Investing in Autonomous Trucks and Driverless Trucking
An interesting article was published by Tech Crunch yesterday which talked about how a convoy of autonomous freight trucks recently drove across Europe and arrived at the Port of Rotterdam. Driverless trucking isn’t coming soon, it’s already here. What struck us about this article were some of the extremely powerful facts presented such as the ones below:
- Labor represents between 33-75% of the cost of trucking
- Driverless trucks could operate nearly 24 hours a day while human drivers are limited to 11 hours per day by law
- There are 1.6 million long-haul truck drivers in the USA
- Driverless trucks can operate at optimal speed to create fuel efficiencies while truck drivers can’t
- Driverless trucks can move in convoys and save even more fuel costs
The only thing preventing driverless trucks from becoming a reality are regulatory hurdles and opposition from truck drivers. Trucking is a $700 billion industry to be disrupted and the jobs lost from driverless trucking are estimated to be around 1% of the U.S. workforce. In fact, truck driving is the most common job in 29 states as seen below:
While there will be strong opposition against driverless trucking at first, it seems inevitable that a technology which is more efficient, costs less, and is safer, will eventually be adopted. The first question we asked after reading this article was, how can we invest in autonomous trucks and driverless trucking?
Like many disruptive technologies for which the same question is asked, some columnist at Forbes will throw together a quick article on “4 Stocks to Invest in for Said Technology” and then include a bunch of names like Google which have almost no actual exposure to said technology. Just because Google is working on robotics doesn’t mean that you should invest in them as a play on robotics. You always have to ask, just what percentage of revenues/income are (or could) be derived from a particular technology for a given stock? Now that we’ve cleared that up, let’s look at how we might invest in autonomous trucks and driverless trucking.
An obvious picks and shovels play is the company that is building driverless trucks. In the examples we’ve seen so far, the leader in this space appears to be German company Daimler which had $168 billion in 2015 revenues. Of these revenues, $42 billion or 25% came from their trucking division which means with all things being equal, Daimler is hardly a pure play on autonomous trucks.
Trucking Companies (JBHT,ODFL,LSTR,KNX,WERN,HTLD)
The most obvious beneficiaries of driverless trucking are the trucking companies themselves that will use autonomous trucks eventually. We created a motif which contains all U.S. freight trucking companies with a market cap greater than $1 billion as seen below:Instead of trying to cherry pick the winning trucking stock, just buy a whole basket of them. Worried about transaction costs? Just use Motif Investing and you can buy the above basket for just $9.95 a trade. You can add up to 24 more stocks and the fees are still the same. We’re going to use this motif to monitor the performance of freight trucking stocks going forward.
Retailers Like Walmart (NYSE:WMT)
Walmart is one of the nation’s largest private fleet operators with 6,000 freight trucks operating in the U.S. currently. The Company has a strong focus on creating efficiencies in this area such as the Walmart Advanced Vehicle Experience (WAVE) freight truck concept which is targeting fuel economy. With net profit margins of under 4%, any significant cost savings like autonomous trucking could have a meaningful long term impact to their share price.
We’ve talked before about a company called Mobileye which is the only stock we know of which offers pure-play exposure to autonomous vehicles. As far back as 2009, Mobileye was working in the area of trucking to install their technology in C.R. England’s entire fleet of 3,500 trucks with 1,000 already complete.
Peloton Technology (Private)
As for startups playing in this space, check out Peloton Technology. Founded in 2011, Silicon Valley startup Peloton Technology has taken in $18 million so far from investors that include Lockheed Martin and Intel. Peloton is developing a convoy concept where the drivers remain fully engaged and retain steering control, while the system controls acceleration and braking similar to adaptive cruise control. This concept called “truck platooning” can save an average of 7% in fuel costs per vehicle. Peloton seem like a likely candidate to move towards fully autonomous trucks as their current offering compliments it well.
Here at Nanalyze, we hold the lion's share of our investing dollars in a portfolio of 30 dividend growth stocks. Find out which ones in the Quantigence report freely available to Nanalyze subscribers.