A retreat in the development of autonomous vehicles was the major news item decelerating the stock of rideshare incumbent Uber Technologies (UBER +0.93%) in December. As a result, the shares skidded to a more than 16% loss in value over the month.
Robotaxi retreat
That news came from storied U.S. auto manufacturer General Motors on Dec. 10 when it announced that it will no longer bankroll the development of a specialized robotaxi under its Cruise autonomous-driving division.
In its official press release announcing this decision, General Motors said it was due to "the considerable time and resources that would be needed to scale the business, along with an increasingly competitive robotaxi market."
The move is part of a broader realignment, which will see the Cruise and General Motors technical divisions combining into a single entity. This will focus on efforts to advance the company's Super Cruise assisted-driving feature.
General Motors' decision was not happy news for Uber or its shareholders. The company is eager to embrace the autonomous-driving future, as this would mean it could operate a massive fleet without human drivers (who, like any workers, need to be paid).
The effective elimination of one robotaxi project narrows competition in what's sure to be a big segment in the future. As General Motors is a producer of mass market vehicles, likely its robotaxi would have been competitively priced. Perhaps it would have been competitive with electric vehicle (EV) king Tesla's recently introduced model, which that company's CEO Elon Musk said would retail for under $30,000.
The market's assertive sell-off of Uber feels like an over-reaction to the news. Although much ink has been spilled about robotaxis, they are still products largely in development. It's possible that once they hit the market, unexpected competitors will enter the fray, and the increasing competition will keep prices down.
NYSE: UBER
Key Data Points
Don't hit the brakes just yet
Uber also took something of a hit from a new analysis published a bit over a week following the General Motors robotaxi news.
Bernstein SocGen's Nikhil Devnani, in a research note, said that investors were souring on the U.S. rideshare market because of declining growth rates, according to reports. Due to this and other bearish factors, Devnani moved Uber down his company's preference list of stocks. However, importantly, he maintained his outperform (buy) recommendation and $95 per-share price target.
I'd be bullish on Uber, too. Rideshare generally might not be as hot as it once was, but management has done a good job diversifying the business so it's less dependent on that segment. At the same time, it remains arguably the most important and influential company in its industry.
