Peak Season for Package Delivery will Extend Far Beyond the Holidays.

As we begin to close out 2020, it’s worth reflecting on what we as an industry were projecting before everything changed.

In December 2019, McKinsey & Company published an article recapping the year’s top mobility trends and how they will impact the future of AVs, EVs, connectivity, investments, etc. One question from the article stood out: Might 2020 be the year in which more attention is given to the transport of goods?

Pandemic or not, it now seems the answer to that question was always going to be a resounding yes. On-demand consumer expectations have continued to get higher and this has led to sweeping changes in logistics and delivery. And these changes will be more noticeable this holiday season than any other.

There are a couple reasons why the industry has re-routed from passenger AVs to the future of goods AVs.

First, market size and value are massive and commercial demand is clear. Trucks, drones and robots will be the backbone of the modern economy and as ecommerce continues to grow, optimizing logistics is going to become even more focal.

According to another McKinsey report, commercial drones are expected to account for 80 percent of consumer goods deliveries by 2026, with major players like Ford, Toyota, Uber, Hyundai, Audi, Mitsubishi, Amazon, FedEx and UPS all investing in the technology. Most recently, we saw Amazon’s approval from the FAA to begin a Prime Air drone delivery fleet, followed closely by Walmart’s partnerships with Flytrex, Zipline and DroneUp for three separate drone pilot programs, including a program designed to expedite the delivery of critical medical supplies such as COVID-19 test kits.

In Michigan, Airspace Link, Inc., a leading North American provider of state and local government drone flight authorization solutions, recently announced a partnership with Wayne County and the Detroit Region Aerotropolis to launch first-of-its-kind digital infrastructure in the sky that will help commercial drones operate across jurisdictions. This is a big step forward as Michigan looks at its multimodal future. 

Second, the value (i.e. costs savings) unlocked by autonomous trucking is immediate. This is also why you are seeing massive amounts of strategic capital in play (i.e. Amazon x Zoox). Shippers want to save money as any additional dollars they retain flow directly to their bottom line. In an increasingly competitive Amazon-driven commerce environment, these dollars are even more valuable.

Analysts at Morgan Stanley estimate self-driving technology could save Amazon over $20 billion a year on shipping as it becomes a formidable competitor to companies like UPS, DHL, and FedEx. By 2023, Amazon is expected to spend $90 billion on logistics, expanding its truck trailer, ocean freighter, last-mile delivery van, and cargo jet networks.

Third, it’s less complex. The technical problem for trucking versus self-driving cars is simpler; structured highway driving is unequivocally simpler than navigating city streets. As I covered in July, the clear, scalable, revenue-generating business model for passenger AVs has yet to be established. And R&D opportunity costs are continuing to grow. While the pandemic has led to new and sometimes unconventional applications of multimodal passenger mobility, the closer revenue-generating opportunity post-COVID looks to be long-haul, middle-mile and last-mile transport of goods.   

Due to the shift in consumer behavior this year, last-mile bot delivery devices such as Refraction AI, Nuro and Starship Technologies have all been able to gain significant traction in real-world testing and deployment. Nuro has raised $500 million, suggesting that investors have an appetite for long-term pursuits in the robotics and automated vehicle technology around delivery. Nuro now has a post-money valuation of $5 billion.

Fourth, there is a clear line of sight to earnings potential and economic impact for commercial freight on long haul routes. As alluded to by Cheng Lu, CEO of the AV trucking pioneer, TuSimple: “One of the biggest misconceptions around autonomous trucking is that you build the truck and it can go anywhere in the world. In reality, bringing self-driving big rigs to market requires an entire ecosystem — terminals, maintenance operations, mapped routes — so that shippers can be assured of adequate coverage, not to mention reliable prices.”

From our perspective, that is why public and private sector collaboration is more critical than ever. Widespread adoption of self-driving trucks will likely require autonomous truck ports located near major interstate exits where local human drivers bring trailers from factories or warehouses and swap the trailers over to autonomous tractors for long stretches of highway driving.

This will create new kinds of jobs, but public-private collaboration around training and worker advancement will be critical in the context of self-driving trucks. One of the biggest concerns with increased automation in trucking is job loss and displacement. It’s our collective responsibility to ensure the right policy frameworks and training programs are in place 21st century trucking workforce.

This is a key reason for Michigan’s partnership with Cavnue as we explore the viability of what a dedicated corridor for connected and autonomous vehicles can do for a region. In Michigan, these technologies and different approaches to commercial delivery services provide a huge opportunity for economic development and job growth.

So, what’s next? I would say more new partnerships and pilot programs around next-generation technologies to move goods. Due to heavy reliance on the same foundational autonomous, connected, shared and electric technologies, many modes of transportation, from ships to drones to trucks, are converging. The future of mobility will impact more than automotive. And, for states like Michigan, there will be tremendous openings in the next couple of years to leverage traditional automotive advantages to help drive other modes of transportation modes forward.

Interested in learning more about the impact of Michigan’s mobility ecosystem? Visit michiganbusiness.org/mobility and sign up for the Michigan Mobility Report here, a biweekly newsletter.