby Bordelon help potential investors get familiar with GM's autonomous driving business. 

Jamie Louko: Going to what I like and what I don't like about this company. I really like their performance-based approach, focusing on nailing it down and then worrying about cost later, especially with a huge partner like GM. They have the money to subsidize some of this stuff until they can get to scale and bring that down.

Deep learning at the core, it's basically something that a lot of autonomous vehicle companies do have, but it is something that I really like, and I'm just fascinated with pictures like this. I could watch these pictures all day, and there was actually like an hour and a half video on YouTube where it was literally this entire picture, just driving around the streets of San Francisco. I was enamored with it, it looked so cool. But anyway, getting back to what I like, [laughs] they really have the real-world data advantage. Tesla might have some more data, but I really think that driving in San Francisco gives some sort of unparalleled crazy-person aspect of the data that other companies might not have. Tesla may have real-world data, but it might be on highways, whereas Cruise has really been driving mostly in San Francisco, dealing with really unique experiences that never could have been thought of.

Like I said, there's no really no downside with their plans, at least in the short term for their mapping. They're using software in their cars to detect changes in their maps in real-time, so this limits risk of roads changing. If one car drives by and they detect a change in a map, it automatically goes out to all other cars in a real-time update, which I think is really cool because like I said, it completely mitigates the risk of roads changing all the time, which they frequently do in San Francisco.

The bad, over-promising, this might go a lot with Elon Musk, but come on, world's largest supercomputer sensor platform in eight years when you haven't even gotten any revenue. I'm a little concerned about that. Also, their CEO just left. This was really, really concerning. He wasn't a co-founder, but he left with no reason, GM didn't explain anything. Their chief technology officer, I can't remember his first name but his last-name is Vogt, V-O-G-T. He is the co-founder Cruise, he's going to be taking over as interim. That is concerning, I don't know why he left. But if they're not really giving any explanation, that is a little worrisome.

They're hung up in San Francisco over a couple of permit challenges. San Francisco is, the city is worried about their cars double parking, and they're, really fierce on it. They do not want Cruise to be driving on the road because they are they had a challenge that said that they were double parking in multiple circumstances. They're dealing with that.

I said it's a good, but I'm also thinking it could potentially be a bad. If they're really focused on performance and this doesn't come to fruition and somehow they're not able to scale it up, they've burned a lot of cash or for whatever reason they think they might take longer than expected. They're thinking six years to fully scale up, But if that doesn't come to fruition for whatever reason, they are burning a lot of cash and that is definitely, definitely a problem. But I think that might be the most case with many AV companies. That is Cruise.

Toby Bordelon: Thanks so much, Jamie. On your point about the CEO leaving, yeah, I was noticing that too, this happened toward the end of last year. He departed. Now, there's some speculation that it might have been with disagreement with GM over whether Cruise should be spun off or not. Because people have been talking about they're going to spin off Cruise, they going to make it an independent company. It might have been if you wanted to do that and they're like no. Because Mary Barra, the CEO of General Motors, in a press conference or comments in last year was pretty clear that they don't really have any intention of doing that, that they want to keep this and they are going to continue to work with the technology and then double-down on autonomous driving. Maybe there's some of that, like maybe it was you wanted to be independent and like no, this is we're not getting rid of this we know we have here. Who knows what the real reason is. Like you said, they didn't comment on it, maybe they didn't address the fact or why.

Jamie Louko: Yeah, it's a really strange scenario. I would've thought that, especially if he was a co-founder of Cruise, I would definitely bring that up, like consider that very seriously. I do to some extent. But this guy was an investment banker I'm pretty sure before he took the CEO role. He's not a co-founder. If it was thought that he was the CEO at the time, I would definitely understand that, but I don't know. It's a very weird scenario. This guy seems very interested in the business and then he just up and left out of nowhere. I was watching their Investor Day, I believe, it was either Investor Day or Under the Hood. He was so energetic all the time, the former CEO, and then he just left. It was very strange scenario. It definitely rubbed me the wrong way.

Toby Bordelon: Yeah. That's something to consider. But again, like if you're thinking about investing in Cruise, you can't really, but the way to do that is to invest in GM. You're getting similar to Tesla, if you wanted to invest in autonomous driving, you have to buy the whole Tesla. There's no real pure-play here, even Nvidia, that's obviously not an autonomous driving pure play, there's no real pure. Now, maybe Mobileye, which I think Intel is spinning off there. That might be your pure-play when that spinoff actually happens. But right now, you can't really, it's hard to find a pure-play company, you also have to consider, especially in Tesla and GM, which auto business do I want along with this. There's pros and cons for each one of those especially when Tesla run valuation. You can lobby autonomist future, but you might say, do you want to pay this much for the car company and the energy company to get that. People might not want to do that.

Jamie Louko: I think that's for the better because if you're trying to invest it in an autonomous vehicle pure-play, that's a very risky bet that could go to zero, extremely easily. I think having that optionality, honestly, I think that's a little better for us as investors because if it does go to zero, we still have a solid business behind it.