The Coming Disruption of Transport

[lenaitch]

If the argument were founded in liking trains, we would have ceased it several pages back.

What is your prognosis for Seaway shipping? Presumably if the grain is all brought to Thunder Bay by AV truck, instead of train, it will continue on to Sorel rather than transloading to boat?

- Paul

According to government data, Canada exported 8.4 million tonnes of wheat in 2020-21 (not including other grains, oilseed, pulse, etc.). That's a lot of trucks heading for a port or border crossing, primarily on 2-lane rural and mountain highways.

 

[afransen]

As much as trains are more energy efficient than trucks, boats are more energy efficient than trains. So, hard to imagine much being diverted from shipping to truck. I imagine even the capital cost of the vehicles would be significantly higher. And no one is in a hurry to get commodities like wheat or rock salt so there is next to no premium for getting it there faster/more predictably.

 

[2transpo]

Shippers as in companies that need to move goods, nothing to do with lake freight.

The main point is, CN is switching industries to save themselves. The impacts of AV trucking have been unclear in the past, but recently they have been more clear. When TuSimple laid out their path to fully autonomous trucking by 2024, reality sunk in and UP and CN climbed aboard. It will be interesting to see what other railroads buy in.

 

[lenaitch]

Shippers as in companies that need to move goods, nothing to do with lake freight.

The main point is, CN is switching industries to save themselves. The impacts of AV trucking have been unclear in the past, but recently they have been more clear. When TuSimple laid out their path to fully autonomous trucking by 2024, reality sunk in and UP and CN climbed aboard. It will be interesting to see what other railroads buy in.

What do you mean by this?

 

[crs1026]

Shippers as in companies that need to move goods, nothing to do with lake freight.

The main point is, CN is switching industries to save themselves. The impacts of AV trucking have been unclear in the past, but recently they have been more clear. When TuSimple laid out their path to fully autonomous trucking by 2024, reality sunk in and UP and CN climbed aboard. It will be interesting to see what other railroads buy in.

As it happens, CN just filed their latest Annual Information Form and issued its Management Discussion & Analysis filing.

Neither of these rather important and legally actionable documents make the slightest comment about AV trucking, other than to observe that trucking is a competitor and CN’s business performance is affected by developments in that industry.

The documents outline that CN continues to invest in new locomotives and rolling stock, as well as upgrading track and investing in new rail technology. CN sounds rather positive about its continued rail operations, including investing in intermodal, such that those investments would make sense to investors and shareholders.

If CN management felt that the railway is about to fall off a competitive cliff due to AV trucking, they would have a legal obligation to disclose this to investors and regulators in these filings. Clearly, they aren’t doing that.

I’m not gonna sell my stock just yet. I think your characterisation of AV’s impact is quite unrealistic.

- Paul

 

[afransen]

MD&A is usually pretty boilerplate, and any competitive concern around AV trucking could be captured under the comment about trucking as a competitor. Also, there is not much for CN to gain at this stage by trumpeting that AV trucking is a bit competitor, as they don't want investors focused on that.

 

[2transpo]

What do you mean by this?

TuSimple announced in 2020 that by 2024, they will have autonomous trucks in service on highways crossing the continent.

 

[rbt]

TuSimple announced in 2020 that by 2024, they will have autonomous trucks in service on highways crossing the continent.

Extremely unlikely to be widely deployed by that date. The requirement that trucks have an aircraft style control system network, including certification processes, is going to take 4+ years even if they did have a 100% ready software and components list today.

A 2024 rollout of small scale commercial delivery vans perhaps. Transport trucks have much higher safety requirements.

 

[2transpo]

If CN management felt that the railway is about to fall off a competitive cliff due to AV trucking, they would have a legal obligation to disclose this to investors and regulators in these filings. Clearly, they aren’t doing that.

But they have about 1-2 years before they start nearing the cliff's edge so that may factor in to why they aren't disclosing. Also, they have the trucking as their fallback, so it is likely they will survive even if the railways is completely discontinued.

I’m not gonna sell my stock just yet.

Be ready though. When an industry is about to be disrupted, it rarely gives warning.

The most telling factor for me is that whenever you hear speakers talking about the future of transport and disruption, rail is never mentioned. The video at the top of this thread is a good example.

 

[MrGoose]

The most telling factor for me is that whenever you hear speakers talking about the future of transport and disruption, rail is never mentioned. The video at the top of this thread is a good example.

Rail is boring, gadgetbahn is cool and gets the investors going.

 

[lenaitch]

TuSimple announced in 2020 that by 2024, they will have autonomous trucks in service on highways crossing the continent.

Setting aside the multi-jurisdictional legal and regulatory hurdles they face (do you honestly believe that can be done in 3 years? Honestly?), in service and widespread deployment, as previously claimed, are quite different. I have driven the highway from Phoenix to Tucson as depicted in the previous video. It is a relatively flat, straight route that typically enjoys pristine weather. Moving millions of tonnes through mountains in the winter (because rail is doomed) might be a tad more difficult.

I tried to find an article on the CN-TuSimple synergy. Any reference I could find spoke of the 'last mile' issue, not mainline disruption, but none were clear as to whose interpretation that was so I didn't copy them.

 

[afransen]

The pressure to approve autonomous trucking will be very high. Jurisdictions don't want to become uncompetitive, and having higher cost shipping contributes to that.

 

[TRONto]

Setting aside the multi-jurisdictional legal and regulatory hurdles they face (do you honestly believe that can be done in 3 years? Honestly?), in service and widespread deployment, as previously claimed, are quite different. I have driven the highway from Phoenix to Tucson as depicted in the previous video. It is a relatively flat, straight route that typically enjoys pristine weather. Moving millions of tonnes through mountains in the winter (because rail is doomed) might be a tad more difficult.

I tried to find an article on the CN-TuSimple synergy. Any reference I could find spoke of the 'last mile' issue, not mainline disruption, but none were clear as to whose interpretation that was so I didn't copy them.

I think a significant factor is payload. Saying trucks would replace all rail would be similar to saying we could replace our subway system with AV buses. I think AV trucks will eat up rail on the margin and on the margin only.

With a growing population Canada will have more cars and trucks on the road without AV. AV creates induced demand which creates more traffic. How much efficiency does trucking gain with the increased volume of traffic?

While the outcome is unknown I would project 2040 vs 2019 rail volumes to be more affected by a decline in oil and coal shipments across North America than AV.

I'd make a point to mention not to rely on experts and their predictions. There are too many variables in this discussion to be able to predict anything with any significance at all.

 

[2transpo]

I think AV trucks will eat up rail on the margin and on the margin only.

That is a good point, but it is important to spell out what the margin looks like.

From an Ontario perspective, we will probably see the extinction of shortline railroads. Railroads like the Guelph Junction Railway, Goderich Exeter, Ontario Southland and Essex Terminal are not going to survive the transition.

I tried to find an article on the CN-TuSimple synergy. Any reference I could find spoke of the 'last mile' issue, not mainline disruption, but none were clear as to whose interpretation that was so I didn't copy them.

CN isn't going to start panic in the shareholders by saying many of their mainline operations (predominently in the east) will be driven into unprofitability until their plans for long haul autonomous trucking are a bit more complete. Until then, expect things to be quiet.

But the investment in TuSimple and JJ Ruest joining TuSimple show that CN is backed in the corner, desperate, and in self-preservation mode.

 

[crs1026]

I think a significant factor is payload. Saying trucks would replace all rail would be similar to saying we could replace our subway system with AV buses. I think AV trucks will eat up rail on the margin and on the margin only.

As a case study, here are some interesting stats from the Port of Vancouver.

2019 Autos unloaded - 419,566 inbound, 402 outbound - That implies a huge volume of empty auto carriers as well as the loads moving eastwards.

2019 Bulk Commodities - 99.7 million Metric Tonnes total, of which 36.9 million Metric Tonnes were coal and 5.5 million Metric Tonnes were Petroleum products.

2019 Containers - Inbound Loads 969,296 Outbound Loads 655,630

Perhaps some of those shipments would be attracted to highway transport, sure... but the container traffic alone equates to 4,452 containers per day moving mostly along the TCH. (And not counting empties, since the traffic is not balanced....a good volume also).

Now picture the traffic caused by 57.3 million metric tonnes of cargo (assuming loss of coal and petro business). At 35 tonnes per AV vehicle, that's 4485 truckloads per day, plus an equal volume of empties on turnaround.

And then 144 auto carriers each day, again in each direction.

- Paul