From Garbage to Mining – Volvo Gears Up for Growth in Autonomous Trucking
Volvo Group, the Swedish multinational manufacturing company, has been testing a multitude of driverless truck applications, ranging from urban waste management to transport flow optimization in underground mines, in hopes of becoming a forerunner in the autonomous trucking industry in Europe.
Going driverless is necessitated by changing economic and environmental conditions
Several macroeconomic trends call for increasing optimization in the truck industry in Europe. In its White Paper on Transport published in 2011, the European Commission set itself an aggressive target to reduce greenhouse gas emissions by 20% from 2008 levels by 2030 (see Exhibit 1 for breakdown of GHG emissions). [1] In addition, congestion costs in European urban areas are projected to increase by 50% by 2050 and transport will continue to depend primarily on oil, with a little over 10% coming from renewable energy sources. [2] Stagnant economic growth in Europe has intensified competition among manufacturers and has shifted management’s focus to profitability. To reduce their carbon footprint and to take cost out of the supply chain, truck OEMs Volvo, Daimler and MAN have begun testing autonomous driving in controlled environments to minimize fuel consumption and decrease road congestion. The next step is to enter public roads.
Volvo’s “platoons” are gradually scaling up
European institutions have been favorable of truck platooning, a driving method which allows WiFi-connected vehicles to drive cooperatively at less than 1 second apart at a constant speed (see Exhibit 2). [3] In April 2016, the Dutch government organized the European Platooning Challenge, during which a dozen trucks, three of which belonged to Volvo, traveled over 1,000 km from Gothenburg, Sweden to Rotterdam, Netherlands. [4] Automated driving has the potential to impact the entire mobility system by reducing fuel consumption by an estimated 4% in the leading vehicle and 10% in the following vehicle, respectively. [5] Other benefits include improving labor productivity, which currently accounts for 35% to 45% of operating costs of road freight in Europe, and eliminating 90% of all accidents that are human-induced. [6]
In the context of mining, where Volvo Group was the first to test driverless truck technology, additional opportunities arise from improved safety as the truck monitors its surroundings and adjusts its trajectory in real time to avoid both fixed and moving objects. [7] Volvo was among the first investors in US startup Peloton, a developer of platooning systems, [8] which demonstrates the company’s long-term commitment to commercializing the technology beyond controlled experiments.
Volvo should address a multitude of parties in the supply chain to expand their automated convoys
Platooning impacts several groups of stakeholders in the supply chain – developers (OEMs), users (carriers), policy-makers (governments), and regulators (EU). In addition to management’s current plans, to succeed in the race for autonomous trucking, Volvo should consider each of the above players, as they scale the program.
Exhibit 3: Value chain overview. Source: TNO White Paper on Truck Platooning
As competitors are also testing driverless truck technology, Volvo should be willing to collaborate with other OEMs to design solutions that enable multi-brand platoons as carriers often source from multiple manufacturers and have significant bargaining power in the value chain. This will allow for more testing and will fuel the growth of the initiative as having lobbying power in front of governments via multiple partnerships along the supply chain will be critical to the endeavor. Volvo’s first-mover advantage in this instance will be extremely beneficial in capturing market share initially, in the long-run however, reluctance to partner may backfire as carriers negotiate favorable deals with other OEMs.
While governments favor technological advances in the field of transportation due to their environmental benefits and more efficient use of road infrastructure, they are also very cautious of how driverless technologies may impact the labor market. In its current state, the technology reduces truck idle time as the driver of the following vehicle may rest while the leading vehicle drives. [9] Man-hour optimization, however, may evolve to a point where drivers are not needed. To manage this tension with governments without restricting innovation, Volvo should explore the impact driverless technology will have on the job market for drivers and proactively re-train employees that risk being displaced to assume other functions within or outside the organization. This will alleviate regulators’ concerns and seamlessly move the project forward.
Several other questions that platooning poses have to do with potential widespread adoption of the technology outside the first EU participants. Should there be a uniform legislation that governs driverless technologies in the context of transportation policies across European borders such as limits on minimum following distance? What arrangements does the EU need to lobby for in countries outside the zone so that platoons can pass through them? In addition to drivers, which functions will become obsolete and what roles can these employees assume in the world of autonomous trucks?
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Resources
[1] European Commission, “White Paper on Transport – Roadmap to a Single European Transport Area”, March 2016, https://ec.europa.eu/transport/themes/strategies/2011_white_paper_en, accessed November 14, 2017.
[2] European Environment Agency, “Transport in Europe”, June 2016, https://www.eea.europa.eu/signals/signals-2016/articles/transport-in-europe-key-facts-trends, accessed November 14, 2017.
[3] Netherlands Organization for Applied Scientific Research, “Truck Platooning; Driving the Future of Transportation”, March 2015, https://www.tno.nl/en/about-tno/news/2015/3/truck-platooning-driving-the-future-of-transportation-tno-whitepaper/, accessed November 14, 2017.
[4] Joon Ian Wong for Quartz, “A Fleet of Trucks Just Drove Themselves Across Europe”, April 2016, https://qz.com/656104/a-fleet-of-trucks-just-drove-themselves-across-europe/, accessed November 14, 2017.
[5] Ontario Trucking Association, “NACFE: Double Truck Platoon Can Reduce Fuel Consumption by 4-10%”, September 2016, http://ontruck.org/nacfe-double-truck-platoon-can-reduce-fuel-consumption-by-4-10/, accessed November 14, 2017.
[6] International Transport Forum, “Managing the Transition to Driverless Road Freight Transport, 2017, https://www.itf-oecd.org/sites/default/files/docs/managing-transition-driverless-road-freight-transport.pdf, accessed November 14, 2017.
[7] Volvo Group Press Release, “Volvo First in the World with Self-Driving Truck in Underground Mine, September 2016, http://www.volvogroup.com/en-en/news/2016/sep/news-2297091.html, accessed November 14, 2017.
[8] Peloton Press Release, “Peloton Technology Secures $60M to Fuel Commercial Truck Industry Collaboration on the Road to Automation”, April 2017, https://peloton-tech.com/seriesb/, accessed November 14, 2017.
[10] Netherlands Organization for Applied Scientific Research, “Truck Platooning; Driving the Future of Transportation”, March 2015, https://www.tno.nl/en/about-tno/news/2015/3/truck-platooning-driving-the-future-of-transportation-tno-whitepaper/, accessed November 14, 2017.
The point around impact on labor is an interesting one to me, as truck drivers is the most popular job in the US in most states. According to the article below there are 8.7M trucking-related jobs in the US. Autonomous trucking would not only affect those jobs, but local economies (particularly in small towns) touched by truck drivers’ income (motels, restaurants, etc). Truck drivers also get paid pretty well today, and is arguably one of the best paid jobs that doesn’t require a post secondary degree. The article also mentions that most researchers believe autonomous trucking to reach massive adoption / disruption somewhere between 2020 and 2030, with countless number of companies pouring money into the industry (including Tesla who recently announced its own autonomous semi-truck focused on the platooning concept). Personally, it feels like mass adoption feels closer to 2020 than 2030, and most of the hurdles today are regulatory in nature vs technological. To many people, it feels like we need some form of alternative income distribution or face economic / social stagnation going forward as technology continues to replace human labor.
Sources:
https://futurism.com/millions-of-jobs-are-at-risk-but-their-loss-could-be-for-the-greater-good/
Thanks Violina – very interesting article.
Ryan, to your point on the labor impact that self-driving trucks will have on the US trucking industry, I believe that the pushback has already occurred, as over the summer the House Energy Committee omitted trucks from a bill barring states from blocking self-driving autonomous vehicles. This comes as a result of significant lobbying from the 1.4 million-member Teamsters Union. The below article from Reuters describes the dynamics behind the vote. It will be interesting to see how this situation plays out in Congress through the rest of the Trump Administration, given Trump’s platform of prioritizing US jobs.
https://www.reuters.com/article/us-usa-fiscal-congress/congress-government-funding-fight-seen-spilling-into-2018-idUSKBN1DS349
However, one dynamic at play in the US that may hasten the adoption of self-driving cars in the US may also be the ability for each state to regulate their own traffic laws to a certain extent. The article mentions that Missouri approved a platooning regulation earlier this year. While state-level adoption may not foster the broad adoption needed in the US due to the interstate commercial nature of the trucking industry, it theoretically should provide ample opportunity to prove out the safety and benefits of the concept and could influence federal approval in the future.
Thank you for a very interesting article. I knew that companies such as Komatsu and Caterpillar were making autonomous trucks for open-pit mining, but I was surprised to learn that a company like Volvo was actively moving inside the underground mining industry. Thinking about the safety issues related to underground mining, the increasing labor cost in mining, and also the industry trend that more underground mines will be developed in the future (many feasible mines on the surface have already been depleted), it looks like there would be a lot of potential in the underground mining business.
Also, as you have mentioned and others have also commented, autonomous trucking raises a very difficult issue of taking numerous jobs away from humans. I do believe that this is a major threat for these workers, but I also do believe that there are many other roles that only humans can perform, for instances roles that involve human interactions. This is Japan specific, but with the aging population and also the lack of nurseries for babies, I believe that these kind of care and nursing roles are an example of jobs that cannot be automated (or at least for quite a while). So it may not be roles in the same industry, but I do believe that there are many other roles specifically for humans.