May 21, 2019
Buffett last year bought Pilot/FlyingJ, the US’s largest operator of truck stops...it is a brilliant move, perhaps for reasons he didn't realize at the time of purchase. Along with his BYD investment in electric trucks, the combination is a game changer.
Everyone knows autonomy is coming in the next couple years to cars. Google waymo is now live in phoenix with their uber killer. Telsa has their neural net hardware done so now they are within a year too. With no human driver, the cost per ride goes down by 80%... making it viable to replace owning a vehicle for people living in the suburbs. We’ll see full rollout nationally over the next 12-24 months...
Autonomy at scale may be even closer in trucks.
Imagine this scenario:
- A local human truck driver picks up a container from the port of Oakland and drives about 75 miles and delivers it to the closest FlyingJ Truck Stop
- Waiting there is a tesla/byd autonomous semi that connects to the trailer and drives it long haul toward the closest FlyingJ to the destination, stopping at a FlyingJs after 7 hours of driving when its batteries are low.
- Waiting there is a fully-charged tesla/byd autonomous semi that connects to the trailer and drives it the next 7 hours, while the last semi recharges and waits for another load... a sort of electric autonomous pony express.
- When the container gets to the FlyingJ closes to the destination, a human driver meets the load and takes it the last 75 miles to the destination. After dropoff, he picks up the next load and takes it to the nearest FlyingJ.
Human drivers with legacy diesel cabs are only involved where they help the most, the first 75 and last 75 miles. That high human and diesel fuel cost is only incurred for 150 miles rather than thousands of miles of the journey.
Electric autonomous trucks are used for the bulk of the trip. No human driver and an electric fuel cost of 1/4th per mile than diesel so fuel costs go down dramatically too.
And perhaps most importantly, speed goes up dramatically. The container can travel 24 hours a day from source to destination at 65 miles an hour, with just a 10 minute delay each 7 hours to swap cabs. Cargo can now go coast to coast in less than two days via ground.
Buffett owns BNSF railways which historically has enjoyed being the lowest cost “per ton per mile” to move containers. Electric autonomous trucks will quickly make the highways both faster and cheaper per ton per mile than rail… Buffett may not have realized it, but his BYD and Pilot/FlyingJ investments are a brilliant hedge to BNSF’s significant risk of disruption from AV and electric truck technology.
And with the American Trucking Association supportive of autonomous trucks to help with the critical shortage of truck drivers, there shouldn’t be any big regulatory hurdles to broad adoption.
Early stage startups are at work enabling autonomy in trucks, details here.
. Tesla will be much faster to market. Autonomy to navigate the quarter mile from the truck stop onto the freeway, then the ¼ mile off the freeway is about as easy as you can make it, so Byd working with Baidu’s AV group could be live quickly. Every single mile of US freeway can be easily mapped to make navigation to stay in the right lane very simple, and then today’s adaptive cruise control can already keep the truck a safe distance from the truck in front… Humans keep doing the hard part on the first and last 75 miles. Autonomy does the easy part.
Trucking is a $700B industry and employs 3.5M people. Trucks cost $100k and burn $70k of diesel a year..so swapping that for a Tesla Semi at $150k burning $17k of electricity instead is a no brainer. If that truck is autonomous it will travel 3x as many miles per year as it can be constantly moving when it isn’t charging… it is going to change everything… Our UPS and Fedex deliveries are going to be both faster and cheaper. Perishable supply chains for grocery and restaurants will change dramatically too, dramatically lowering food waste and costs.
Other pure-play railroads are going to struggle big time, they will lose out to better/faster/cheaper autonomous trucks: CSX
for example has a $40B+ market cap on $10B of revenue and 20% net income margins… That is going to change dramatically in the next decade. There is no truck stop company with the national footprint that Pilot/FlyingJ has with whom for CSX to partner.
Since Buffett owns BNSF, PilotFlyingJ, and BYD he can take significant share from CSX and others. BNSF can run the service, taking containers they currently send over rail and instead send them over highways. They simply need supercharging stations at PilotFlyingJs and a partner like BYD to enable AV trucks that can navigate going on and off freeways.