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  • Craig Webb

Arrival of Self-Driving Trucks Could Lead to Price Gyrations, Supplier Consolidation



McKinsey & Co. report, December 2018

The future is exciting. It's also messy. As evidence, consider some recent stories regarding the potential economic impact of self-driving trucks. For construction supply, the bottom line appears to be that autonomous driving systems will cut your shipping costs, but they'll also leave you with fewer companies vying to carry your goods.


The investments certainly are substantial: On Jan.7 CES Daimler Trucks executives announced the company will invest around $570 million to bring highly automated trucks to the road within a decade. These are regarded as "Level 4" trucks, which means they travel in defined areas between defined hubs without requiring human intervention. Such trucks are a couple of grades above "Level 2" trucks that can steer, accelerate, and decelerate automatically, but still a step away from "Level 5" trucks in which no human driver is needed.


Investments like Daimler's spring in part from forecasts by groups like McKinsey that predict fully autonomous trucking would cut the industry's operating costs by 45%, saving $85 billion to $125 billion. It predicts driverless trucks could arrive on the scene in a decade.


Such savings might sound good, but Freightwaves, a news service that covers the transportation industry, questions how much of those savings will drop to truckers' bottom line. In a December response to the McKinsey article, Freightwaves' John Paul Hampstead predicts this scenario:


* The better-capitalized trucking companies will be able to afford the self-driving gear and software (perhaps $100,000 per truck).

* That equipment will make it possible for those trucks to cover three times the mileage of human-driven trucks. Thus, these rigs will become "money machines," especially if rates remain pinned to the non-autonomous side of the business.

* Eventually, all the major trucking firms will have autonomous vehicles. At that point, rates will crash and large trucking companies will fight for market share. Small trucking companies will get absorbed.

* Ultimately, the trucking industry will look like the maritime industry, where six lines owned 68% of the market in 2017 but they barely turned a profit.


"In other words," Hampstead concluded, "autonomous trucking will not change the fundamentals of what is already a capital-intensive, low-margin industry, except for the brief period when large carriers with autonomous trucks are seizing market share while expanding their margins. Once autonomous trucks are competing with autonomous trucks, carriers’ margins will evaporate again, but even more capital will be locked up in the assets and increasingly sophisticated and highly paid professionals who manage them."

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