Logistics giants hedge their bets in America’s uncertain self-driving truck race

TUCSON, Ariz., April 4 (Reuters) – U.S. self-driving trucking companies have a golden opportunity in the form of a nationwide driver shortage, but their robotic drivers aren’t ready yet and neither are their biggest potential customers.

The uncertainties surrounding self-driving trucks come at a critical time for the US trucking industry, which is facing a record shortage of 80,000 drivers, as demand for online shopping and fast delivery times testing supply chains.

Private investors, who have poured nearly $9 billion into US AV trucking companies so far, according to data from Pitchbook, are hoping that self-driving trucks will finally catch on. Companies developing the technology include TuSimple Holdings Inc (TSP.O), Aurora Innovation Inc (AUR.O), Embark Technology Inc (EMBK.O), and Alphabet Inc’s Waymo (GOOGL.O).

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But the big logistics companies, which represent the coveted future customers of tech startups, are in no rush to sign big contracts. They continue to test multi-vendor technology in limited partnerships.

“Everyone is at a point where they are hedging their bets,” said Eric Fuller, chief executive of US Xpress Enterprises Inc (USX.N), a trucking and transportation brokerage firm that manages 6,000 of its own tractors.

The company has announced partnerships with TuSimple and Aurora. Fuller, who is also on TuSimple’s advisory board, said US Xpress was working with all the other AV companies but had not yet announced any more partnerships.

The companies say they have developed technology that can safely pilot a 33,000-pound (15,000 kg) truck down a busy highway and are moving toward commercial launches.

They provide the sensors and software, and some have partnered with truck manufacturers to get their technology onto the assembly line, but all rely on large logistics companies to pay for their offering.

The US Southwest, primarily Texas and Arizona, where the weather and regulations are favorable, has become the proving ground for heavy-duty autonomous vehicle (AV) companies.

Large logistics groups such as DHL (DPWGn.DE), United Parcel Service Inc (UPS.N), and Ryder System Inc (RN) have launched pilot programs with various autonomous trucking companies.

But the logistics giants also say they are still in the early stages of exploring the technology and are waiting to see which startups have the equipment, capital and network to survive and prove that autonomous driving is feasible on a large scale.

‘SHAKE THINGS UP’

While much attention has been focused on autonomous taxis, industry insiders are increasingly betting that driverless trucks will be the first autonomous vehicles to generate significant revenue due to the less complex driving environment in which they operate. Read more

However, it will take time to make a significant dent in the 2.3 million-truck US market, with industry experts projecting no more than a few hundred thousand self-driving trucks over the next decade.

Logistics companies hope that robotic trucks will one day take over monotonous long-distance hauls, but not replace existing jobs.

Human drivers will prefer to spend more time on shorter, more complex routes closer to home, routes that are still too difficult for autonomous driving technology.

Pitchbook analysts expect the global AV truck market to skyrocket from around $530 million in 2023 to $167 billion in 2035.

“There are still opportunities for more players. We’re not at a point where we’re shaking things up,” said Jim Monkmeyer, president of transportation for DHL Supply Chain, during a February visit to the TuSimple test facility in Tucson, Arizona. .

DHL Supply Chain, which operates some 1,500 trucks and manages about $3 billion of annual freight spend in North America, has so far partnered with TuSimple and Embark and has booked future trucks with both companies. Those orders are scheduled to be fulfilled in 2024.

Monkmeyer said DHL had contracted with multiple vendors to reduce its risks, but added that making truck reservations early was crucial to being among the first to explore the new technology.

Monkmeyer and his logistics colleagues say autonomous trucks offer the potential to increase cargo capacity and reduce costs, with robots, unlike humans, not subject to a mandatory 11-hour daily driving limit.

LOWER COSTS

But the economy works only once the driver is out of the cabin.

So far, only TuSimple has taken out its security drivers in a handful of late-night tests along an 80-mile (130 km) stretch of highway between Tucson and Phoenix, Arizona.

The company plans to present cost-per-mile calculations in the coming months, Cheng Lu, TuSimple’s former chief executive, said in late February, just days before the company replaced him in a surprise move. Read more

“Their cost has to be lower than today’s costs, or there is a clear line of sight to be lower,” said Lu, who now serves as an adviser to the new CEO.

Drivers account for more than 40% of costs per mile, according to data from the American Transportation Research Institute.

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Graph on current transportation costs per mile: https://tmsnrt.rs/3ulCdyo

Autonomous driving could cut drivers’ costs in half, with companies planning to charge 35 to 45 cents in subscription fees per mile, according to two industry experts.

But the companies, three of which are publicly traded, are far from generating significant revenue, let alone profit. Embark posted a 2021 net loss of $124 million, TuSimple had a loss of $411 million, and Aurora lost $755 million.

For logistics partners, access to sufficient capital is crucial in determining who to partner with, said DHL’s Monkmeyer and US Xpress’s Fuller.

TuSimple said it ended 2021 with about $1.3 billion in cash, Aurora with $1.6 billion.

But companies also face other real-world hurdles as they try to launch their technology on a larger scale.

Ryder, which operates nearly 240,000 trucks and around 800 maintenance locations in the US, has partnered with TuSimple, Waymo and Embark to explore how self-driving trucks would fit into its network.

The logistics company wants to understand how to service the myriad of camera, radar, and lidar sensors and whether 24-hour trucks require different maintenance schedules.

In the long run, technology companies also had to deal with more challenging driving conditions, such as snow, said Karen Jones, Ryder’s director of new product development.

“I can’t just run a freelance business in the Southwest and Southeast, you have to figure out how to get to the Northeast,” he said.

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Reporting from Tina Bellon in Tucson, Ariz. Edited by Matthew Lewis

Our standards: the Thomson Reuters Trust Principles.

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