Uber plans to dominate the logistic market
Last year, Uber bought transportation startup Otto for a rumoured $680 million USD. The young company were behind the creation of the genius ‘retro-fit kit’ capable of turning any truck built in or after 2013 into an autonomous vehicle. At first, the partnership looked like it was geared towards the domination of driverless transportation. However, Uber’s latest plans reveal an ultimate goal that stretches far beyond that – if you thought of Uber as no more than a handy taxi app, then think again. Services like UberEats and UberRush have built up the business’s knowledge about urban mapping and logistics, but now they want to apply this on a much larger scale. Uber’s partnership with Otto is part of a self-confessed strategy to become a global leader in shipping and delivery. Otto have the resources to kick start this venture in freight hauling, which is worth a staggering $700 billion in the U.S. alone. It’s long been said that the industry is in need of disruption, and the partnership between the two companies will definitely deliver it.
By the summer of this year, venture capitalists had invested over $300 million USD in new transportation startups, not including Otto. Around 70% of global freight is transported by trucks, but the adoption rate of new technology within trucking has been generally quite slow. This is because of legacy trucking companies who don’t want to fix what, in their eyes, isn’t broken. So where do Uber and Otto fit into this? Well, team innovation with an enthusiastic expansion plan, and you’ve got a very promising partnership. It’s almost unsurprising that Uber is striding on into the logistics sector after the success of ventures like UberEats. According to CEO Travis Kalanick, though, Uber has always been a logistics company (unbeknown to the general public and also to Wikipedia, apparently). For now, Uber is leaving Otto to expand their fleet from six to 15, and build up a repertoire of information and customers. The startup has already begun to make links with independent truckers, just like Uber did with taxi and delivery drivers. Otto’s expansion will add to their expertise in tracking, navigation and mapping, which in turn will benefit Uber when they come to deal with shippers and drivers. In fact, Otto is already selling its services. The two companies don’t just want to offer their own services, either – there’s talk of going head-to-head with industry brokers to become the go-to name in shipping. Of course, there are obstacles. First of all, they have a lot of big names to compete with, and they’re not the only ones developing cutting edge innovation. Automotive giant Daimler, for example, funded the development of the first licensed autonomous truck in 2015. New startups are also getting in on the action, fuelling development and keeping Uber and Otto on their toes.
The disruptive angle
At the moment, Otto’s new trucks are still under testing, but when they’re ready for the road they’ll set the ball rolling for the complete upheaval of the shipping business. Much of this will be positive, as autonomous trucks narrow the margin for human error by, well, removing the human driver. Yes, there are still going to be accidents, but according to statistics from the Federal Motor Carrier Safety Administration, the driver is the key factor in 87% of big-rig crashes. Remove the driver, and you lessen the risk. Of course, if you remove a driver then you have to accommodate for the vehicles that are still operated by humans, which could change the whole infrastructure of the road. For example, motorways might need new lanes reserved for driverless trucks (and cars). It’s uncertain as to whether Uber will begin to develop electric trucks, but they have experimented at length with electric vehicles and it seems to be a natural progression. Either way, replacing the outdated, polluting legacy trucks would really help out with the whole global warming situation. Less positive is the rise in unemployment that will be caused by displaced truckers, and the consequent depression of the local economies that catered to them.
From a business perspective…
Together, Uber’s experience and Otto’s innovation will create a major challenge for freight haulers. Businesses in the industry will either respond by offering their own innovative products, or remain stuck as stubborn legacy companies. But it’s not just Uber and Otto that are going to put pressure on the old companies – hundreds of millions of dollars have been invested in new startups like SmartRoad Systems and GreenRoad Technology. The industry is undergoing real change, fuelled by innovation. Most of the impact will be positive, as autonomous trucking will cut costs, cut time and make the roads decidedly safer. Once businesses see the efficiency of driverless deliveries, the innovators and early adopters will benefit from further investment and partnerships, perhaps with bigger suppliers or retailers. Basically, autonomous trucks are a massive business opportunity, and the race is on to create a monopoly. Uber and Otto have thrown the first dice.
Uber is undoubtedly one of the biggest success stories in business within the last five years, going from a transportation startup to the go-to name for all things taxi. And then they started delivering food. And then parcels. And then they set up a carpooling service. And then they teamed up with TomTom. It’s really not difficult to imagine them as a leader in logistics, and with the resources of a startup like Otto, there’s no doubt that they will take the road freight industry by storm. There will be obstacles to their continued corporate quest, of course – such as competition with promising startups – and there will be continued fears about unemployment and the destruction of local economies. Characteristically, though, Uber is pushing on. So what’s next? What else could Uber possibly add to their agenda? Well, Lockheed Martin just launched an unmanned drone from an unmanned ship. Maybe the eager expansionists at Uber should don their wet-suits…
Will Uber and Otto really threaten established legacy companies? Could autonomous trucking change the entire freight hauling industry? Let us know what you think.