July 10, 2019 / 11:58 AM / 9 days ago

Volvo solves autonomous revenue riddle with package deals

STOCKHOLM (Reuters) - Swedish truckmaker AB Volvo’s first commercial autonomous truck deal shows how it is bundling services to generate revenue from a technology that is years away from wide deployment.

FILE PHOTO: A self-driving Volvo electric truck with no cab called Vera is seen during a presentation in Berlin, Germany, September 12, 2018. REUTERS/Emma Thomasson/File Photo

Driverless transportation has been hailed as a transformative revenue opportunity, with the Boston Consulting Group expecting connected high-tech vehicles to generate about $150 billion of new profits for the auto sector by 2035.

But regulatory, technological and infrastructure roadblocks stand in the way of deploying fully autonomous vehicles on public roads and the journey is proving long and costly.

Volvo, the world’s second biggest truckmaker behind Daimler, has decided for now to only deploy driverless trucks in pilots for customers, aiming to perform specific jobs on a limited, repetitive and controlled route, often on enclosed customer sites.

“There’s a lot of uncertainties and that’s why we believe the right way to develop autonomous is with commercial pilots where we partner up with customers, go for real implementations and learn from that,” Sasko Cuklev, Volvo Trucks’ autonomous solutions director, told Reuters in an interview.

The truck maker said last month that its first commercial autonomous transport package will involve seven trucks transporting limestone for Norway’s Broennoey Kalk AS from a mine to a nearby port starting this winter.

“We are in the early stages when it comes to implementing autonomous solutions, so we’re trying to learn and we’re open to different setups. But in general it is more and more talk about services and solutions that is coming into play,” Cuklev said.

The deal with Broennoey bundles together the provision of the autonomous trucks with a virtual driver, control tower system, maintenance, repair and insurance, with Volvo paid per tonne transported.

“We see autonomous as more of a complement to today’s business and limited to dedicated specific applications where it really makes sense,” Cuklev said.

He said Volvo was targeting autonomous vehicles for mining operations and hub-to-hub transport on a highway road or regional hauling over shorter distances such as between ports and warehouses using its cabinless truck Vera.

Volvo’s Vera and some other commercial vehicles from rivals are experimenting with using self-driving trucks on public roads, often limiting speeds, picking less busy industrial roads or having people in the cabin in case the technology fails.

Nvidia-backed startup TuSimple said in May that it would deploy its self-driving trucks to haul mail between U.S. Postal Service facilities in Phoenix and Dallas in the southwestern United States.

Sweden’s Einride is testing its cabinless trucks to haul freight between a warehouse and a terminal on public roads in Sweden.

TEAMING UP

Carmakers BMW and Daimler this month teamed up to spread the costs of developing automated driving technology as cooperation within the industry becomes more widespread.

Volkswagen and Ford are in the final stage of talks on a strategic alliance to jointly develop self-driving and electric cars, while Renault and Fiat Chrysler Automobiles attempted and failed to merge.

Automakers’ investment in autonomous transportation comes as traditional sales are dented by the economic uncertainty caused by the U.S.-China trade war, with analysts worried that truck cycles might have peaked and margins might fall.

Volvo has forecast lower demand in China and Europe this year and its trucks order intake has fallen for two consecutive quarters this year, missing forecasts.

Volvo, which produces trucks under the Mack, Renault and UD Trucks brands, is facing a push to cooperate with others from China’s Geely [GEELY.UL], which became a top shareholder in both Volvo and its main rival Daimler last year.

Cuklev declined to comment on the subject, but highlighted the example of Volvo’s recent tie-up with Nvidia to develop artificial intelligence for self-driving trucks as the type of cooperation that Volvo was keen on.

“When it comes to automation we’re open to looking into different partnerships in the entire autonomous area,” Cuklev said.

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Reporting by Esha Vaish in Stockholm; Editing by Elaine Hardcastle

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