Autonomous Trucking: Great Potential For Aurora Innovation But Risks Weigh

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Autonomous trucking, driven by LiDAR technology, offers significant potential due to its scalability, efficiency, and ability to address driver shortages and safety concerns.Aurora Innovation is the ...

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Risks Weigh\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-08-30 20:30 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4718108-autonomous-trucking-great-potential-for-aurora-innovation-but-risks-weigh><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Autonomous trucking, driven by LiDAR technology, offers significant potential due to its scalability, efficiency, and ability to address driver shortages and safety concerns.Aurora Innovation is the ...</p>\n\n<a href=\"https://seekingalpha.com/article/4718108-autonomous-trucking-great-potential-for-aurora-innovation-but-risks-weigh\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU0823414478.USD","symbol_name":"法巴经典能源转换基金","start_time":0,"source_url":"https://seekingalpha.com/article/4718108-autonomous-trucking-great-potential-for-aurora-innovation-but-risks-weigh","article_id":"2463734793","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1437738922/image_1437738922.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2463734793","pubTimestamp":1725021000,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Autonomous trucking, driven by LiDAR technology, offers significant potential due to its scalability, efficiency, and ability to address driver shortages and safety concerns.Aurora Innovation is the 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investment.The market potential is substantial, with over 1.4 million trucks produced annually, but widespread adoption of autonomous trucking is still years away.I rate Aurora Innovation as a hold due to its potential and financial backing, but significant cash needs and commercialization uncertainties pose risks.   Scharfsinn86 I am interested in autonomous trucking because I am fascinated with LiDAR technology and its applications. I have been writing about LiDAR for a few years and observing its gradual adoption as a critical hardware component in various fields. The delays in consumer auto ADAS have significantly impacted LiDAR companies. However, some companies have diversified to include autonomous trucking and other verticals. I believe other verticals have the potential to outpace the consumer auto market due to more significant financial support for the application and improved adoption with fewer integration concerns, including the cost of the technology. I believe that costs may not be prohibitive in autonomous trucking as they are offset by the revenue generation potential in the way the trucks driven by humans do, yet maximizing efficiency and productivity. Still, the question remains: Will autonomous trucking outpace consumer auto ADAS adoption, or is widespread adoption still years away? Additionally, I would like to know if Aurora Innovation (NASDAQ:AUR) offers an investment opportunity. In my review, I focus on four companies. While others could contend for a place in this vertical, these four—Aurora, Torc Robotics, Plus, and Kodiak Robotics—best represent the dynamics of this vertical and its connection to LiDAR. These companies concentrate on long-haul driving, which I believe offers an easier path to adoption than urban autonomous driving, as it avoids some of the issues faced by robotaxis and offers much more significant potential for scale when deployed in a more universal way than robotaxis would. For Seeking Alpha readers, direct investment in this segment is possible only through Aurora, which is publicly traded. The other companies are private entities, with Torc owned by Daimler Truck. It is clear, especially from Aurora's experience, that companies are still in the testing phase and are only beginning to prepare for long-term scaling. The costs have been enormous; for example, Aurora has been spending at least $300M every six months and frequently sells equity to fund ongoing development. The concept of commercial autonomous trucking is particularly compelling. Generational shifts in job attraction and declining interest in long-haul driving have led to a shortage of truck drivers. This labor gap mirrors shortages in other entry-level industrial sectors. AI-powered autonomy in trucking could address this shortage while driving innovation that enhances overall productivity. Safety regulations restrict driving time in regions like North America and Australia, where long-haul routes cover extensive distances. These regulations are designed to mitigate risks associated with driver fatigue, which can lead to safety hazards or accidents. Autonomous trucking has the potential to not only alleviate the driver shortage but also improve safety and efficiency on these long-haul routes. Unlike consumer auto ADAS, where relinquishing the driving function is the least appealing aspect and the current focus remains on L2, autonomous trucking is advancing toward conditional autonomy at L3 and highly automated driving at L4. While a human driver is still present, in most L4 conditions, the system can operate independently, allowing the driver to override it if necessary. In this environment, these companies are focused on building and refining software to manage various hardware configurations, including LiDAR, radar, and cameras, enabling trucks to operate within L3 and L4 capabilities. A Brief History of Autonomous Trucking Companies Aurora Innovation was founded in 2017 by Chris Urmson, former lead of Google's (GOOG) (GOOGL) self-driving car project; Drew Bagnell, a former Carnegie Mellon University professor and Uber ATG (UBER) co-founder; and Sterling Anderson, former Tesla's (TSLA) Autopilot director. Aurora focuses on developing a scalable self-driving technology platform called Aurora Driver, which can be applied to various vehicle types, including trucks.   A Peterbilt 579 truck equipped with Aurora's self-driving system is seen at the company's terminal in Palmer, south of Dallas, Texas, U.S., September 23, 2021. (Picture taken September 23, 2021. REUTERS/Tina Bellon/File Photo) Kodiak Robotics, founded in 2018 by Don Burnette and Parker Thompson, is dedicated to developing autonomous driving technology specifically for long-haul trucking.   Kodak Robotics Displaying Hesai LIDAR sensor (Autonomous Vehicle International) Established in 2005 and acquired by Daimler in 2019, Torc Robotics is working on creating autonomous trucking solutions.   Torc Robotics Featuring AEVA and Ouster sensors (Torc Robotics) Finally, Plus, initially known as Plus.AI, was founded in 2016. The company concentrates exclusively on autonomous trucking technology. Initially targeting the Chinese and U.S. markets, Plus gained significant traction with its PlusDrive system. In March 2024, the company secured a new deal to commercialize its solutions with the Volkswagen-owned Traton Group.   MAN Truck, A brand of Traton Group Using Ouster sensors, among others (Traton Group) The market potential for autonomous trucking is highlighted by the annual production of Class 8 and other vehicles, as well as the revenue generated by the top four OEMs in 2023: Daimler Truck 2023 Sales: Approximately 523,000 trucks and buses, with around €50.5B in revenue. Market Presence: brands including Freightliner, Mercedes-Benz, and Fuso. Volvo Group 2023 Sales: Approximately 345,000 trucks, with around €43.5B in revenue. Market Presence: A major player in Europe and North America with Volvo Trucks and Mack Trucks. PACCAR 2023 Sales: Approximately 290,000 trucks, generating about $29.3B in revenue. Market Presence: Significant presence in North America and Europe with the Kenworth, Peterbilt, and DAF brands. Traton Group 2023 Sales: Approximately 290,000 trucks (including Navistar figures), with around €32.8B in revenue. Market Presence: Includes MAN, Scania, and Navistar. Traton is a subsidiary of Volkswagen Group. These figures highlight the substantial market potential, with over 1.4 million trucks produced annually. A 10% penetration rate for L4 autonomy would result in approximately 140,000 autonomous trucks annually. Given that these systems are not designed for aesthetic integration—where LiDAR is ideally hidden within the vehicle's body or under the windshield—trucks are often equipped with multiple sensors mounted externally. Some images I included here show up to six LiDAR sensors per truck. At a 10% penetration rate, this would require 840,000 sensors, compared to just one sensor per consumer vehicle, which would necessitate 840,000 cars. In summary, the opportunities in this sector are significant. Technology In general terms, the technology will be divided into two categories: software and hardware. The software will include perception modules, motion planning, simulation systems, and the utilization of mapping data. To quote Torc's mission statements around software, which essentially describe all purposes of the software for each company: \"We designed our technology to emulate the driving styles of highly skilled and safe drivers. Our system bases its driving decisions on an approach we call See-Think-Act. The system first perceives the world and understands its location (perceiving and localizing). It uses these factors to calculate the optimal driving decision (thinking). Finally, it executes this decision in real time to navigate its environment. Our system continuously performs these tasks as it traverses the roadway.\" Companies use a range of sensors, including LIDAR, radar, and cameras, to enable execution. A LIDAR sensor may be proprietary, such as Aurora's FirstLight, a Frequency-Modulated Continuous Wave (FMCW) sensor from Blackmore Sensors and Analytics acquired by Aurora in 2019. However, most sensors come from LIDAR companies. Financing Until 2021, Aurora Innovation secured $1.9B in funding and raised over $1.8B through its SPAC listing, achieving a market valuation of more than $10B. In July 2023, the company sold $820M in equity. By the end of June 2024, Aurora had approximately $1.04B in current assets, including $402M in cash and $618M in short-term investments. On August 2, the company raised an additional $483M. Currently, Aurora's market capitalization exceeds $7B. Plus, it has likely secured around $1.6B in financing. Torc Robotics raised $350M before being acquired by Daimler Truck, which valued the acquisition at approximately $1.5B, though specific purchase details were not disclosed. Daimler Truck is reported to have committed roughly $550M to developing autonomous driving technology in the coming years. Lastly, Kodiak Robotics has raised $670M, counting Warren Buffett among its investors. The table below illustrates the relationships and platforms utilized by each company. Although early deals have been announced for the LiDAR sensors, these have yet to generate significant revenue streams for LiDAR companies. The most recent publicized deal was between Aeva (AEVA) and Torc, and I have expressed skepticism about Aeva's revenue prospects and concern over the deal's timeline.   Autonomous Truck Companies, Relationships, Platforms, LIDAR Vendors (Author, data sourced from companies) Luminar (LAZR) provides a long-range sensor Iris to at least two companies. Ouster (OUST) is linked to at least three companies using LiDAR sensors for mid to short-range applications. While Ouster has not made recent announcements, most of its previous announcements date back to 2021. Still, recent images (MAN Truck) featured the deal with Plus and the Traton Group and were published by Torc Robotics (TORC Picture) in discussions about Aeva. Aurora Innovation Analysis As mentioned, Aurora Innovation offers investors direct exposure to autonomous driving, particularly in the trucking sector. Aurora's projected revenues are modest, beginning at just $1.4M in 2024, increasing to $17.7M in 2025, and then rising to an estimated $97M in 2026. The most significant growth is expected in 2027, with projected revenues of $470M, with further substantial increases anticipated. In the first half of 2024, Aurora consumed $326M in operating cash flow (OCF). At that time, the company held $1B in cash and short-term investments. According to the investor letter published for Q2, CFO David Maday indicated that the money should last until the fourth quarter of 2025, which aligns with the current OCF spending rate. In August, the company raised $483M by selling equity at $3.60 per share, which is expected to extend the company's financial runway to Q3 of 2026. By the end of Q2, 2024, Aurora had 1.7 billion shares outstanding, excluding an additional 152M shares issued in the latest offering. Aurora's accumulated deficit stands at $3.6B, reflecting substantial investment in development. To become profitable, Aurora would need nearly $700M in gross profit annually to cover operating costs and at least $652M per year to break even and stop using equity to fund its cash. Interestingly, the company's forecast for 2029 projects revenue of $1.74B, with two analysts predicting earnings of $0.46 per share. That would translate to $782M in profit based on the share count before the August stock issuance. This forecast implies an unusually high gross margin for the company's first year of profitability. Achieving $782M in profit would necessitate $700M in operating expenses, resulting in a gross profit of $1.48B and an 85% gross margin. Such a high margin is at the upper end of expectations, even for software as a service or SaaS companies. This projection poses a significant risk to the investment thesis because achieving such productivity efficiency is highly challenging, and the five-year timeline assumption is, at best, uncertain. Utilizing the CFO's projections, the company will run out of cash by mid-2026 and need an additional $1.2B to fund two more years of operations, likely requiring further equity sales. While commercialization is anticipated at the end of 2024, the uncertainty about the next five years and the potential for additional dilution cast doubt on the investment's future returns. To further make things less attractive, the company's stock trades are closer to its 52-week-high. Conclusion Autonomous trucking is one of the most exciting verticals for LiDAR utilization, serving as a prime example of how LiDAR sensors are becoming essential hardware for the future. However, revenue growth and returns in this sector remain elusive, existing only in future projections. The widespread adoption and scaling of autonomous trucking are still years away. In my opinion, an additional significant concern for Aurora Innovation is its reliance on sensors from the Chinese manufacturer Hesai (HSAI). There have been numerous discussions regarding the potential security risks associated with connected cars, mainly concerns that LiDAR could be used to undermine the security of the USA and the E.U. by mapping sensitive areas around military bases or through firmware updates that could create dangerous conditions for infrastructure and road users. While these scenarios may seem like science fiction, there are reports that Chinese cameras have allegedly been used in Ukraine to assist the Russian military in targeting objects. In this context, how would Aurora handle a situation where a ban on Hesai's sensors is imposed?  I currently rate Aurora Innovation as a hold, but there is a risk of this rating deteriorating to a sell. My hold rating is based on the potential of the autonomous trucking vertical and the company's ability to secure financial resources with solid market support. However, the significant cash needs and the uncertainty surrounding commercialization present a long and unclear path to profitability, which is at least five years away and requires highly efficient operations. While autonomous trucking remains a promising potential market, the commercialization timeline, much like that for consumer auto ADAS, remains challenging to predict despite massive investments and the involvement of OEMs, software developers, and hardware providers.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2463734793"}