Uber and scores of VCs are investing millions into trucking innovation - but little is going toward self-driving trucks, despite the hype around them. Here's why.
- Technologists and big spenders in America's $800 billion trucking industry are investing in new types of trucking software - but not much in self-driving trucks.
- That's because the likelihood that self-driving trucks will be realized in the coming decade is diminishing further and further, making it a lesser focus for big players in the industry.
- As a result, investors are gravitating toward software solutions for trucking companies, which are a safer, less volatile bet.
- With investor focus elsewhere, the expectation for self-driving trucks could be pushed even further down the road.
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Everyone from Tucker Carlson to Andrew Yang has opined on self-driving trucks in recent years. And while many of those influencers' opinions differ on virtually everything else, their standpoint on autonomous trucking is unified: Self-driving technology is coming, soon, and it will squash the livelihoods of 1.8 million Americans.
But looking at the $19.3 billion supply-chain venture-capital space tells a much different story.
Investment in supply chain is red hot. VCs in that space closed 534 deals in 2018, according to Pitchbook's most recent numbers in a December report. That's up from 392 deals in 2015, and just 85 in 2010.
But Pitchbook revealed that self-driving trucks aren't dominating the space, with 122 deals in 2018 and 96 in 2019. That may be because, according to the Pitchbook report, there's an "unproven model in autonomy."
"The technological ideas that may be the most scientifically exciting are often not the highest probability of success," Benjamin Gordon, founder and managing partner of private-equity firm Cambridge Capital, told Business Insider.
"Most venture capitalists, and certainly all private-equity firms, prefer to invest in businesses that have a high likelihood of success and a low level of volatility," Gordon continued. "And self-driving is a pretty good example of the opposite."
That could push the expectation for self-driving trucks even further down the road, because innovation takes money, and much of the money is currently going elsewhere.
VCs and tech giants are looking at automating brokerage instead
Four years ago, Uber Freight's head of operations, Bill Driegert, would have said self-driving trucks would be on the road by 2030. Now, he's not so sure.
"It's still more in the investment phase, where you don't have large-scale commercial implementations," Driegert told Business Insider.
Meanwhile, most players in the trucking-technology space are focusing on automating the process in which truck drivers are matched with loads to move from retailers and manufacturers. Companies like Amazon, Uber, and Oracle all have their own freight-brokerage platforms.
The folks who lead these efforts at big companies and the ones who helm the startups, like Seattle-based Convoy and New York-based Transfix, say that automating brokerage could help truck drivers drive fewer miles without a load and wait less at warehouses for new loads. That helps truckers, many of whom work for themselves or for a small business, make more money.
As for Uber Freight, Driegert, who previously held leadership positions at Amazon and Coyote Logistics, said the company's technology is already slashing costs for customers. Carriers who work with Uber Freight report that they reduce empty miles by 20% to 30%, Driegert said.
"The tech we're building, it's very immediate," Driegert said. "Any shipper or any carrier can download it today and start seeing the difference."
Freight-brokerage software, as well as buzzy data-visibility startups like Project44, are thus a safer bet for investors.
"It's a much lower-risk proposition for a VC to invest in an enterprise software company with proven customers and revenue, and a predictable growth curve, than something as exciting but unpredictable as self-driving technology," Gordon said.
A $70 billion opportunity
Of course, many folks are still pushing ahead in self-driving trucks. UPS recently acquired a minority stake in self-driving company TuSimple, and the startup has been piloting self-driving UPS shipments since spring 2019. Waymo began testing self-driving trucks in Arizona in 2017, and Elon Musk is gearing up to produce the Tesla Semi sometime by the end of 2020.
The revenue upside is clear. Autonomous vehicles would save the trucking industry billions and increase fuel efficiency, according to a Morgan Stanley report. Labor savings alone could be $70 billion per year, and productivity would be up 30% because driverless trucks would run 24/7.
But trucking is technologically further behind than outsiders may understand. Drivers often pick up new jobs through calling individual brokerages, GPS tracking is still a novelty, and a law that requires drivers to keep a device to electronically log driving hours was panned partially because truckers felt they were being monitored too closely.
In the past two decades, just about every major industry has been digitally transformed - retail with online shopping, travel with online airline and hotel booking, and finance with digital stock brokers. Eric Berdinis, the group product manager at Uber Freight, said logistics is getting its belated digital revolution right now.
"It's the last kind of major industry where this transformation is happening," Berdinis told Business Insider.
Asad Hussain, a mobility-tech analyst at PitchBook, agrees.
"Our view is that self-driving trucks are coming, but it's going to take years for them to become widespread," he told Business Insider. "In the meantime, there's a lot of inefficiencies and excess costs and supply chains that can be addressed with the technologies of today."
For that reason, it might be necessary for the public to roll back its expectations of what will come out of the trucking industry. An industry that's still working out how track the location of truck drivers isn't likely to going to be able to eliminate their roles altogether by virtue of technology.
Of course, the challenges of developing self-driving technology aren't limited to truck startups. As The New York Times reported last year, the heads of companies like Ford have admitted that developing driverless cars was harder than they thought.
"There was this incredible optimism," Navigant Research's Sam Abuelsamid told the Times. "Companies thought this was a very straightforward problem. You just throw in some sensors and artificial intelligence, and it would be easy to do."
Gordon, who has been in supply chain since the mid 1990s and previously sold a startup to shipping giant Maersk, points more generally to an adage PayPal and Palantir billionaire Peter Thiel wrote in 2011, criticizing a slowing rate of innovation and lack of ambitious entrepreneurs: "We wanted flying cars, instead we got 140 characters."
Sometimes the more conventional route wins out, not because it's the cheapest or most innovative long-term solution - but because it's the safest for the people with a stake in the industry right now, no matter how imminent the revolution may feel.
Like other buzzy ideas that always seem 10 years out, that safety net may be what keeps self-driving trucks a thing of the future rather than one of the present.
