October 21, 2020

Autonomous trucking: a disruption of the transportation industry

As operations go digital, the transportation industry's structure and profits tend to change. Passenger transportation and parcel services have developed rapidly. Now, traditional trucking companies are starting to feel the heat. Digitization, automation, robotics, advanced analytics, and other technological advances expose the industry's vulnerability. One development it will have to deal with is autonomous trucking. The question is, how will it impact the industry?

Martin Mommersteeg

Martin Mommersteeg

Partner

Disruption in four waves

Full autonomous trucking is not an issue we'll have to tackle in the near future. But the first real-life examples demonstrate where we're headed. Scania, Daimler, and Volvo have successfully launched the first pilots, showing that heavy-duty trucks — equipped with lidars, sensors, and other technologies — can be operated safely without human intervention.

How will autonomous trucking be rolled out? We believe the process will consist of 4 waves that will increasingly lower operators' cost structure:

  1. The first wave will feature a technology that can wirelessly connect a convoy of trucks to one truck that leads the way. This will allow them to achieve maximum efficiency. Each truck still has a driver, but the trucks will interlink through algorithms, which allow the tailing truck to benefit from better aerodynamics. We've calculated that this technology will reduce the total operating cost of a truck by 1-2%.
  2. The second wave will feature a driver in the lead truck and unmanned trucks that follow closely behind. Upon leaving the freeway, drivers will resume control of the tailing trucks to complete the journey in areas that are still too complex for autonomous trucking. Operating costs will be impacted more significantly: we've calculated that 7-10% will be saved on fuel and labor.
  3. During the third wave, drivers will drive the trucks to the freeway, where the vehicles will continue their journey autonomously. Once they exit the freeway, drivers will step in and drive them to their respective destinations, navigating smaller streets, parking lots, and unloading docks. This constrained autonomy will reduce the operating cost of a truck by another 8-10%.
  4. The most significant cost reduction will be realized during the fourth wave, when trucks will operate fully autonomously — from loading till delivery. Operating cost will reduce by another 20-25%, resulting in a total cost reduction of 35-45%.

What's the impact of autonomous trucking?

The most obvious effect of autonomous trucking will be a huge reduction of operating costs. Although capital expenditures will rise due to investments in technology, trucking companies will benefit from lower salary and fuel costs. More importantly, there will be less latent capacity of trucks, as near-24-hour operations can be implemented — companies will no longer be hampered by hours-of-service regulations for drivers and weekend or night restrictions. This increase in productivity can be leveraged further through instant planning, on-the-move route adjustments, and improved load factors.

Autonomous trucking will also result in industry concentration. Big trucking companies will gain a larger market share at the expense of owner-operator companies. Since there will be no breaks during near-24-hour operations, new issues may arise: we will need to build a new infrastructure to troubleshoot new issues, do roadside maintenance, and resolve problems drivers currently handle. Major companies are better able to build these networks. Moreover, autonomous trucks will be guided by advanced routing software, using constant connectivity and creating vast amounts of data that needs to be analyzed. Smaller companies are not sufficiently equipped to invest in and manage this type of software. Moreover, operating in a convoy requires smooth collaboration, which isn't their forte.

Furthermore, new business models may arise. When the value of trucking shifts from hardware to software, supply-and-demand platforms such as Shipster and CargoX might take control of the trucking supply chain. OEMs could vertically expand and offer transportation-as-a-service, taking further control of their trucks' usage and maintenance. On the other hand, major trucking companies might reduce demand for brokers or set up these services independently. It will be a struggle for power, and it's difficult to predict who the winner(s) will be.

Change is imminent

Autonomous trucks will likely disrupt the transportation industry's operating and business models as well as cost structures. Experts believe we will have to deal with the fourth wave in about 10-15 years, but the pilots of wave 1, 2, and 3 have proven to be successful. This means autonomous trucks will soon gain ground in countries across the globe, changing the face of freight transportation like never before.