Volkswagen's Traton, TuSimple Team Up for Autonomous Trucks

Zacks Equity Research
·4-min read

Volkswagen’s VWAGY truck arm Traton SE recently entered into a global partnership with TuSimple for developing self-driving trucks. As part of the deal, Traton has also purchased a minority stake in TuSimple, making it one of the four main investors in the company. Financial terms of the deal and the size of the stake remain undisclosed.

The companies will team up to roll out a development program aimed at building Traton’s Scania trucks equipped with TuSimple’s Level 4 automation system that have the ability to drive without any human intervention. Initially, the autonomous trucks will run “hub-to-hub” over a pre-decided route in Sweden. The driverless truck fleet will eventually be tested across Sweden, Germany and other countries of Europe. The companies have not yet outlined the scope or the timelines of the development program.

The alliance is beneficial for both companies as it brings together a global automaker and a level 4 self-driving technology company to build Level 4 robotic big rigs that enable complete driverless operations on predefined routes.

TuSimple, headquartered in San Diego, is an autonomous driving technology start-up company focused on heavy-duty commercial trucks. The company currently operates in China, and San Diego and Tucson, AZ in the United States. The start-up operates a 40 self-driving truck fleet in the United States that are used for transporting freight between Arizona and Texas. The latest alliance will roll out TuSimple’s autonomous vehicle operations to Europe for the first time.

Traton’s new CEO Matthias Gruendler seems optimistic about the partnership, as it paves way for the Germany-based auto giant toward becoming a global champion. Although the driverless trucking industry got a relatively late start compared with self-driving cars, this innovative technology will create additional value for Traton customers as it could compensate the rising driver-unavailability crisis. Both companies are committed to a brighter future together as the alliance will help facilitate the commercialization of self-driving trucks.

The Traton-TuSimple alliance marks the latter’s second deal with a major truck maker, following its recently-announced partnership with Navistar International Corporation NAV for developing autonomous big rigs in the United States by 2024. The partnership is aimed at developing new self-driving semi trucks instead of retrofitting the existing Navistar trucks that TuSimple was already using.

The Traton-TuSimple deal also strengthens the bond between Traton, TuSimple and Navistar. Notably, Traton already owns around 17% stake in Navistar. Recently, Traton increased its offer to buy the rest of the Illinois-based truck maker to $43 per share from the $35 offered in January 2020. Navistar had dismissed the revised proposal, citing that the bid was too low.

The future of driving is autonomous. Higher levels of autonomy have the potential to reduce risky and dangerous driver behavior. The rapid development in the self-driving vehicle space can be attributed to breakthroughs in technology, with the integration of robust AI and ML capabilities in advanced driver-assistance systems. Moreover, improving the neural networking capabilities, and advancements in digital mapping and obstacle recognition functionalities are expected to lead to safer navigation, reduction in accidents, as well as commuter comfort. Per Allied Market Research, the autonomous driving space is expected to witness a CAGR of 39.5% between 2019 and 2026, and reach $556.67 billion by 2026.

Traton is optimistic that the deal with TuSimple will aid the truck maker in its pursuit of gearing up the autonomous vehicle industry.

However, Traton faces stiff competition from its German peers like Daimler AG DDAIF and BMW AG BAMXF that are ramping up their efforts in the autonomous vehicle space.

Last year, Daimler Trucks purchased a majority stake in Torc Robotics, a rival to TuSimple that has been helping Caterpillar build driverless mining trucks since 2007.

Volkswagen currently carries a Zacks Rank of 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of the company have depreciated 12.8% year to date compared with the industry’s decline of 5.5%.

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