Hype! Maybe some of you saw “60 Minutes” on Sunday which repeated its puffy-ish piece, “King of the Roads” about AV trucking? Interestingly, since the first showing, only March, one of the two featured AV tech startups, Starsky Robotics, has shuttered; the other, TuSimple, seems to have building momentum and was featured in the IANA webinar (below). Efforts by those in (metaphorically) Silicon Valley (TuSimple is in SD) are trying to attack the first three of the rails’ five Structural Advantages (refer, once again, to my slide at the very bottom of this write-up). How is it going, threat or hype? Will it be “Suicide for rails”? Well, no, Elon, if you are successful with your Class 8 EV truck, that might (contribute to) “homicide” (“suicide” would come if the rail industry were to take its 5th Structural Advantage, its financial position, and do nothing about the EV/AV threats). One rail that’s doing something about it is CN, with a big new hire (see below). But, let’s start with some scheduling:
First, join me if you will or can on two Webinars – “Rails & The Age of Disruption” (slides attached) Click HERE for the replay link. Thanks to Commtrex and “KSU Rumors Redux” with Coleman Research at noon, tomorrow/Thursday (ditto)….
Second, recent Tweets:
On the STB/FRA Letter on (future) rail service coming to me on the same day as Logistics Management “Quest for Quality” 2020 Awards showed that rails had actually edged trucking!
Stay in your lane! A rare (unprecedented?) letter from BOTH the STB (the commercial regulator over tariff moves of bulk materials and chemicals) & the FRA (the RR safety regulator) out today urges the rails to prepare for the recovery, harvest, and peak season (and avoid slowdowns and congestion and crew shortages, etc). While I greatly respect the 4 signatories (the Administrator & the three Commissioners) but this isn’t their job! RRs faced the all-time sawtooth (thanks to C19) - demand destruction & the rapid recovery. Recent metrics indicate they did it better – and safer - than could have expected. And Intermodal isn’t even (STB) regulated ... At the same time of the joint letter, LM Magazine’s Quest4Quality Awards hit my desk – and RRs beat Truckload (for the first time?) in “Value” - 4.43 to 4.38/5 – and tied in “Customer Service”! So the STB/FRA are not only out of their lanes, they have been lapped….
On the WSJ/Weekend’s superb article on shortages in paper towels, down to lean supply chains and JIT processes, clarifies the market share issue for RRs - mentioned just once (pulp via inbound boxcars) in a long study. But with “no slack” in the supply chain nor inventory it is hard to react to events….So could this be a market share opportunity for RRs? Paper is a battleground and outbound issues with truck appearing (tight capacity, deadhead moves), shippers are adding back safety stock and adjusting JIT. But so far they are also adding truck bays, as well….
And on this topic, Next-Level Truck Technology and the Effects on Intermodal’s Competitive Landscape - following the great IANA Webinar I was fortunate to participate in with representatives of Navistar (builder of the Cascadia), NFI (the trucker/Drayman and purchaser of Cascadias), and TuSimple, the AV developer:
Today’s IANA webinar Truck Tech & the Impact on RR/IM was scary even if the keyword was “incremental” – Advances in EV (& DV) & AV (electric/digital & autonomous) offer hope for RR/IM (drayage) but pose an existential threat to RR advantages in labor fuel & emissions. As I stated on the webinar RRs retain advantages in their self-financed network & great financial strength. They must use these assets – now- to build on PTC & other IT developments as higher service trends accelerate due to C19 or risk being irrelevant by the 2030s….
Two quotes that are relevant to the truck technology & Intermodal impact topic (after “Suicide is painless” etc. above)::
- “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.” Bill Gates (paraphrasing an old saying in technology); I would say 20 years….
- “Safety is the Trojan Horse to get automation in the door – beware the Geeks bearing gifts” – famed Intermodalist (Tireme-to-Chariot) Homer
And one important note – I am, as most of you know by now, not fit to judge technology so below is a combination of research, notes, meeting notes, conversations, the expertise of others (notably Oliver Wyman, Wabtec, the rails, IANA, PWC and notable entrepreneurs in the field such as Wi-Tronix and Cloud Moyo) and, yes….hype.
The threat to rail can be divided, like Gaul, into three parts:
1) EV (Electric), which impacts the fuel advantage to rail and also impacts rails’ current emissions advantages as well, of course. This also impacts engine maintenance as EVs are much simpler, fewer parts, etc. Wards has stated that the long-haul (Class-8) trucking segment will be the last trucking sector be impacted because of the range-factor; the most current being offered – prospectively, is 500 miles – the theoretical all-things-being-equal (which they never are) breakeven between truck (a day's drive) and rail/IM, as well as battery size & weight. The latter is the current suicide pill for Tesla Trucking – but they are working on it.
- One solution – in the future – is fuel cell technology, which Daimler and Volvo (among many others) are working on….This is an area of enormous government subsidy – E-cars would perhaps not exist without it.
- How will the combination of recession and (very) cheap gasoline impact this sector? We note that the demand for E-cars has dropped with everything else in 2020….
- The key issues are battery life; range, and the infrastructure for refueling (and the time it takes to do so). This makes closed-loop systems a better initial target (garbage trucks, etc).
2) AV (Autonomous) – the big kahuna, which is coming incrementally which even in earlier stages (“driver assist”) could bring more drivers into the population. AV could be a help to rails – see port automation and IM terminals. (below) and help out with the toughest job in transport, drayage. The dream of driverless cars and robotaxis, once thought to be imminent and perhaps now to be remembered with other cover stories of “Popular Mechanics” has moved to driverless trucks – why? Because, like that other famous Intermodalist Willie Sutton, said – “that’s where the money is”.
- Each incremental step to level 5 (full AV) is a chip off of rails’ labor advantage
- The driver shortage is coming back even in the pandemic year, making the idea of government modal parity less likely
- There are some 1.8mm – voting, one presumes – truck drivers
- The impact of full AV would be huge (refer to the slides for Oliver Wyman’s estimates – the beginning of the legend of Rod “Doctor Doom” Case)
- But this has proven to be no easy trick – unlike rails, AV trucking has been as mystified by snow as a lifelong Floridian, for example. IHS says: “We see only a few hundred level 4 or 5 Class 8 trucks in service in the 2030s, even to 2040”. Before we hear those sighs of relief in Fort Worth, Omaha, Jacksonville (etc, etc, etc, etc) this is just a window of time for the rails to get their own autonomous/automated act together!
3) DV (Digital) which comes from the modular rollout of both EV and especially AV components. One combination that appears to be a rail/IM threat is platooning, using multiple trucks with one (or less?) drivers…
4) These new trucks could drive 24/7 (they don’t need sleep; they don’t drink) – but where will they go? Dedicated lanes? Who pays? Not the Highway Trust Fund, of course (further challenged by EV taking diesel tax dollars away). Rolling driverless platoons on the Grade D- highway system(ASCE – which gave railways a “B”) looks like truck-trains; as Union Pacific CEO Lance Fritz pointed out at RailTrends 2018, why aid a truck train (on a tax-needy highway) when you have an actual (tax-paying) railway right there in parallel?
Players, even with Starsky sent back to the hutch (sorry):
- The trucking OEMs, of course
- TuSimple is clearly a leader working with Navistar. They are, IMHO (and that is an uneducated O) the ones to watch. They, like many/most of the EV/AV pioneers, are based in California, where start-up monies are cheap, and they test in the Southwest, where, apparently, life is cheap (or at least less expensive). But they are growing - They plan to build an “Automated Freight Network” whose map linking California/Az and Texas to start, looks like a direct threat to rail/IM.
- Waymo, Google’s AV player, which recently had a $2.25B cash infusion (this isn’t cheap)
- Rivian, which raised some $1.3B led by institutional investors (including, it's been said, T. Rowe Price)
- Plus.ai, which ran a “coast-to-coast” run of Land O’Lakes butter (highlighting one current regulatory advantage to trucks – they can experiment on public roads while rail cannot on their private network)
- Nikola, funded by a SPAC, and then valued at $15B!
- Aurora, not the slot car company but, having switched from cars to trucking AV, known as the last of the “independent self-driving technology unicorns standing”, whose goal is to sell to the OEMs (most of which have partnered)
- China – many feel that China is catching up and perhaps passing the US in AV and battery technology – for example, Geely is spending over $350mm to build a rocket factory – to launch AV-enhancing satellites!
Also to keep rail managements up at night!
- Drone deliveries ((like a lot of this new technology, could be used to enhance rail services) and other robotic deliveries
- Electrified or otherwise smart roads (see Israel and China) – hard to envision given how we treat our existing roads
- Hyperloop, again, using moving folks as the T-horse to get at freight; this stomach-churning technology (backed by Mr. Musk, naturally) is actually being considered in Cali and even in Columbus, Ohio.
- 3D Printing – it’s now limited and expensive but so was instant photography at one point; being used by high-end parts users such as the DoD and Formula 1 (speaking of auto racing, there will be an AV Indy race next year at, well, Indy….more hype; there’s also an AV Trimaran – sailboat – the “Mayflower Autonomous Ship”, set to replicate the Pilgrims to show AV, er, Progress….).
Rail Response – it's muted so far. Rails have PTC, which should be fully operational on January 1, 2021. With that, they have the ability to stop trains remotely (and with Trip Optimizer, etc, they can start them) – what CSX COO Jamie Boychuk calls “zero-to-zero”. On their privately owned, privately financed, privately policed network, they have the technology (or will have very soon) to run autonomous trains. What they don’t have is union support (national negotiations, supposed to be considering one-man crews, are ongoing). Nor do they have government/regulatory (nor it is supposed, popular) support. In fact, the latest Transportation Bill included a provision to legislate two-man crews, using that same T-Horse; I suppose it has more to do with the power of and competition between the two union groups represented in the cab (Teamsters and the AFL-CIO), and their relationship to the Democratic Party. The rails need regulatory change, labor buy-in (BNSF came close with a sector a few years back), and proof of concept….Remember that full autonomy is “advantage truck” because the rails start from a labor advantage.
In addition, the rails are working on:
- A battery-powered locomotive is being tested by BNSF and Wabtec (but remember that the larger trucking companies change out fleets in a matter of a few years while rails would have to modify their enormous existing fleet with all of its’ embedded costs).
- Wabtec of course is always working in "more" (see attached); also at least one C-1 is working through the political difficulties to create a consensus for carload visibility throughout the network and with all the stakeholders (Class Ones, short-lines, car owners, OEMs, shippers)....
- Other forms of autonomy – KSU stated at RailTrends 2018 that they expected to be “fully autonomous” in 5-7 years – and recent conversations suggest that while that is a stretch, they aren’t abandoning their goal.
- BNSF COO Katie Farmer just told an IANA (web) audience the highlights from their extensive automation of intermodal terminals; CSX views itself as a leader in automated IM cranes, etc.
- CSX also has gone public with car trip plans and reliability performance stats, real-time – a good example of what I (and so far, only I) call an “offensive” use of technology.
- CN (and others) are pushing what I have called “defensive” automation (car and track inspections, etc).
- On the tech front, I have “interviewed”3/7 of the Class One carriers on technology, “defensive” (operations/expense focused) and “offensive” (customer-facing/visibility, etc) and have been more than pleasantly surprised by the level of commitment and expertise (and accomplishment) – details to follow
- CN made what looks to be a great hire as new CIO (or, as CN styles it, EVP & CITO), Dominique Malenfant who was SVP-Engineering and CTO of….Wabtec! I suspect but do not know that, as an EVP, he will report to the CEO….
- Well-known hazmat transport observer Rolling Stone (my first favorite magazine) weighs in on LNG transport by rail – and not subtly: Click Here.