2019 Trends: Autonomous Trucks in the Supply Chain
William Craig, CPA – Senior Manager - Market Research
Since 2008, mining company Rio Tinto has moved more than one billion tons of iron ore and waste material across its five mining sites in the Pilbara Region of Western Australia using fully autonomous trucks. They currently have more than 80 autonomous Komatsu trucks operating with plans to increase the number to over 140 by the end of 2019. Each truck operated an estimated 700 hours more than a conventional truck during 2017 and had around 15% lower load and haul unit costs (Mining.com).
While on the open roads, in 2016, a Volvo truck outfitted with Uber’s (Otto) autonomous vehicle (AV) technology and no driver behind the wheel, traveled 120 miles along I-25 from Fort Collins to Colorado Springs to deliver 50,000 cans of Budweiser. For full disclosure, the driver engaged the autopilot and moved to the backseat once on the highway (CNN Business).
In the first coast to coast experiment, Embark, a San Francisco’s based startup, used a Peterbilt truck coupled with Embark’s autonomous technology to travel 2,400 miles from Los Angeles to Jacksonville with only a safety driver on-board. Now, Embarkhas teamed up with Electrolux and Ryder to deliver Frigidaire refrigerators 650 miles on I-10 throughout Texas, New Mexico, Arizona and California using the same technology. (TT News). Waymo, Google’s self-driving vehicle company, will begin a pilot project delivering freight to Google’s data centers in Atlanta, using modified Peterbilt trucks using Waymo’s autonomous capabilities and safety drivers (Forbes).
Many industry titans as well as start-ups have invested and will continue invest in the autonomous truck market, including the likes of Volvo, Daimler, GM, Ford, Tesla, Waymo (Google/Alphabet), Uber, Embark, Nicola, Thor, Peloton, to name just a few. According to KPMG, $50 billion has been invested over the last 5 years, developing AV technology.
McKinsey and Company believes it will be 8 years, before fully autonomous trucks with no humans on board will be on the highway in North America. The semi-autonomous and autonomous truck markets are projected to reach 1.2 million units in combined sales by 2025 (ResearchandMarkets.com). Growth will continue to accelerate, with HIS Automotive forecasting 21 million vehicles sold with some level of autonomy in the year 2035. While the future is promising, there are lots of current developments. In fact, Walmart, Pepsi, FedEx, UPS, DHL are just some of the companies that have ordered the new Tesla Semi, a self-driving electric powered truck capable of doing 0-60 in 5 seconds (Business Insider)!
In the immediate term, automatic emergency braking (AES) and adaptive cruise control (ACC) will have the most significant potential for impacting the industry, as the National Highway Traffic Safety Administration (NHTSA) expects AES to be standard in vehicles by 2022. NHTSA defines 6 levels of autonomous vehicles (video overview of each level), including; 0 – No Automation, 1 – Driver Assistance, 2 – Partial Automation, 3 – Conditional Automation, 4 - High Automation, 5 - Full Automation. For a complete description, please visit NHTSA.
Partially automated platooning, where 2-5 trucks follow closely behind each other could be rolled out over the next five to seven years according to Bernstein analysts (Business Insider). In 2016, Volvo demonstrated how a caravan of autonomous trucks could work in unison to reduce fuel consumption and increase safety, using vehicle to vehicle (V2V) platooning technology.
More recently, they have teamed with FedEx to test the platooning technology with the North Carolina Turnpike Authority. Others currently testing platooning technology include Daimler AG, Navistar International and Tesla.
The benefits of autonomous and semi-autonomous trucking could be immense! Let explore some of these major benefits.
Operating Costs/Labor: McKinsey and Company reports the industry will see a 45% reduction in truck operating costs once fully autonomous trucks are on the road, which could take more than a decade. The net savings of these technologies on the trucking industry are likely to be between $100 billion and $125 billion, mainly in labor-savings, which represent 43% of the costs (Bernstein).
Fuel Consumption: According to the Energy Information Administration, fuel consumption could be reduced by as much as 18% using autonomous truck technologies by 2050 (Forbes). In a recent platooning test, fuel consumption was reduced 4.5% for the lead truck and 10% for following trucks (Forbes).
Environment: McKinsey and Company reports that fully autonomous vehicles could reduce CO2 emissions by up to 60%, while vehicle platooning can reduce emissions by up to 20% (LTX).
Safety/Insurance: According to the Insurance Institute for Highway Safety (IIHS), over 350,000 accidents involve large trucks each year, with driver related issues cited as contributing factors in 87% of the crashes (LTX). Autonomous technology can dramatically decrease those numbers. Autonomous vehicles could eliminate 90–95 percent of road accidents caused by human error (KPMG) as well as reduce insurance costs.
Drivers: Autonomous technology could have a major impact addressing driver shortages. With the demand for shipping increasing (Amazon, Walmart, etc.), there’s a major shortage of almost 50,000 drivers, which is expected to grow to 330,000 by 2024 (LTX).
Let address some of the major challenges.
Security: Hackers could potentially infiltrate the software and override controls of an autonomous truck. Safeguards will need to be put in place to address these concerns.
Regulations/Laws: Current liability laws prevent suits against the maker of the equipment/technology. Only the trucker, the trucking company that hired the driver, and the company that hired the trucking company can be sued. Who will gets sued if a self-driving truck is involved in an accident? There is current legislation pending to address this concern (Business Insider).
As far as laws governing self-driving vehicles, laws vary widely between states. 22 states have passed laws on autonomous vehicles, 10 have executive orders in place, 10 have legislation pending, while the remaining 8 have not considered legislation. These is also a need for federal self-driving laws (DMV.org). No federal bills have been passed to date.
Technology: With recent highly publicized deaths involving Uber and Tesla vehicles, additional technology improvements are required as well as close regulatory scrutiny. Autonomous technology must continue to be enhanced to better accommodate for all possibilities, including changing environmental factors (weather, lighting, etc.), unforeseen events, etc.
Infrastructure: Major improvements are still needed to replace aging roads and bridges, as well as support autonomous and connected vehicle technology.
The industry will continue to see the introduction of new real-world applications for autonomous technology in the supply chain. Consider XL Parts, a Texas based auto parts dealer, which will begin delivering auto parts to repair and automotive service shops in mid-2018 using Udelv self-driving vehicles (Trucks.com). Kroger Co. has partnered with Nuro, a Silicon Valley Startup, to deliver groceries to consumers in Scottsdale, AZ, using fully autonomous vehicles. There isn’t even a spot for the driver in the Nuro robot vehicle, called the R1 (Video)! Ford, Walmart and Postmates have recently teamed up for a similar venture for home deliveries. In China, JD.com and Alibaba have introduced driverless delivery robots to carry packages to small lockers outside apartments (KPMG) and are experimenting with self-driving trucks and drones for more remote areas.