Thank you for subscribing.

Please check your email to confirm.

Unsubscribe success..

You already subscribed and confirmed.

Please check your email.

You already subscribed.

Please check your email to confirm.

Interview with Chen Mo: Mass Production Comes as Early as 2023
Interview with Chen Mo: Mass Production Comes as Early as 2023
TuSimple autonomous truck. Image credit: TuSimple website
Associated Company
TuSimple TuSimple

Founded in September 2015 and based in Shanghai and San Diego, TuSimple (图森未来) is one of the first batch of companies in China to develop Level-4 (SAE-standard) commercial autonomous driving truck solutions. Since August last year, the company has started small-scale commercial operations on Highway 10 in Arizona; it has been engaged by some large retailers and e-commerce platforms.

According to the company, TuSimple has about 50 driverless trucks in China and the US. Each truck can generate thousands of US dollars a week at present by transferring goods. In the case of meeting research and development needs, the remaining vehicles are headed to the road for trial operation. However, the business is not profitable because each vehicle is equipped with a security officer and a tester who are both paid. Moreover, R&D costs and the salary of more than 500 employees amount to a sum much higher than the freight income.

In an interview with EqualOcean recently, Chen Mo (陈默), the founder and CEO of the company, said that the profit could come soon in 2020 when the company was able to remove the people. By then, the company could break even in 2023 or 2024 once its self-driving vehicles reach mass production in two to three years. However, he also mentioned that the worst case might be that the autonomous driving startup breaks even in 2027.

Bet on the US market

Unlike many Chinese companies that have placed centers in China, TuSimple is more aggressive in developing its business in the US. There are very rational business considerations behind this. Chen Mo told EqualOcean that one of the reasons was higher overseas labor costs.

According to the US Department of Labor, in May 2017 the median annual revenue of heavy-duty truck and large trailer drivers in the US was USD 42,480, while the corresponding annual income of Chinese drivers was about USD 14,028. While the cost of employing drivers is increasing, there is also a shortage of truck drivers. According to Bob Costello, chief economist at the American Truck Association, the number of drivers in the trucking industry reached 50,000 by the end of 2017. If the trend continues, the shortage of truck drivers may amount to more than 174,000 by 2026, which will inevitably lead to higher employment costs.

In addition to the cost of employment, relatively sound autonomous driving laws and regulations are one of the issues that prompts TuSimple to actively expand in the US market. According to Chen Mo, there are 16 states in the US where autonomous driving companies can conduct autonomous driving road tests and four states where companies can conduct commercial trial operations. It is expected that, by the end of 2020, all states in the nation will open autonomous driving road tests. In contrast to China, the US has better commercialization scenarios, and any Chinese autonomous driving company that does not launch a commercialization process overseas will not be able to fulfill large-scale commercialization in China.

The quality and cost of trucks also prompted TuSimple to increase its bet on the US market. Relatively speaking, China's OEMs are less mature than those in Europe and the US. For instance, they have backward development of line control systems. For the same line-controlled truck, the cost is cheaper abroad.

Achieve mass production as early as 2023

TuSimple's current business model is simply to use driverless trucks to help people transport goods and dig deep in the logistics field. Chen Mo said that TuSimple directly cooperated with OEMs in China and the US and shared revenues. In other regions, such as Japan, Korea, Australia and Europe – where the company does not operate business currently – TuSimple may choose to rent out self-driving technology and charge license rental fees.

At present, TuSimple has 18 partners, including shippers and OEMs. Most of TuSimple’s clients are taking its autonomous trucks on trial currently, and large-scale applications of self-driving trucks will emerge after the vehicle costs become lower than the existing labor costs. Only after the software is ready will clients choose to place orders – by then OEMs will be willing to do mass production, as it takes a long period and large investment to prepare hardware parts. Chen Mo expects that TuSimple's self-driving trucks will drive out and start receiving orders in 2021 and achieve mass production in 2023 or 2024 when costs begin declining.

Since the company's inception, TuSimple has received a total of USD 298 million in financing. Investors include Sina, NVIDIA, Compound Capital, ZP Capital, CDH Capital, UPS and Mando Corporation. Among them, Compound Capital, ZP Capital and CDH Capital are financial investors. On September 17, TuSimple completed an extended Series D round and received USD 200 million in funding. Chen Mo told EqualOcean that the company started the D round of financing in October last year, but due to the deterioration of the economic environment and downturn of the capital market, it finally completed the financing in September, which took much longer than expected.

When it comes to introducing investors, Chen Mo said that TuSimple welcomed equity investment from upstream and downstream industries. For example, the US logistics company UPS and the Korean automotive Tier 1 supplier Mando Corporation were introduced in Series D. At the same time, he said that the news that Amazon was in talks to acquire TuSimple was fake news, but the two companies did have a conversation in terms of investment.

Although the environment of China's capital market is not good, TuSimple seems to have no capital concerns. When talking about most Chinese Level-4 companies having to turn to the lower level (Level 2 and Level 3) development due to funding problems, Chen Mo said that TuSimple did not consider the Level 2 and Level 3 markets at all, because the company's advantages lie in the Level 4 software algorithm and lower level of autonomous driving can emphasize hardware parts more compared to Level 4. He said, “You cannot just do Level 2 or Level 3 algorithm alone.”

However, he also admitted the biggest problem the company may potentially confront may be the company’s lack of cash flow to support driving out, which is a common problem for all Chinese autonomous driving companies.

Target Waymoo and Daimler

In China, the competition in self-driving truck industry is becoming fierce. When talking about competition, Chen Mo said: “After 2015, the window period of the autonomous driving truck field has gradually passed, and new startups cannot have enough resources to survive.” In the eyes of Chen Mo, in the market and technical strength considerations, his opponents are just Waymoo and Daimler. The former ported its mature passenger car driverless system to the truck. In March last year, it began to use the self-driving truck to transport goods in Atlanta's data center, using the same set of custom sensors as its passenger car. The traditional car companies represented by the latter are also stepping up to make driverless trucks.

Chen Mo is a serial entrepreneur. Before creating TuSimple, he founded a number of companies covering the fields of advertising, gaming and used car transactions. Talking about the difficulties of cross-industry entrepreneurship, he said: “The main thing is to master the essence of doing business: learn to match resources and formulate strategies.”

Enterprise Information

TuSimple is an innovative technology company that is devoted to the development and application of artificial intelligence and computer vision technologies.
CATEGORIES: AI
Last Funding Type
Series D
Number of Employees
101-250
Number of Funding Rounds
4
Total Funding Amount
83.10M

Enterprise Information

TuSimple
TuSimple is an innovative technology company that is devoted to the development and application of artificial intelligence and computer vision technologies.
CATEGORIES: AI
Last Funding Type
Series D
Number of Employees
101-250
Number of Funding Rounds
4
Total Funding Amount
83.10M

Reach the Author!

Ask the author questions about the copied text

MOST READ

THE LATEST

Any Question

EqualOcean is a leading industrial tech media and investment research company that focuses on technological and industrial innovation in China.

We aim to assist Chinese entrepreneurial enterprises to break into the global market and provide overseas investors, VCs, and enterprises with a deeper understanding of China's business environment and to seize opportunities in China.

Join over 800,000 of your peers