California's Department of Motor Vehicles (DMV) says it suspended Cruise's autonomous vehicle deployment and driverless testing permit, ending efforts by the company for the time being to test the cars without safety drivers.
"Based upon the performance of the vehicles, the department determined the manufacturer's vehicles were not safe for the public's operation," the DMV says in a statement, citing "an unreasonable risk to public safety".
The DMV added that Cruise had "misrepresented any information related to the safety of the autonomous technology of its vehicles". The state agency said Cruise was allowed to challenge the suspension within five days. The company did not say if it planned to do so.
The suspension, following a series of accidents involving Cruise vehicles, is a major setback for the self-driving business that GM has called a major growth opportunity and to the autonomous vehicle (AV) industry. But unionised transit workers and other critics of robotaxis hailed the suspension, which was effective immediately.
"This could be a big blow to Cruise," says Bryant Walker Smith, a law professor at the University of South Carolina. "This plays into the narrative about the technology and the companies failing. The whole industry will suffer as a result."
Cruise says in a statement: "We will be pausing operations of our driverless AVs in San Francisco. Ultimately, we develop and deploy autonomous vehicles in an effort to save lives."
Cruise says the DMV was reviewing an October 2 incident, where one of its self-driving vehicles was braking but did not avoid hitting a pedestrian previously struck by a hit-and-run driver.
"When the AV tried to pull over, it continued before coming to a final stop, pulling the pedestrian forward. Our teams are currently doing an analysis to identify potential enhancements to the AV's response to this kind of extremely rare event," it added.
The DMV order said Cruise had not initially disclosed all video footage of the accident and stated: "Cruise's vehicles may lack the ability to respond in a safe and appropriate manner during incidents involving a pedestrian."
Cruise could not immediately be reached to comment on DMV report, and the company had not initially shared all videos of the incident.
GM executives have repeatedly called Cruise a giant growth opportunity, repeating that view during an earnings conference call on Tuesday before California's DMV announced its decision.
"We do believe that Cruise has tremendous opportunity to grow and expand," GM CEO Mary Barra told analysts. "We ... see tremendous upside opportunity and growth."
In her call before the ruling, Barra said Cruise robotaxis have better safety records than human drivers.
Critics of the self-driving technology pounced on the DMV decision.
The Transport Workers Union of America (TWU), which represents airline, railroad and transit workers and which has harshly criticised self-driving vehicles, says in a statement that companies like Cruise must meet measurable safety standards.
"Despite the propaganda pushed by tech executives, Cruise has shown the world that robots are incapable of even coming close to achieving the high standards human operators meet each and every day,” TWU President John Samuelsen says.