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TuSimple IPO: Here's What You Need To Know

By Investing.com (Yaniv Elbaz/Investing.com)Stock MarketsApr 07, 2021 08:25AM ET
www.investing.com/analysis/trusimple-ipo-heres-what-you-need-to-know-200571658
TuSimple IPO: Here's What You Need To Know
By Investing.com (Yaniv Elbaz/Investing.com)   |  Apr 07, 2021 08:25AM ET
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Self-driving vehicle company TuSimple recently unveiled paperwork for its initial public offering. They're in the race to be the first to launch fully autonomously driven semi-trucks.

Morgan Stanley, Citigroup, and J.P. Morgan are the lead underwriters on the IPO. TuSimple plans to trade on the NASDAQ under the ticker “TSP” as the first autonomous technology company targeting the truck freight market. With the recent favorable market conditions, specifically revolving around technology and SaaS ecosystems, TuSimple is looking to take advantage of the public markets via a traditional IPO rather than participate in the recent SPAC boom.

Based on the S-1, their aim is to revolutionize the $4 trillion global freight trucking market. The San Diego, California-based company has developed autonomous technology specifically designed for semi-trucks to enable the world’s first Autonomous Freight Network (“AFN”) in partnership with world-class shippers, carriers, railroads, freight brokers, fleet asset owners, and truck hardware partners. TuSimple believes their technology and AFN will make long haul trucking significantly safer, more reliable, efficient, and environmentally friendly.

According to the filing, TuSimple has developed a fully integrated software and hardware solution enabling what they believe is the world’s most advanced Level 4 (“L4”) driver-out autonomous semi-truck technology. Hallmarks of their proprietary semi-truck specific technology include their 1,000 meter perception range, 35 second planning horizon, high-definition maps with accuracy within five cm., and a conclusive integrated L4 autonomous semi-truck design comprised of a fully redundant sensor suite and components. The company launched their AFN back in July 2020 and looks to quickly scale operations and expand autonomous shipping lanes in order to provide users access to autonomous capacity freight anywhere and 24/7 on demand.

The Company is backed by a strong international group of strategic and financial investors, and notably, investments from two global, leading OEM manufacturers: Navistar (NYSE:NAV) and Volkswagen's (OTC:VWAPY) TRATON. TuSimple has a large U.S. presence and a robust ecosystem of vertically integrated hardware partners which further accelerates the benefits of their capital light business model.

Furthermore, by leveraging these partnerships significantly, the company aims to focus developments on their proprietary, core autonomous software solution and looks to de-risk and accelerate the commercialization of the AFN at requisite scale to adequately serve the freight industry. To date, the company has raised well over $800M in capital and looks to cement themselves as the clear leader within the autonomous trucking space.

Key ingredients to be first to bring L-4 autonomous freight capacity to market at scale 

TuSimple claims they dominate the autonomous trucking space as they have the most advanced L4 autonomous driving system for trucks. They say they are the only company whose trucks can drive autonomously from terminal to terminal on both highway and surface streets. They also say they have a clear 2024 target production date coupled simultaneously with their go-to-market strategy – the AFN.

Business Case: Reshape the estimated $4 trillion-dollar global freight transportation market

In the United States alone, the truck freight market is estimated to be about $800 billion dollars and accounts for nearly 80% of all freight transportation. With the majority of all goods transported on just 10% of the nation’s interstate highways coupled with high operating costs hovering around 43% (Labor) | 30% (Fuel). As such, the freight market would ultimately benefit from the TuSimple autonomous technology solution the company says.

In addition to building out their AFN domestically, TuSimple aims to also expand in both China and Europe with OEM partner TRATON to further augment and complement their Autonomous Freight Network, which has a combined total addressable market of an estimated $2.1 trillion dollars.

Provide safer freight capacity, lower overall environmental impact, increase cost efficiencies.

Safety: Over the last decade, there has been on average 5,000 fatalities annually involving large trucks, with roughly 90% of all accidents due to distracted, impaired, fatigued or non-compliant drivers. With the adoption of autonomous technology in trucking, this will significantly reduce the number of accidents caused by human error.

Environmental: Engineered to improve fuel efficiency by ~ 10% conducted in a study with University of California, San Diego coupled with empirical data – the company seeks to address fuel efficiency in both cost savings and carbon footprint.

Address a fundamental supply and demand imbalance of freight capacity, that is drivers and trucks.

With increased demands from E-commerce trends and faced with growing shortages of drivers and safety issues, freight capacity has been routinely unable to keep up with the incremental uptick in demand. Nonetheless, with an estimated industry shortage of over 60,000+ drivers and over 100% in driver turnover rate, TuSimple looks to address this imbalance head-on.

Multiple service models through the AFN.

The company mentions two distinct service models:

  1. Carrier-Owned Capacity
    1. Under this model, larger shippers and carriers will purchase a purpose-built L-4 autonomous semi-truck from Navistar powered by TuSimple technology.
    2. Customers will subscribe to TuSimple Path which is the company’s per-mile service fee for an all-inclusive “white-glove virtual driver” service.

 

  1. TuSimple Capacity
    1. The company looks to provide service by operating the fleet on behalf of their customers.
    2. Users can expect an approximate 15% discount from prevailing rates.

$800 million dollars in private rounds of financing including investment from:

  • OEMs: Navistar, VW’s TRATON,
  • Railways: Union Pacific (NYSE:UNP) and CN
  • Carriers: UPS, Schneider, Werner, and U.S. Xpress
  • Strategics: Goodyear and NVIDIA (NASDAQ:NVDA)

As part of the production program with Navistar, 5,700 autonomous truck reservations were already received.

Given that 2024 is still relatively far out, there is already genuine interest and a waiting list for TuSimple L4 autonomous trucks. Approximately ten customers with significant freight operations signed on within a relatively confined period of four months and with roughly 75% of reservations already made by commercial truck fleet customers, who are also equity investors. Last, but not least, reservations appear to be cancellable and refundable.

Conclusion

According to the S-1, TuSimple had a loss from operations of $177.9 million in 2020, more than double the loss of $84.8 million incurred in the prior year.

TuSimple’s revenue did rise to $1.8 million in 2020, up 2.5x from the $710,000 in revenue recognized prior year. Given, the sheer amount of capital needed to scale, TuSimple has rendered an impressive operation on producing high value output given the minimal amount of capital considered as compared to their competitors. Distinctively, TuSimple is trending within the R&D growth phase as they look to grow operations quickly within the next 2-3 years, but with a clear itinerary harnessed with leading proprietary software, world-class hardware partnerships, and a scalable go-to-market strategy, TuSimple looks to have locked in all the key ingredients on bringing autonomous freight capacity to market at scale.

Currently, TuSimple has not disclosed how much they will publicly raise, but it's clear the company anticipates a signficant influx of additional capital from the IPO.

TuSimple IPO: Here's What You Need To Know
 

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TuSimple IPO: Here's What You Need To Know

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