Trends in trucking: Self-driving trucks, electrification and digitalisation

15 October 2018 10 min. read

The trucking industry –the leading freight transportation mode in Western economies – has to brace itself for disruption. Vehicle automation, electrification and digitalisation will radically change the trucking industry over the next decades, according to a new analysis. While disruption will unquestionably introduce major threats to incumbents, the industry as a whole could shift up a gear, and shave up to 40% off operating costs.

In countries like Germany, France, Spain and the Netherlands, trucking is the most used means for freight transportation. According to estimates from national statistics bodies, around 70% of all the freight tonnage moved in Europe goes by truck, a percentage which is similar to the United States (70%) and is even higher in China (75%).

According to researchers from Roland Berger, a German-origin strategy and management consulting firm, three technological trends – automation, electrification and digitalisation – are set to fundamentally change the trucking industry. The authors contest that first fruit of these technological developments are already visible today. When it comes to digitalisation, the emergence of new digital-driven platforms such as Convoy, Uber, the J.B. Hunt 360 platform, CHR Freightview and XPO Connect are changing the mechanics in the freight booking space. Both within companies and across ecosystems, digital is playing an instrumental role in driving innovation and collaboration, a development which is part of a wider trend in the broader logistics industry.

Combining conventional and autonomous trucksIn the field of electrification, multiple examples of innovations are demonstrating the potential of electrical trucks. The startup Nikola has for instance announced a hydrogen fuel cell truck for long-haul applications, while green automotive player Tesla is working on a battery-electric semi-truck focused on short to midrange applications, with 300 mile (480 km) and 500 mile (800 km) range options. Meanwhile, the movement towards autonomous driving – according to Strategy&, autonomous vehicles will account for half of kilometres travelled in the EU by 2030 – is also making its foray into the truck industry. Across all corners of the globe, experiments with the technology have been setup. 

China-based autonomous truck technology startup TuSimple is testing a self-driving truck fleet at a deepwater port in a northern Chinese city. In the US, the startup Embark has been operating automated trucks on the I-10 freeway between El Paso, Texas and Palm Springs, California since the end of 2017. And in the Netherlands, which is regarded as the globe's top location for self-driving vehicles on the back of its state-of-the-art infrastructure, a highway strip on the A58 between the cities of Helmond and Tilburg has been freed up to test self-driving cars and trucks.

Greener trucks

Successfully shifting to electric vehicles has a host of benefits, across an increasingly broad sets of stakeholders. Higher fuel efficiency and lower CO2 emissions contribute to sustainability targets, while a more organised traffic network would enhance urban landscapes and reduce the number of causalities in on the road. These factors also apply for the trucking industry, although Roland Berger’s consultants note that many of these benefits are context dependent. In the US, the key driver for truck electrification is the total cost of ownership (TCO) benefits that derive from fuel cost savings. The fuel cost per mile for a diesel truck is around $0.34 at today's fuel-efficiency level and diesel price. An electric truck can operate at around $0.2 per mile at the current electricity price – 30% less than a diesel truck. “This cost benefit could grow to 40% in the near future,” project the authors.

In Europe, the main aspects driving developments are both TCO and planned inner-city restrictions on diesel vehicles, while in China, progress would mainly be driven by the need to resolve the local air pollution problem, and so the government is keen to remove polluting trucks from roads.

From no automation to full automation

The study notes that electric trucks with ranges of around 400 km, the vast majority in many regions, will be cost effective within the initial five-year period of a new acquisition. However, given current battery technology, electrical trucks are likely to remain impractical for long-haul trucking of distances in excess of 1,200 km, largely due to the size of the battery and the long payback period.

Automated trucks

The maturity of automation in the trucking industry is set to advance along the lines of five stages, from no automation to full automation. The timeline for the development of full automation remains a key uncertainty, however, pundits put the full automation – stage five – at some time after 2025. High automation, requiring only input from a driver in tricky terrain, is set to be ready by 2025, while lesser forms of the technology, partial and conditional forms of automation, are touted to be deliverable for new trucks by 2020 and 2022 respectively.

While the technology is set to develop relatively quickly through the early stages to stage four – the relative payoff for trucking companies, the not needing a driver, are unlikely to arrive until after the technology has matured and more complex situations can be modelled.

The shift to driverless technology is set to require considerable investment from both manufacturers and OEM players, with R&D investment of more than $1 billion required to create the technology for level four automation, as well as the unit side – with around $15,000 extra per truck unit sold initially required to acquire level four autonomous trucks with hardware by far the largest contributor of cost, followed by development costs. Overall the price is set to fall rapidly as the technology matures and scale kicks in, with margins for producers set to see falls.

Another example of an automation benefit is ‘truck platooning’. Using automation, trucks can drive at a smaller distance from each other, typically between 10 and 20 meters apart. This reduces the wake at the rear of the leading truck and also the high-pressure zone in front of the following truck. The lower air drag cuts fuel consumption, typically by 4% to 5% for the first truck and 10% for the second truck, meaning combined average savings per truck of 7.5%. The approach is supported by a vehicle-to-vehicle wireless link between the trucks, which enables connected braking and driving.

Combining long-haul and urban transportation

Intelligent trucking

The benefits of digitalisation will feed into several areas of trucking operations. At the logistical end of the value chain, digital can combined with data analytics and artificial intelligence (AI) algorithms, automate today's largely manual, telephone-based freight capacity and demand matching process. “We expect to see freight booking and optimisation platforms emerging and disrupting the industry in the same way that booking platforms have disrupted the travel industry,” said the authors. This development will initially apply primarily to standardised freight, which accounts for approximately 25% to 30% of today's freight volumes. Better booking will bolster capacity in the industry – around 20% of trucks in the West currently travel empty.

Artificial intelligence can also revamp the way dispatching is done in the industry. “AI is the key to solving the ‘dispatcher's problem’,” forecast Roland Berger’s consultants. This task at hand is highly complex, involving many uncertainties and requires coordination of a large number of moving elements. Intelligent machines bring the computing power to make instant decision on optimal planning, routing, while enhancing the customer experience through a more informed process.

A new business model

The authors stipulate in the report, ‘Shifting up a gear’, that combined the three technology-led trends “have the potential to reshape the trucking industry's business model.” As a result, a number of developments will take hold. Truck fleet and composition will change, and companies will have to invest significantly in embracing technology within their primary processes and operations. Heightened competition, including the entry of new tech players into the market, similar to Amazon’s entry into healthcare or the tech revolution in banking, will mean that freight rates will come under pressure. More regulation is expected to unfold to curb the risks of autonomous driving. All in all, consolidation in the industry is deemed inevitable as scale becomes more of a differentiator to remain in the driving seat.

New opportunities will also arise. In a scenario which the authors describe as ‘the transfer hub’, which blends conventional and autonomous trucking through an exchange hub, total operating cost savings could exceed 20%, and even reach 40%. Such hubs could also better accommodate for the diversified needs of segments: in long-haul transportation, the focus would be on reducing operating costs, while in urban logistics, the focus would be on better customer expectations in terms of delivery speed, information and flexibility.

“Market shifts will have far-reaching implications for fleet operators, changing operating practices and rewriting the underlying economics. To stay ahead of the pack, trucking companies need to be proactive and start preparing now for the road ahead,” concluded the authors.

Related: European truck manufacturers have much ground to gain in Chinese market.