Volvo's Autonomous Trucking Plan With Aurora Is Ambitious. The Stock Is Slowing.

Volvo is the world’s second-largest manufacturer of heavy-duty trucks.

Paul J. Richards/AFP via Getty Images

Volvo has joined with self-driving start-up Aurora, making it the latest legacy truck maker to join forces with an autonomous vehicle specialist as disruption from artificial intelligence comes for the £1.5 trillion global trucking market. Shares in Volvo were near flat in Stockholm trading on Wednesday, with the stock down 3% since the beginning of the week following a downgrade from Swiss bank UBS.

The back story. Volvo, which also owns Mack Trucks, is the world’s second-largest manufacturer of heavy duty trucks–a dominant player in a global trucking market estimated by UBS to be worth £1.5 trillion. Legacy groups like Volvo are already expected to cede market share to the likes of Tesla as the industry faces pressure from innovation in zero-emissions vehicles, and self-driving trucks represent the next technological frontier. Established truck makers have followed a familiar pattern to expand into autonomous vehicles by joining with high-tech upstarts.

Daimler has a strategic partnership with Waymo, Google‘s self-driving car project, and Volkswagen -owned Traton is joined with autonomous vehicle start-up TuSimple. In 2019, Volvo began a partnership with Nvidia to develop decision-making systems for autonomous commercial vehicles and machines. Also read:Zero-Emissions Vehicles Are Bringing Disruption to the £1.5 Trillion Trucking Market.

Watch These Stocks, Says UBS What’s new. Volvo said on Tuesday that it had entered a strategic partnership with self-driving company Aurora to develop autonomous trucks for highway use. The group said the long-term partnership, which will integrate Aurora’s self-driving system with Volvo’s trucks, would initially focus on trucking routes between hubs for North American customers. 

“Creating a viable autonomous on-highway offering requires close partnerships with both customers and tech partners to develop the needed capabilities,” said Nils Jaeger, the president of Volvo’s autonomous driving arm.  Aurora was founded by a former self-driving engineer from Google, and its backers include Hyundai and Amazon. Launched in 2017, the group’s co-founders include former leaders at Tesla and Uber, and in December 2020 Aurora acquired Uber’s self-driving unit. “Aurora is already a leading force in autonomous systems, and its integrated self-driving stack, software, hardware and data services platform combine to offer a clear path towards efficient and safe on-highway solutions in the medium term,” Jaeger added.

Plus:Global Chip Shortage Halts Volvo Truck Production. The Stock Is Tumbling. Looking ahead. This is an exciting partnership for Volvo.

Self-driving vehicles have long been touted as the future of taxis, but the technological implications for trucking are far more critical. Autonomous haulage is hurtling toward the industry, and groups like Volvo must look to high-tech partners or risk getting left behind. But as trucking groups jockey for pole position in the race to dominate the next generation of the industry, Volvo and its shares face far more immediate headwinds.

Volvo said earlier this month that the global semiconductor shortage would have a “substantial impact” on quarterly production and that it would have to periodically halt manufacturing. 

Supply-chain issues were one of the reasons UBS downgraded Volvo stock to sell on Mar.

29, with analysts at the bank writing that “Volvo shares have detached from the company’s cyclical fundamentals.” UBS cut its target price for Volvo from 212 Swedish krona (£24) to SEK 188 crowns–with the stock trading at around SEK 222 on Wednesday.