The ‘Race’ To Win The Autonomous Truck Market

There is no doubt that autonomous trucks will change the face of logistics. But there are questions that many would like clarity on around this cutting-edge technology. What kind of trucks will they be? When will we see autonomous trucks on the road? How fast will the rollout be? And who will win the race?

TORC and Daimler Truck held an event for journalists last week at a TORC facility in Albuquerque. The event provided their perspective on these questions. TORC is an autonomous truck company and an independent subsidiary of Daimler Truck.

What Kind of Autonomous Trucks Will We See?

There are different types of trucks and different types of routes used in hauling freight. Trucks range in size from delivery vans to the Class 8 semi-trucks that haul 80,000 pounds. Broadly speaking there are first mile, middle mile, and last mile deliveries. First mile is a trip to a local or regional transportation or distribution hub. The middle mile connects a distribution hub on one side of the country to a hub on the other side. And last mile involves delivery from that destination hub to businesses, stores, and consumers in the destination region. The biggest investments in autonomous trucks from the financial community have been bet on the middle mile solution involving large Class 8 trucks. The middle mile solution for autonomous trucks involves deliveries from an origin terminal located a few miles from the interstate to a destination terminal, also within proximity to the interstate. This is the solution TORC is “racing” to develop.

The middle mile solution involving autonomous trucking is rather constrained, there is less flexibility than would be the case with traditional trucks. The way it works is that trucks with drivers would bring full trailers – called full truckloads (FTLs) in the industry – to a terminal. These trucks would travel relatively short distances from a factory or warehouse and drop the trailer at the terminal. The trailer would be hooked up to the autonomous truck. That truck would then travel in autonomous mode – that is with no driver in the truck – hundreds of miles to a destination terminal. At the destination terminal, the trailer would be detached from the autonomous truck, put on a truck, and that human operated truck would be used to deliver the load on more crowded and difficult to navigate roads a relatively short distance to the final destination.

This is a problem that – if solved right – offers significant benefits to carriers and the owners of private fleets, as well as significant returns to investors. Further, while it is by no means an easy technical problem to solve, it is a far easier problem to solve than having trucks drive on secondary roads or in crowded urban areas.

In terms of sales, TORC – and some of their competitors – are selling the autonomous brain of a truck via subscription. The truck’s brain is a software product that derives information about the world around it from an array of sensors. This subscription model comes with higher margins – margins akin to what enterprise software companies get when they sell in a software-as-a-service model. The truck that itself would be purchased or leased from Daimler Truck. Because TORC is majority-owned by Daimler Truck, their level of integration with this OEM is much deeper than a partnership. It is worth noting that Freightliner, a Daimler Truck’s brand, has the largest market share in this industry.

Carriers would also see benefits. The trucking industry claims that there is a truck driver shortage. Simple economics would suggest that is not the case. If there are not enough drivers, that is because the industry is not paying high enough wages or creating a desirable work environment. The industry does have significant turnover – cross country driving is a tough job; hiring is not easy. Finally, there are large numbers of drivers just a few years from retirement age; training a new crop of drivers will be an issue.

Autonomous trucks – with their arrays of sensors and complex software – will cost significantly more than traditional trucks. Carriers operate with very tight margins. And the big carriers understand their costs at a very detailed level. Carriers are looking for payback on their investment in a truck in a year to a year and a half. To succeed, autonomous truck makers will need to be able to match those payback periods by offsetting the higher initial costs with savings from better asset utilization and lower fuel and maintenance costs.

Asset utilization basically refers to keeping the truck in motion, instead of sitting in a yard unused for significant periods of time. Drivers have hours of service requirements to make sure they get enough sleep and can drive safely. Autonomous trucks, of course, don’t stop to rest. On the other hand, to fully utilize a truck, a backhaul is needed. Initially, before the network of terminals builds out, that could be an impediment.

Autonomous trucks will also likely have lower fuel and maintenance costs. Autonomous trucks are programmed to follow the speed limit, which saves fuel. They are also programmed to follow best driving practices – avoiding tailgating followed by hard braking, for example. This should lead to lower maintenance costs.

When Will We See Autonomous Trucks on the Road?

When will we see autonomous trucks on our interstates? The Chairman of the Board of Management at Daimler Truck – Martin Daum – has a surprising answer – not all that soon. This is surprising as some of TORC’s competitors are claiming they will have autonomous trucks being used in a fully autonomous mode on a regular basis as soon as next year.

Mr. Daum, on the other hand, is saying that it might take until 2030 for autonomous trucks to reach 6% of the Class 8 trucks on the road. That means, there will be more Class 8 truck drivers on the road in five years than there are today, because freight shipments are projected to grow at a faster rate than Daimler believes the autonomous truck market will grow.

The autonomous truck roll out will proceed incrementally. Initially, autonomous trucks will run in the southwest states like – New Mexico and Texas – where difficult climate issues like snow are rare, and the regulatory climate is favorable. Over time, the roll out to other regions will gradually spread east and north. After the US, Australia and Canada are good target markets. The rest of the world is a tougher nut to crack for a variety of societal, road, and regulatory reasons.

TORC is taking a safety-first approach. They don’t want to rush to market with an autonomous truck that is not demonstrably safer than traditional trucks. In a social setting, one executive did admit that a gruesome accident involving an autonomous truck is probably inevitable. Further, this kind of accident could slow the progress of the industry. TORC does not want to be the autonomous truck company at fault when that happens. They also want their safety protocols to be robust enough to stand up to additional regulatory scrutiny.

The journalists did get to ride in the autonomous trucks. There was a driver supported by an assistant in the passenger seat that was used for coding anomalous situations where control of the truck was handed back to the driver. We, the journalists, got to experience merging onto the Interstate, traveling on a busy highway, changing lanes, and exiting the interstate. On one of my two rides, control was handed back to the driver when the sensors detected an accident a half mile up the road. On another occasion the driver took control when wind gusts exceeded thirty miles an hour. My fellow passenger – a TORC executive in the back seats (where a sleeper would exist in most trucks) explained to me that the trucks have been tested off the road and the trucks were handling gusts of up to 60 miles per hour without a problem. But because of an “abundance of caution, and out of recognition that it was a privilege to be able to test the vehicle on public roads,” the truck was programmed to hand control back when the gusts reached 30 miles per hour or higher.

Interestingly, the truck had driver assist features for when not in the autonomous mode. One executive explained that even if autonomous driving occurs 99% of the time, when drivers are needed, they want the truck to be as safe as any other human controlled trucks on the road.

I felt safe on the ride along. I felt much safer than I feel in many instances when I am a passenger in a car or am driving in busy traffic in a location I don’t know. It felt so safe, that about halfway through the second ride it started to get a little boring.

So, is a safety-first culture preventing TORC from getting to market first? The executives were not saying that. What they said is that Daimler Truck is a patient investor, while many of their competitors must please impatient venture capitalists. To keep the investment dollars flowing, some of their competitors have made big promises. Michael Fleming, the CEO of TORC, said “in this industry we have never seen a timeline met.” What has been most surprising to Mr. Fleming is “the amount of misinformation in the industry.” He is disappointed with the amount of time he needs to spend having to correct that misinformation.

Who Will Win?

TORC and Daimler Truck executives do not believe this is a winner-take-all market. They believe there will be multiple winners. They do believe that TORC will be one of the winners. TORC was first to begin tackling the terminal-to-terminal problem. They were also first to create a significant tie-in to a truck OEM. The OEM relationship is important because carriers trust the dealers they are working with and the service they are getting.

And the OEM relationship is important because solving the autonomous truck problem is not just about software. The truck chassis needs to be adopted to the needs of an autonomous vehicle. Daimler Truck added redundant braking and steering, additional batteries, higher voltage, and other features, to fit the distinctive needs of an autonomous truck. But they added the features in a manner so that repair personnel would not be looking at a truck chassis new to them. The engine and chassis has a very similar look and feel to traditional trucks.

Finally, management will be a critical factor in who wins and losses in this market. I was impressed by Mr. Fleming’s management style. Finding and retaining smart engineers is, and will remain, critical. This, it appears to me, is something Mr. Fleming is good at.

In conclusion, if you read the press around the autonomous truck market, it appears that there is a “race” to get to market first and win. Daimler Truck and TORC clearly have a different view. Their approach is more patient, emphasizes safety, and avoids making promises they believe can’t be met.