Cruise CFO Hammers Out Robotaxi Venture’s Cost Structure Ahead of Charging Customers

Table of Contents Cruise CFO Bill Nash. He previously served as vice president finance and…

Cruise finance chief

Bill Nash

said he is learning from other ride-hailing companies as he works to finalize the cost structure of his company’s robotaxi venture.

The business, which isn’t generating significant revenue yet, is waiting for one final permit before it can start charging passengers in San Francisco, likely later this year.

“When we think about commercialization, we’re really excited about where we’re at,” Mr. Nash said, pointing to the company’s plans to roll out its autonomous-vehicle service across California before looking at markets in other U.S. states.

This month, Cruise unlocked $1.35 billion in funding from SoftBank Corp.’s Vision Fund, which became a minority investor in 2018. Those funds, together with the $3.1 billion in cash and marketable securities on its balance sheet, will go toward building out its fleet of driverless taxis, its network and charging infrastructure, Mr. Nash said.

Cruise CFO Bill Nash. He previously served as vice president finance and head of finance and accounting at the company.



Photo:

Cruise

The company also has a $5 billion credit line from

General Motors Co.

, which owns a roughly 70% stake.

“We’ll be looking at tens of thousands of vehicles that will be used to roll out the fleet and launch the overall service,” Mr. Nash said. In 2021, Cruise booked a net loss of $1.61 billion, widening from a $675 million loss in 2020.

Cruise, which currently operates retrofitted driverless cars and offers free rides in San Francisco between 10 p.m. and 5 a.m., will from next year use purpose-built, self-driving vehicles manufactured by GM. Called Origin, the shuttles have been designed to have a million-mile lifespan, which will help the company amortize the cost over a longer period and reduce annual expenditure, according to Mr. Nash.

A GM spokesman said Cruise will get “a fair deal on those purchases” but declined to provide specifics.

Competitors

Uber Technologies Inc.

and

Lyft Inc.

usually charge about $5 a mile in San Francisco and take roughly 20% of that as a fee, leaving the rest for the driver. Cutting out the driver, Cruise wants to keep its costs to $1 to $1.50 a mile, leaving more profit for the company, Mr. Nash said.

“That margin between the $5 and the $1.50 gives us a lot more flexibility about pricing and allows us to still get a healthy margin,” Mr. Nash said.

Unlike Uber and Lyft, which leave the fueling and charging to their self-employed drivers, Cruise will need charging infrastructure as well as parking for its vehicles. The company is partnering with others and also building its own infrastructure, Mr. Nash said.

Cruise has a different cost structure than its rivals, but management is studying their business models, Mr. Nash said. “When you think about fixed versus marginal cost, we will have a much higher fixed cost base than they do,” he said. He declined to comment on whether Cruise would copy other elements, such as surcharges or higher fares at times of higher demand, from its rivals.

The business doesn’t have immediate financing needs, Mr. Nash said, responding to questions on whether Cruise would seek an initial public offering any time soon.

Dan Ammann,

who previously led Cruise as chief executive, left the company abruptly in December, which some analysts attributed to disagreements with GM on strategy. Over time, GM will likely expect Cruise to share technology with its parent company,

Credit Suisse Group AG

noted in a recent report.

Cruise, which has about 2,000 employees—less than 50 of them in finance, accounting and purchasing—is working closely with GM in areas such as accounting, tax and treasury, Mr. Nash said. He previously served as vice president finance and head of finance and accounting at Cruise before taking on the CFO role in May 2020.

Waymo is operating fully driverless robotaxis in Chandler, Ariz., and recently took a step toward offering the same to riders in San Francisco. It is a test that could provide a roadmap for Waymo’s expansion and help the Google sister company build a revenue-generating business. Photo: Karl Mollohan

Asked whether the company would lose software engineers and technical talent to other, publicly traded ventures, Mr. Nash said Cruise continues to evaluate its compensation programs. “We know it’s a competitive market out there,” he said.

Cruise, which has a partnership with

Walmart Inc.

in Phoenix to deliver online orders, has ambitious goals: Last year, GM said it wants Cruise to generate $50 billion in annual revenue by 2030.

Analysts said Cruise has to demonstrate its ability to deploy its technology on a commercial basis.

“What investors are watching is the ability to scale this up and eventually start monitoring the financials,” said

Emmanuel Rosner,

an analyst at Deutsche Bank.

Write to Nina Trentmann at [email protected]

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

https://www.wsj.com/articles/cruise-cfo-works-to-finalize-cost-structure-for-robotaxi-venture-11645619400