TuSimple – Amazon’s Next Acquisition Target?

Following a Series D funding round in January 2019, autonomous driving technology start-up TuSimple is embarking on another round of fundraising in North America with several potential investors, including Amazon. Interestingly, Amazon is also interested in acquiring TuSimple outright.

Amazon is known to be very keen to enter the autonomous driving market and has already invested in autonomous vehicles (AV) start-up Aurora and electric truck start-up Rivian. However, CEO Chen Mo maintains that TuSimple is not for sale. TuSimple raised US$95 million in January. SinaiCorp led the funding round, which also included blue-chip tech companies such as NVIDIA. It is not yet clear how much TuSimple is looking to raise in this round.

Founded in 2015, TuSimple is an AI start-up, focused on autonomous vehicle R&D for the trucking industry. The company has developed an end-to-end solution permitting depot-to-depot operations of autonomous trucks.

The company is targeting two markets where there is a clear demand for its AV technology – the long-haul trucking industry in the US and the closed-environment container port market in China. Shortage of drivers (mainly due to unsociable hours) and a need to improve safety by reducing accidents due to driver exhaustion characterizes both markets.

In the US, large, heavy 18-wheeled trucks travel long distances on multi-lane interstate highways at constant speeds most of the time. This is one of the least complex autonomous driving use cases, and TuSimple has focused on the development of its L4 autonomous vehicle technology for this market. Currently, there is a backup driver and a system engineer in every truck for testing and safety purposes. However, eventually, the trucks will operate without any human drivers at all.

As a result of this focused strategy, the company has progressed rapidly and has become one of the first autonomous driving technology providers to offer commercial services in the country. It claims that it is already generating commercial revenues.

A key factor behind its progress is its choice of technology. Competitors such as Waymo and Baidu, use LiDAR-based sensor fusion. However, patented camera technology, using Time of Flight (ToF) and stereo vision cameras is at the core of TuSimple’s technology. The use of LiDAR and radar sensors are only in a supporting role. Together with the use of deep learning algorithms, this provides TuSimple’s autonomous driving technology with a 1,000-metre range capability, one of the best in the industry and a game changer in the truck AV market. The company is ranked No. 1 in the KITTI and Cityscapes AV benchmarks Markets (Fig. 1).

KITTI and Cityscapes AV benchmarks Markets

Fig. 1 TuSimple company highlights

Currently, TuSimple has a fleet of 11 autonomous trucks operating three to five times per day along three fixed routes in Arizona, with an average run of 200 miles. The company claims that it already has 12 contracted customers, including some Fortune 100 companies. It also plans to introduce new routes from Arizona to Texas and New Mexico later this year. To provide the extra capacity, the company is expanding its US truck fleet to 40 by June 2019 and up to 200 by the end of 2019. This will make it the largest autonomous truck solution provider in the world. It is targeting early 2021 as the start of “driver out” commercial services.

During the past year or so, the sheer complexity of implementing Level 4 and 5 autonomous driving has become apparent to the automotive industry. As a result, players are focusing on more limited use case deployment scenarios. Compared to autonomous driving passenger vehicles such as robo taxi-hailing services, Counterpoint Research believes that autonomous driving trucks for long-haul freight delivery is relatively easier to deploy and commercialize. Autonomous driving trucks are also likely to create much more demand since they target several pain points in the logistics industry, such as the shortage of drivers, safety issues, poor efficiencies, etc.

However, TuSimple needs to overcome a few key challenges before it can claim that it is offering fully commercial services:

  • The company itself admits that more development is required to improve the robustness of the overall system and a lot of testing and fine-tuning of algorithms iterations will be required before its solutions are ready for full commercialization. Although it is confident that its technology stack and software will be ready for “driver out” operations by early 2021, it cannot guarantee that the system supplied by its partners, such as the braking and steering systems, etc. will also be ready by that time.
  • Public acceptance and regulations are also potential barriers, In the US, only 24 states have passed legislation permitting autonomous driving technology while in China, open-road testing of autonomous vehicles is only allowed in Greater Beijing and Greater Shanghai. Clearly, TuSimple can only introduce services where regulations permit them to do so. Any serious accidents or concerns by the public in the early stages of “driver out” operations may cause the regulators to “ground” the fleet.
  • Offering a cost-effective service is also a major challenge. Even if the technology is ready, the cost for using TuSimple’s autonomous truck fleet needs to be lower than the traditional human-driver solutions. This is critical to generate greater demand. In this respect, TuSimple claims that its technology can reduce logistics costs by around 30%-40%. However, this depends on economies-of-scale reductions in the cost of AV technologies, which will be driven by the much-higher volume car autonomous driving market. It might, therefore, take some time for it to reach its target operating costs.

Compared to some of its competitors, however, TuSimple possesses several key advantages. Its focused strategy on L4 trucking logistics has enabled it to progress rapidly to become one of the first commercial players and its presence in both the US and China will allow it to penetrate the two biggest markets in the world simultaneously. Unlike other start-ups, TuSimple is also very well-funded by investors in both China and the US. This allows it to keep improving R&D and to develop sustainable technological advantages.

As a result, it is not surprising that TuSimple has become one of the most sought-after start-ups with both US and Chinese investors. It is probably only a matter of time before an American company will acquire it, or more likely, a Chinese company.