Driverless Truck Innovator TuSimple: Not As Strong As Some Think

  • TuSimple (TSP) is the first listed firm in the autonomous driving space.
  • Its business model implements B2B SaaS to improve per mile costs to increase efficiency.
  • We evaluate TSP with multiple risks in technology, competition and regulation.
  • We estimate the company's value at between USD 4.2 billion to USD 5.2 billion, 40% lower than the current 7.8 billion.
  • TSP is a speculative stock due to its technological uncertainty.

Inception and funding

Even though it was the first listed company in this field, TSP is not the first company running road tests with autonomous trucks. Another pioneer, Starsky Robotics, did that even earlier, but this startup failed from a lack of funding in March 2020. In contrast, founded in 2015, TSP accumulated more capital in China and raised a total of USD 648.1 million in over 11 rounds of funding before its IPO, including proceeds from shipping giant UPS, truck manufacturers Navistar and Trapton.

The success of TSP is indispensable to mutual efforts from both of its China and US management, which has a rather large percentage of Americans so that people first thought TSP was a US company. Its two founders Mo Chen and Xiaodi Hou are serial entrepreneurs and professionals in AI. Xiaodi Hou holds a few key patents in this industry. Other directors have abundant experience in the US truck sector. TSP is running a fleet consisting of 70 trucks that are sporadically applied in the US and China with a ratio of 5:2, as of April 2021, with over 2.8 million miles of the road test.

Business model: Demand and supply

Autonomous trucking services can help to solve the current structural problems of US truck transportation. The sector historically has a low-profit margin with high costs of labor, fuel, administration and equipment. According to the founder of Starsky Robotics, Stefan Seltz-Axmacher, because of a scattered supply, 8% of the company's profit margin results from running a trucking company in the US. Another major hurdle for these companies is that it is hard to find truckers, especially drivers for long-haul trips. Drivers averagely spend 3.5 weeks per month inside their cars. To compensate for their hard efforts and time, shippers and carriers need to pay drivers with a competitive salary, which means more costs to the truck companies. This dilemma is even worse amid the thriving of e-commerce, along with increased demand for truck delivery.

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