Technology, Infrastructure: Make Freight Great Again
Trucking has been steadily evolving for over 60 years.
Two major developments – the Interstate highway system and deregulation – changed US trucking in the past 50 years. The Federal Aid Highway Act of 1956 enabled unfettered national transportation with four lanes and no traffic lights. The next boost came in 1980, when the Motor Carrier Act eliminated excessive regulation from the Great Depression, pushing trucking prices down by 50%-75% and, as intended, made competition more fierce.
Technology connecting customers and truckers is far from a new idea.
US domestic trucking has been shifting towards technology for nearly 50 years. Truckers and customers used to coordinate loads through bulletin boards at truck stops. This was digitized when Dial-a-Truck (now called DAT) launched a telephone freight matching service in 1978, followed by an electronic version years later. Electronic load boards evolved into a $150 billion dollar freight brokerage market, with brokers leveraging sophisticated technology to manage both inbound and outbound shipments for clients.
So domestic trucking in the United States has two key drivers (pun very much intended) – incredible infrastructure and outstanding technology. Together, they helped lower the US’s percentage of GDP spent on logistics to “only” 8.2%, compared to around 18% in China and well over 20% in less developed countries.
What Uber’s Announcement Means
In 2015, trucking revenue reached $726.4 billion dollars, with 3.6 million trucks moving 10 billion tons of freight. That’s a lot of freight. But it can get more efficient. As a matter of fact, there are at least 10 companies that have billed themselves as an “Uber of freight,”:
||Spun off from GlobalTranz (July 2016). Offers multiple trucking technology solutions.
||Information currently based on media reports
||Recently faced difficulties after pivoting to freight broker model
||Brazil-based with funding from Uber co-founder
||Investors include Amazon’s Bezos, Salesforces’ Benioff and eBay’s Omidyar
||Began as telephone matching service. Owned by Roper Industries (S&P 500 company)
||Focus on long-haul, not local
||Platform launch in May 2016
Writing on the Wall
Uber’s move is no surprise. Uber CEO Travis Kalanick was talking about logistics back in 2014 (although he called it “icing on the cake” back then). Acquiring an autonomous trucking company was another clear indicator, as was the 2015 Uber Cargo test runs in Hong Kong. Finally, when Uber handed Uber China over to hometown rival Didi Chuxing in August 2016, Kalanick’s letter to employees also mentioned the shift:
This merger paves the way for our team and Didi’s to partner on an enormous mission, and it frees up substantial resources for bold initiatives focused on the future of cities — from self-driving technology to the future of food and logistics.
(via Tech In Asia)
But here’s the thing. Uber-for-freight technology isn’t (so) new.
What is new is Uber-for-freight technology backed by this magnitude of capital and with the promise of infrastructure. There’s a huge potential for vastly lower-priced (and more efficient) autonomous trucks, as well as autonomous cargo planes.
The autonomous component does introduce a fundamental industry shift. Interestingly, this also represents a shift for Uber. Once Uber owns the trucks carrying its goods, it moves away from the marketplace model in the taxi space and becomes an asset-heavy carrier.
Until then, Uber’s marketplace for les- than-truck loads is an evolution in US trucking efficiency, not a revolution.