In mid-April, autonomous semitruck developer TuSimple (TSP) successfully completed its IPO (initial public offering). Unfortunately, the deal got off to a rough start, as its shares plunged more than 16% within the first couple of days. Since then, the situation for TuSimple has improved, and currently, its stock is down by only 0.6%.
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Of course, the markets have been choppy lately, especially for growth companies. Despite that trend, the long-term future for TuSimple seems promising.
Innovative Technology
TuSimple is a young company, having gotten its start back in 2015, but it has accomplished quite a bit during this period. The company has built the world’s first Autonomous Freight Network (AFN).
The AFN involves a soup-to-nuts integrated software and hardware solution that allows for Level 4 autonomous driving for semitrucks. This means a vehicle can have full self-driving capabilities with some limitations in terms of driving locations or conditions. To allow for this, the TuSimple platform has up to a 1,000-meter perception range, high-definition maps that are accurate within five centimeters and a planning horizon of 35 seconds. The technology has over 240 patents and the company’s trucks have had 2.8 million miles of road testing.
TuSimple has also been aggressive with partnerships. The company has formed business relationships with top-notch carriers, shippers, railroads, freight brokers, truck hardware partners and fleet asset owners. It has also closed deals with two OEMs (original equipment manufacturers), which include Navistar and Traton.
The benefits of TuSimple’s technology are significant. For one, it promises tremendous savings in labor costs, considering that direct labor costs, i.e., paying drivers, accounts for more than 40% of the per-mile truck freight costs. Additionally, Level 4 autonomous driving should lead to major improvements in safety, given that about 94% of serious accidents are the result of human error.
Moreover, an autonomous vehicle will likely have an improved environmental impact. According to a study from the University of California San Diego, the optimized systems of autonomous vehicles will deliver fuel efficiency savings of more than 10%.
The Risks
No doubt, there are considerable risks with TuSimple. It is far from clear whether the company will be able to effectively scale its technology. TuSimple relies on a wide assortment of third parties for systems, components and equipment, and those third parties would have to scale up in tandem with TuSimple’s expansion.
Besides, when it comes to AI, there are still ongoing issues with the accuracy of autonomous driving. Problems include dealing with the erratic behavior of other drivers on the road, the low reflectivity of objects and extreme weather conditions.
In the meantime, there are likely to be challenges in encouraging adoption of the product. It seems reasonable that there will be lots of skepticism from customers. If anything, they may just want to wait for others to try out this technology. Additionally, adopting a cutting-edge platform like TuSimple’s will require changes to a company’s workflows and systems, such as dispatching, pre-trip inspections and so on. These adjustments will not be easy or cheap.
Finally, there are the regulatory requirements, which are onerous, and there are even geopolitical concerns, with the Committee on Foreign Investment in the U.S. (CFIUS) reviewing the relationships for any national security problems.
Bottom Line
Level 4 autonomy will be transformative, allowing for improvements in costs and safety. The market is also enormous: the global truck freight category is valued at about $4 trillion.
While there are notable risks, it does look like the company has the right focus and could provide a good entryway into the autonomous driving megatrend. (See TuSimple stock analysis on TipRanks)
Disclosure: On the date of publication, Tom Taulli did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
