Economic Boom From Faster and Cheaper Movement of Goods

There is some suggestive evidence that lowering the cost and barriers to trade and increasing the volume of trade will boost GDP. It is difficult to isolate cause and effects. Past major examples of reduced transportation times and lowering costs of movement of goods are Interstate and national highway systems and shipping containers. Shipping containers reduce the handling times in and out of ports and warehouses. Shipping containers increase efficiency and reduce costs. The highways enabled trucks to move faster compared to dirt roads or poorly connecting regional road systems. Understanding these huge benefits is important now because the world can get comparable or larger economic boosts from self-driving cars and automation at ports, warehouses and factories.

A vector autoregressive approach looked at container shipping volume and data across 135 countries suggests that trade is a determinant of economic growth, as a 1% increase in transported TEUs (shipping containers) will lead to an approximate 1.7% increase in GDP.

A researcher with the St Louis Federal Reserve believes that shipping container related innovation was a major part of world trade increased by ten times (adjusted for inflation) from 1970 to 2018.

The US build the Interstate highway system from 1947 to 1964. This enabled cars and trucks to increase the distance traveled in a day by as much as two times to four times compared to 1920. It was a 1.2 to 1.5 times benefit compared to the roads of 1945. The gross domestic product (GDP) grew at an annual compounded rate of 3.9 percent from 1947-1964. The transport of freight in the U.S. grew considerably during this time. There was also the post-war economic boom as military production and investment was redirected to the domestic economy. However, President Eisenhower said the Interstate was the single biggest contributor.

The Interstate has had a significant impact on U.S. productivity. It reduced travel times in rural areas, as much as twenty percent and, by as much as fifty percent in some urban locations. Its expansion helped companies keep their transportation costs relatively low, which, in turn, has decreased product costs and increased product availability.

Strategy and Analytics estimates that self-driving trucks could halve logistics costs by 2030. Halving logistics costs is like a global tax cut. If logistics are 4% of all costs now then this would be a 2% tax cut for all transactions.

Self-Driving Vehicle Potential

Self-driving trucks would be able to drive 23 hours per day instead of 8 hours for a human-driven vehicle. Longer-term as safety for self-driving is improved and all vehicles on some or all roads have exclusive self-driving or self-driving compatible vehicles then the speed of traffic could be safely increased to 150 miles per hour. The eventual future of safe high-speed self-driving would make every dedicated highway like high-speed rail. Any country could make the regulation and infrastructure adjustment and rapidly have a network of high-speed rail equivalent highway. The US could go from no high-speed rail equivalent system to 100,000 to 150,000 mile networks of high-speed self-driving trucks. This would be five times the size of China’s high-speed rail network. China might have about ten thousand high-speed rail cars. Converting or replacing all semi-trucks with self-driving semi-trucks would be fifty to hundreds of times the capacity of China’s high-speed rail system.

China will also be able to convert its larger fleet of large trucks to self-driving electric trucks.

Converting the world to self-driving electric trucks would eliminate about 10 million barrels per day of oil usage. It would be about 3-4 million barrels per day in China alone. This would also have a large air pollution reduction. Air pollution in China reduces China’s GDP by about 6% from environmental and health damage.

Ark Invest Analysis of Autonomous Electric Trucks

ARK expects autonomous electric trucks to reduce the cost of trucking from 12 cents per ton-mile to 3 cents during the next five to ten years. Initially, truck shipment revenues could contract from $180 billion as costs drop by roughly 75%. Longer-term, however, the ton-miles shipped by truck could double as autonomous electric platforms undercut rail and add $100 billion to revenues.

The combination of electric and autonomous technology will increase productivity and lower the costs of trucking enormously. According to ARK’s research, electric drivetrains will push shipping costs down from 12 cents to 10 cents per ton-mile. Autonomous technology should cut costs by another 7 cents to 3 cents.

Higher utilization rates and reduced labor are the two most important variables in lowering autonomous trucking costs. Astonishingly, in the US today the capacity utilization of trucks is below 20%. ARK estimates that the utilization of autonomous trucks will be four times higher, not only relieving drivers of grueling duties behind the wheel but also reducing labor costs significantly.

SOURCES -Ark Invest, Strategy and Analytics, WeForum, Dept of Transportation

Written By Brian Wang,

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