Focus: Logistics giants hedge their bets in uncertain U.S. self-driving truck race

US Xpress Enterprises

04/04/2022 11:00

By Tina Bellon
    TUCSON, Ariz., April 4 (Reuters) - U.S. self-driving truck
companies have a golden opportunity in the form of a nationwide
driver shortage, but their robot drivers still are not ready and
neither are their biggest potential customers.
    The uncertainties surrounding autonomous trucking come at a
critical time for the U.S. trucking industry, which faces a
record shortage of 80,000 drivers as demand for online shopping
and rapid delivery times is straining supply chains.
    Private investors, who have so far poured nearly $9 billion
into U.S. AV trucking companies according to data from
Pitchbook, are hoping that self-driving trucks eventually catch
on. Among the companies developing the technology are TuSimple
Holdings Inc  TSP.O , Aurora Innovation Inc  AUR.O , Embark
Technology Inc  EMBK.O  and Alphabet Inc's  GOOGL.O  Waymo.
    But large logistics companies, who represent the tech
startups' coveted future customers, are in no rush to sign big
contracts. They continue to test the technology of multiple
providers in limited partnerships.
    "Everybody is at a point where they're hedging their bets,"
said Eric Fuller, the Chief Executive of US Xpress Enterprises
Inc  USX.N , a carrier and trucking brokerage that manages 6,000
of its own tractors. 
    The company has announced partnerships with TuSimple and
Aurora. Fuller, who also sits on TuSimple's advisory board, said
US Xpress was working with all the other AV companies, but had
yet to announce 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 pushing toward commercial launches.
    They provide the sensors and software, and some have
partnered with truck manufacturers to incorporate their
technology at the assembly line, but all rely on large logistics
companies to pay for their offering.  
    The U.S. Southwest, primarily Texas and Arizona, where
weather and regulations are favorable, has emerged as the
testing 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  R.N  have launched
pilot programs with several autonomous trucking companies. 
    But logistics giants also say they are still in the early
stages of exploring the technology and are waiting to see which
startups have the team, capital and network to survive and prove
self-driving to be feasible on a large scale.
    
    'SHAKING THINGS OUT'
    While much attention has been focused on self-driving taxis,
industry experts increasingly bet on driverless trucks to be the
first autonomous vehicles to generate meaningful revenue due to
the less complex driving environment in which they operate.
 urn:newsml:reuters.com:*:nL1N2SF0RF
    Making a meaningful dent in the U.S. market of 2.3 million
trucks will take time, however, and industry experts project no
more than a few hundred-thousand autonomous trucks over the next
decade.
    Logistics companies hope robo-trucks will one day take over
monotonous long-haul tours, but not replace existing jobs. 
    Human drivers will prefer to spend more time on shorter,
complex routes near their homes - routes that are still too
difficult for self-driving technology.
    Pitchbook analysts expect the global AV trucking market to
balloon from around $530 million in 2023 to $167 billion in
2035.
    "There's still opportunity for more players. We're not at a
point where we're shaking things out," Jim Monkmeyer, president
for transportation at DHL Supply Chain, said during a February
visit to TuSimple's testing facility in Tucson, Arizona.
    DHL Supply Chain, which operates some 1,500 trucks and
manages around $3 billion of annual North American freight
spend, has so far partnered with TuSimple and Embark and put in
reservations for future trucks with both companies. Those orders
are slated to be fulfilled in 2024.
    Monkmeyer said DHL had contracted with multiple providers to
reduce its risks, but added that placing truck reservations
early was crucial in order to be among the first to explore the
new technology.
    Monkmeyer and his logistics colleagues say self-driving
trucks offer the potential to increase freight capacity and
reduce cost, with robots, unlike humans, not subject to a
mandatory 11-hour daily driving limit.
    
    LOWER COSTS
    But the economics pan out only once the driver is out of the
cabin.
    So far, only TuSimple has removed its safety drivers in a
handful of night-time trial runs along an 80-mile (130 km)
stretch of highway between Tucson and Phoenix, Arizona.
    The company is planning to present per-mile cost
calculations in the next few months, Cheng Lu, TuSimple's former
CEO, said in late February, just days before the company
replaced him in a surprise move.  urn:newsml:reuters.com:*:nL5N2V64Z3  
    "Your cost has to either be lower than what today's costs
are, 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 per-mile costs,
according to data by the American Transportation Research
Institute.
    
    Graphic on current per-mile trucking costs: https://tmsnrt.rs/3ulCdyo
    
    Autonomous driving could halve driver costs, with the
companies planning to charge between 35 and 45 cents in per-mile
subscription fees, according to two industry experts.
    But the companies, three of them publicly listed, are far
from generating meaningful revenue, let alone profit. Embark
recorded a 2021 net loss of $124 million, TuSimple had a loss of
$411 million and Aurora lost $755 million. 
    For the logistics partners, access to sufficient capital is
crucial when determining whom to partner with, DHL's Monkmeyer
and US Xpress' Fuller said.
    TuSimple said it ended 2021 with some $1.3 billion left in
cash, Aurora with $1.6 billion.
    But the companies also confront other real-world hurdles as
they try to release their technology on a larger scale.
    Ryder, which operates nearly 240,000 trucks and around 800
U.S. maintenance locations, 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
host of lidar, radar and camera sensors and whether trucks
operating around the clock require different maintenance
schedules.
    In the long run, the tech companies also had to tackle more
challenging driving conditions, such as snow, said Ryder's head
of new product development, Karen Jones.
    "I can't just run an autonomous business in the Southwest
and Southeast, you have to figure out how to get to the
Northeast," she said.

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Drivers and fuel account for bulk of trucking costs    https://tmsnrt.rs/3CSvvmk
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 (Reporting by Tina Bellon in Tucson, Ariz.
Editing by Matthew Lewis)
 ((Tina.Bellon@thomsonreuters.com; +1 646 573 5029; Reuters
Messaging: tina.bellon.thomsonreuters@reuters.net; Twitter
@TinaBellon))