The freight industry underlies every economy in the world and is a primary component of the operations behind every product on the market. Despite its importance, though, the trucking industry in particular has been plagued with inefficiencies, labor shortages, and costly legacy systems. 70% of America’s freight is delivered by truck, and the trucking vertical of the freight industry currently employs over 3.5M people. Given its global impact and opportunities for disruption, then, it’s no surprise that the trucking industry has received a spike in attention from VCs — just last month, for instance, electric truck startup Rivian raised $700M led by Amazon.
As trucking tech becomes more and more hyped and garners increasing interest from VCs, some disruptive startups may end up going head to head with legacy tech companies, such as Tesla and Uber. In fact, according to a recent NewtonX large-scale survey with executives of companies building or investing in trucking tech, the top three areas for trucking disruption are electric trucks, fleet management platforms, and on-demand fleet services (“the Uber of trucking”). Based on the results of the NewtonX survey, here’s how each of these trucking tech dimensions are developing.
Driver Shortages and Inefficient Planning: Why Silicon Valley Plans to Reimagine the Trucking Industry
Not only has there been an ongoing shortage of truck drivers, but drivers are also increasingly at odds with their employers over stricter drug testing and oversight. Trucks made up 12 percent of highway accidents, many of these due to drivers being under the influence or too sleepy to concentrate. However, drivers and their unions are concerned that false negatives from new drug tests could endanger their already minimal livelihoods. This conflict has resulted in even more inefficiencies in the industry.
To boot, many of these trucks are only half full, take inefficient routes, and can have costly maintenance issues in the middle of a job. In fact, over 43% of trucks on the road are completely empty. Not only is this an environmental travesty, it’s also wildly cost inefficient — especially with fluctuating fuel prices.
But, there’s technology out there to fix each of these issues:
As we mentioned above, Rivian is one of the major players in the electric truck space, and is going head-to-head with Tesla, which was the assumed leader in the space. Both Pepsi and FedEx have already placed orders for the electric trucks that Tesla says it will have on the road by 2020. The company estimates that its trucks will have a range of 300-500 miles, which the company estimates would save at least $200,000 in fuel costs. Other players include Daimler, the world’s largest truck manufacturer, which announced in 2018 that it would offer electric semi tractor-trailers by 2021.
Fleet management is one of the most lucrative sub-divisions of the $800B trucking industry. Most fleet management companies, such as Track Your Truck, OnFleet, Cobli, OnTruck, and US Fleet Tracking offer GPS devices trucking companies install on their trucks. The software in the device tracks not only location, but also the driver’s speed, breaking habits, etc. Information on factors such as speeding, excessive starting and stopping, idling, and breaking can help companies optimize their drivers’ performance in the truck — in addition, of course, to allowing them to track where their drivers are and what routes they take. Some companies specialize in last-mile delivery (delivery within urban areas), whereas others specialize in long-range transportation.
Fleet management software can also include scheduling, maintenance, route planning, load optimization, and compliance with regulation around driver hours. The smart fleet management market is expected to reach $565B by 2025, and is currently the biggest sub-industry of the trucking industry. In part, this is because the technology is fully ready to be deployed and has already been rolled out by most large fleets — unlike, say, electric or autonomous trucks.
As we recently wrote, in mid-2018, CapitalG (the PE branch of Alphabet) led an $185M round in Convoy, an on-demand freight app that connects truckers with customers who need shipping, at a $1B valuation. Uber also entered the industry with Uber Freight, which has expanded threefold in the past 15 months and is considered a viable source of business for the company. Parenthetically, Uber also invested in self-driving truck technology by acquiring Otto, a self-driving truck company founded by a former Google engineer, but after a lawsuit from Waymo, the company shut down its self-driving truck unit. Other companies, such as OnTruck (a Madrid-based on-demand freighting company) have rolled out similar platforms that connect companies with trucks and drivers, while also providing access to logistics systems.
The Trucking Industry Shows No Signs of Slowing Down
We would be remiss not to mention self-driving trucks, but the reality is that fully operable long-range autonomous trucks are years away from becoming a reality. And while they would solve numerous issues for the trucking industry in regards to efficiency and driver rights/safety issues, currently they’re still a very risky proposition. That said, Embark has a fleet of five self-driving trucks and has used them to deliver refrigerators from a warehouse in El Paso to a distribution center in Palm Springs.
The biggest area of investment for the trucking industry will continue to be SaaS services for fleet management, particularly ones that integrate IoT devices with their software. There continue to be pervasive inefficiencies in the industry, and software that helps solve these issues will be adopted by even the smallest players in the industry.