Entrepreneurship

Self-driving truck race suffers from major traffic

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A self-driving mail truck is seen during its presentation at the Austrian Post logistics centre in Vienna, Austria March 26, 2019. REUTERS/Leonhard Foeger

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NEW YORK, June 23 (Reuters Breakingviews) – The race to create self-driving trucks, as well as public companies to invest in them, is getting crowded. Embark Trucks is the latest to merge with a blank check firm in a $5.2 billion deal. It has built up some speed. Some smart money names are investing alongside, and Donald Trump’s former transport boss, Elaine Chao, is joining the board. Embark’s strategy might please freight shipper and truck makers alike. The valuation isn’t bad either, in relative terms. But competitive and regulatory roadblocks lie ahead. Embark doesn’t have the open highway to itself.

Embark sells software which aims to work on multiple brands of trucks. Given the complexity of autonomous driving, differing makers of 18-wheelers might prefer to outsource the task. Carriers are offered big potential savings – about half the cost of a human driver per mile, according to Embark, in exchange for a fee for distance driven. It has already signed up beer king Anheuser-Busch InBev (ABI.BR) as a client, and Knight Swift Transportation (KNX.N), which is also investing in the deal.

The valuation doesn’t look crazy either, at 1.6 times its estimated 2025 revenue of $2.8 billion. Rival TuSimple (TSP.O), which went public in April, is valued at about twice as much. That may help explain why boldfaced names of the investment firmament, Sequoia Capital and Tiger Global, signed up.

Chao’s presence may also help the firm wade troubled regulatory waters. Currently, a patchwork of state and federal rules governs the testing and commercial use of the technology. While the public may be wary of the risks, the possible benefits of higher safety and economic efficiency mean there’s sure to be a strong push behind creating comprehensive rules.

Embark’s clever alignment of all these parties give it a shot at winning a piece of the self-driving truck business. That’s a giant opportunity, as its 2025 projections only count on the firm snagging a single-digit percentage of miles driven in America. But it’s hardly alone. In addition to TuSimple, rival Plus is seeking to go public and signed a partnership with Amazon.com (AMZN.O). And plenty of other startups, established vehicle firms, and tech outfits are chasing the holy grail of autonomous driving. Expect more traffic ahead.

Follow @rob_cyran on Twitter

CONTEXT NEWS

– Embark Trucks said on June 23 it would go public through a merger with a blank-check firm Northern Genesis Acquisition II that would give the self-driving truck technology developer a market capitalization of $5.2 billion.

– Embark will receive $614 million of proceeds. This includes a $200 million private placement from investors including Sequoia Capital and Tiger Global.

– The company also said former Secretary of Transportation and Secretary of Labor Elaine Chao will join its board.

– For previous columns by the author, Reuters customers can click on

Editing by Rob Cox and Katrina Hamlin

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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

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