Autonomous trucking: a long road to commercialisation

After some initial bullish announcements and inflated expectations regarding rollout timing, autonomous truck players have changed their view over the past few years on feasible mid-term achievements. Slower-than-expected technology progress and safety issues have delayed commercial launches. Ultimately, however, the industry has come a long way, and many autonomous truck start-ups are close to developing and implementing the full set of capabilities that the autonomous driver requires or are currently solving the last remaining challenges. The industry is now working to prove the safety capabilities of their technology and, if all runs smoothly, driver out operations can be expected in 2024.

While driver out is an important milestone, it merely marks the starting point of the market adoption curve. The overall opportunity of autonomous trucking is huge. The US trucking market is estimated to be worth US$800bn. Roland Berger estimates that by the middle of the next decade, 20-30% of the on-road freight volume can be handled by autonomous trucks. The speed of adoption, however, will be determined by both technological advancements and consumer behaviour. Operational challenges and the risk adversity inherent to the trucking industry can slow down adoption despite the significant value proposition offered by autonomy. Furthermore, while there are several pilot programmes ongoing where carriers have partnered with autonomous truck start-ups to deploy the technology in real world applications, meaningful revenues for start-up players are likely still several years out.

Investor interest cools and more players drop out

The general cool down of investments in the tech sector over the past months has also affected autonomous truck start-ups. In a high interest rate environment, investors are shying away from pre-revenue companies, especially those whose commercial timelines continue to be delayed. Figure 1 shows the market capitalisation of selected, publicly traded autonomous truck players. TUSimple, Aurora and Embark lost over 90% of their market cap since beginning of 2022.

Autonomous truck start-ups need significant funding to support the development of their new technology. Roland Berger estimates that the development and testing of a Level 4 autonomous driver system costs about US$2bn. This number remains significantly higher than the funding that any autonomous truck start-up has raised up to now. Drying up funding inflows will lead to further shakeout of players. While early-stage players have failed in the past, the industry is now beginning to see more advanced players like Embark winding down operations and selling their assets.

Investors divert their attention to confined area applications

While it looks like autonomous truck start-ups are facing mounting challenges, there is a silver lining in all of this. Automation of confined area applications such as yard tractors or mining trucks is still attracting investors. US start-up Outrider develops self-driving yard trucks that can robotically connect and disconnect from trailers. Outrider was able to secure funding earlier this year despite general reduction of funding inflows to the autonomous over-the-road (OTR) truck space.

The overall market potential for automated yard tractors is much lower than for OTR trucks. According to Roland Berger estimates, annual sales in the yard tractor segment range between 6,000 and 8,000 trucks, compared to 150,000 trucks in the OTR segment. However, the risk profile of a venture trying to automate yard tractors is much more favoruable than that of a player aiming to automate the more complex use case of unconfined area trucking. The capabilities that an autonomous driver needs to have in terms of sensing, route planning, and decision making are much more limited in confined areas. Average speed is lower, reducing the need for long-range perception, and many complex driving tasks that are difficult to automate, such as high-speed merges onto a highway, do not exist. Additionally, yard tractors are operating in environments such as port terminals that are already highly automated. As a result, required investments in developing technology are lower, while the saving opportunities, that primarily come from eliminating the human driver, are comparable. As an industry, confined-area autonomy focuses on similar technology while overall reducing much of the risks faced by the OTR trucking industry. This can be seen as high value proposition for investors who continue to invest in this space despite the current economic headwinds today.

About the authors: Walter Rentzsch is Director and Wilfried Aulbur is Senior Partner at Roland Berger