The race to develop the first commercially available autonomous vehicle has been building for several years, and it doesn’t seem to be slowing, based on a Morgan Stanley analysis of the marketplace following a visit to recent 2nd VDI Autonomous Truck Conference in Dusseldorf, Germany, by company representatives.
Equity analysts Ravi Shanker and Diane Huang and research associate Shaked Atia prepared a report on observations at the conference, including the broad respect that tech companies seem to be generating for their autonomous vehicles/delivery investments.
“There was broad respect for the tech giants (Google/Waymo, Uber, Tesla, Amazon) who have been spending billions of dollars on development of technology and who may end up taking home the prize by finding the sweet spot of a product that works and getting it to market quickly,” the research note said.
“Irrespective of the winner, the unanimous view was that in the future, size is going to matter and carriers/OEMs will need balance sheets to be able to survive,” the note added. “This is likely to drive significant industry consolidation (through mergers or attrition) with incumbent OEMs constantly evaluating startups for viability.
The event saw the more traditional OEMs warn about the challenges in moving past the demonstration phase of autonomous vehicle development, questioning whether the startups and tech companies may be moving too fast.
“Indeed some incumbent OEMs believed that they themselves will do the most thorough job with testing/validating the technology but will likely be last to market,” Morgan Stanley’s note said.
Waymo and Uber are already testing autonomous vehicles and upstart Einride plans to make its delivery pod available to commercial customers later this year.
Autonomous vehicles, regardless of the manufacturer, are not without their critics when it comes to safety. The big dilemma that engineers are grappling with is the moral question: What should an autonomous vehicle do if there is no right answer to the decision it faces? Is it better to swerve into ongoing traffic or the sidewalk where pedestrians walk? These are some of the more complicated decisions that must be worked out.
There is also plenty of buzz when something goes wrong, such as the recent Uber self-driving vehicle that struck and killed a woman in Arizona. The company immediately suspended testing until more information could be collected.
Even the negative incidents, though, are not deterring the autonomous vehicle crowd, as Morgan Stanley found out.
“We expected the recent Uber autonomous passenger prototype accident and Tesla Autopilot incidents to be an overhang on the event but there was very little evidence that these developments would have much impact on slowing down the rollout of L3/4/5 autonomous driving,” the note said. “These incidents were addressed briefly and were viewed as important catalysts to ensure the safety and validation of prototypes subject to public road testing.”
There was also some surprise expressed at how little discussion there was about electric trucks, with most OEMs still believing that long-haul, heavy-duty electrification remains out of reach. With that, there was still interest in the development of the Tesla Semi to see if that may represent a breakthrough.
Another hot topic at the conference surrounded the role industry stakeholders would play in an autonomous world.
“The outlook was most bearish for brokers/3PLs, with some existing brokers wondering if the function would even exist in a highly automated, data-rich, consolidated truck environment,” the research note related.
OEMs are also said to be seeking their role, with some suggesting that vertical integration into the carrier/3PL role may be the answer.
The conference did not change Morgan Stanley’s expected timeline of autonomous vehicles, with Level 4 vehicles appearing between 2020 and 2025 and fully autonomous driverless vehicles by 2030. Closed loop applications, such as ports, will come first followed by highway-only linehaul and finally mixed-use/urban applications.
“The ball remains in the courts of large public truck carriers and shippers with private fleets – early adopters who test prototypes today and get early access to order books will see the cost and productivity benefits first, fend off structural driver shortage issues and gain market share from the shippers who are lagging or do not participate in the technology shift,” it said. “We also remain bearish on the long-term viability of 3PLs/brokers who appear to be the biggest disruptees from the digitization of freight, the automation of trucking and the consolidation of the industry.”