Nuro: self-driving delivery accelerates

Autonomous delivery vehicles benefit from e-commerce growth and new regulations.

Stay-at-home guidelines, lockdowns, and quarantines have forced the adoption and experimentation of new technologies across several industries. The increase in online commerce and grocery delivery is creating opportunities for self-driving companies to accelerate the implementation of their products and services.

Some companies have also found ways to pivot from their original plans and directly help the people working in the front-line of the emergency. Nuro is one of them.

What is Nuro

Nuro is a startup building autonomous self-driving delivery vehicles. Founded by two ex-Google engineers (one of them part of the founding team at Google’s self-driving car project, now known as Waymo). The company is based in Mountain View, California, and backed-up by Softbank. They have raised more than $1 billion. (1)

Nuro is designing vehicles for last-mile delivery of groceries, food, consumer products, and packages. Their custom-designed R2 vehicles don’t have space for passengers, instead, they are optimized for deliveries and safety: they’re small, narrow, use electric motors, and have pedestrian-protecting features.

Operations

Nuro’s business model is built on top of several digital-enabled industries, such as e-commerce and grocery delivery. Today, a small proportion of shopping is done online, for example, only 3% of grocery spending is done online (2), but it’s growing fast. Several self-driving companies are trying to position themselves as the leader of different verticals of the supply chain (last-mile, trucking). Nuro’s vision becoming a reality depends on several factors including the ability to create relationships with regulators that can help accelerate the implementation of these new technologies and to build partnerships with retailers that will leverage the technologies to serve their customers.

Nuro started operations in December 2018, launching an unmanned delivery service in Scottsdale, Arizona, in partnership with retailer Kroger. The service was the first unnamed delivery pilot for the general public in the US. (3) In December 2019, Nuro announced a new partnership with Walmart, bringing Nuro’s delivery technology to customers in Houston, Texas. (4)

Nuro’s business model is reliant on changes to regulation and permits to test their vehicles. In February 2020, they received an exemption by the U.S. National Highway Traffic Safety Administration’s (NHTSA) that allows them to deploy up to 5,000, over the next 2 years, of their vehicles on road without certain equipment required for passenger vehicles. For example, the current regulation, designed for passenger automobiles, requires all vehicles to have back-mirrors and windshields. Nuro’s vehicles have cameras instead of mirrors, and specially designed panels that absorb energy much better than a windshield to protect pedestrians in case of a collision. This type of exemptions and grants are crucial for the development of self-driving delivery vehicles.

COVID-19

While most of the self-driving companies have suspended their operations during the crisis, Nuro has been able to follow their pilots because their activity is considered essential delivery services. In Houston, they’re still delivering groceries sold by Kroger and had an increase in orders by almost 100% since the first weeks of shelter-in-place. These orders are not being made by R1 or R2 vehicles but by modified Toyota Priuses using Nuro’s technologies with safety drivers on board (2). The increase in deliveries is not the only effect of the pandemic, other consumer behaviors have changed and some of these may persist in the long-term. Studies show that 23% of consumers have increased the purchase of products they used to buy in-store, and 9% of consumers have started doing online shopping for the first time. (5)

The crisis has also helped Nuro in terms of regulation. In April 2020, they received the first permit to test a self-driving vehicle on public roads without a safety driver inside. This is the first passengerless permit granted by the State of California, and the second driverless testing permit granted to any other company (the first was Alphabet’s Waymo). The permits allow Nuro to deploy and test their newly launched R2 vehicles as a way to decrease supply chain strains caused by the pandemic.

The initial plan for the R2 vehicles was to deploy them in California and provide free deliveries to customers around Mountain View, but once the pandemic hit the US, Nuro started rethinking their strategy. They looked for ways to contribute with their technologies. They realized that using their R2 vehicles they could provide truly contactless deliveries of packages, removing any interaction between drivers and the people picking the packages. With this in mind, they teamed up with state authorities and started working in two initiatives.

In Sacramento, Nuro is providing contactless delivery of medical supplies to help patients affected by COVID-19 being treated at the Sleep Train Arena, a former NBA arena that was transformed into a care facility with space for up to 400 COVID-19 patients. The robots are moving food, linens, and personal protective equipment between a nearby warehouse and the care facility. This allows support workers to be distanced from patients, nurses, and doctors at the hospital. Similarly, R2 vehicles are transporting food, water, and other supplies between an off-site kitchen and the San Mateo County Event Center, which was also transformed into a facility to help with the COVID-19 crisis. (6)

These two initiatives help to prevent transmission of the deadly virus between drivers and healthcare workers in those locations, and they save time for the teams working on the ground. David Estrada, Nuro’s chief policy and legal officer was interviewed by Forbes and gave more details about their initiative: “We’re carrying all the different kinds of materials that are needed–test diagnostic kits, pharmaceuticals, food, water, office supplies. There’s no physical contact with the vehicle. Workers can put materials inside them that can then be removed without making any physical contact”. (7)

Opportunities and Challenges

The COVID-19 crisis has accelerated the implementation of new technologies and facilitated the approval of regulation critical for pilots of these new vehicles. These changes are creating new opportunities for Nuro to take advantage of.

First, they can increase their business development initiatives by creating more and deeper partnerships with retailers and e-commerce platforms that want to accelerate their digital growth. Several of these companies are much willing to listen to this type of startups now that they are forced to move most of their operations to the online world.

Second, Nuro can leverage the crisis to increase its lobby at the state and federal levels, accelerating the discussion of new regulations and permits to implement and deploy self-driving vehicles. Their next step in the regulatory process is to get a full statewide commercial deployment permit in California.

Third, this is a great opportunity to build brand awareness given their support of healthcare workers. This should facilitate the two previous points and also attract talented engineers for the expansion in the next few years.

At the same time, several challenges arise. Self-driving startups were not prepared to scale their operations quickly, and production issues exist as they have limited capacity to build these vehicles.

As the crisis evolves, and things go back to normal, we will see how the self-driving space adapts. Even if most of the people that have adopted online commerce goes back to offline, a bigger percentage will keep doing their groceries online compared to before, incentivizing retailers to try these technologies, and the memories of the crisis will force regulators to consider self-driving vehicles as tools to support shortages on the supply chain.

References

  1. Nuro — About (2020). Available at: https://nuro.ai/about (Accessed: 26 April 2020).
  2. Mims, C. (2020) The Scramble for Delivery Robots Is On and Startups Can Barely Keep Up, WSJ. Available at: https://www.wsj.com/articles/the-scramble-for-delivery-robots-is-on-and-startups-can-barely-keep-up-11587787199 (Accessed: 26 April 2020).
  3. Introducing R2, Nuro’s Next-Generation Self-Driving Vehicle (2020). Available at: https://medium.com/nuro/introducing-r2-nuros-next-generation-self-driving-vehicle-a9974ff6c2e0 (Accessed: 26 April 2020).
  4. Why Nuro and Walmart Have Teamed Up: Bringing Autonomous Grocery Delivery Into 2020 (2019). Available at: https://medium.com/nuro/why-nuro-and-walmart-have-teamed-up-bringing-autonomous-grocery-delivery-into-2020-8e1ae8b3b9f6 (Accessed: 26 April 2020).
  5. Coronavirus: impact on e-commerce in the U.S. | Statista (2020). Available at: https://www.statista.com/study/72608/coronavirus-impact-on-us-e-commerce/ (Accessed: 27 April 2020).
    Helping the Heroes during COVID-19 (2020). Available at: https://medium.com/nuro/helping-the-heroes-during-covid-19-49c189f216a2 (Accessed: 26 April 2020).
  6. Ohnsman, A. (2020) Nuro Driverless Vehicles Become Robot Pack Mules For California COVID-19 Medical Centers, Forbes. Available at: https://www.forbes.com/sites/alanohnsman/2020/04/22/nuro-driverless-vehicles-become-robot-pack-mules-for-california-covid-19-medical-centers/#1913a6c35ff8 (Accessed: 26 April 2020).

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4 thoughts on “Nuro: self-driving delivery accelerates

  1. Thanks for sharing this. I did not know that Nuro was operating in big cities such as Houston! I must try it when I move to Houston soon. Indeed it is a great time for them to aggressive with testing and pushing for regulations in their favor. However, in terms of testing for safety on roads I wonder if this is a good time. With hardly any vehicle on road currently, self-driving vehicles can show great results. But those results might not be realistic and therefore the data collected might not be as valuable for future research – to operate in a “normal” world.

  2. Really neat article. So interesting to hear that they’ve pivoted to short-range medical delivery at this time. I’d imagine there might be more money in grocery/package delivery (which also has heightened demand), but it is encouraging to hear how they are applying this technology to better help those in the medical field/being treated. I wonder how this pivot might influence their longterm strategy – can this technology be used in hospitals? Warehouses? Or is the biggest ROI on streets delivering foodstuffs/last mile deliveries?

    Also fascinating to hear how their design is centered around safety (e.g., safer panels for pedestrians, cameras instead of mirrors) and how legislation has enabled them this license.

  3. Thanks for sharing this very interesting article. It is fascinating to learn how Nuro is facing some challenges produced by COVID-19. I believe that the main challenge that self-driving cars will have in the future is regulation. Although self-driving cars will be safer than humans, regulators will be more strict with the companies. The COVID-19 creates a unique environment in which companies are getting exceptional permits. Companies should use this opportunity as a pilot. The successful experience of this companies in the next months can be used as examples to promote regulation that allows self-driving cars. Nuro will have to continue investing in technology for improving its customer experience and reducing costs for competing in a sector that will have the presence of big players (e.g. Uber, Google).

  4. Interesting read. It will be interesting to see how Nuro takes advantage of covid-19 to position itself for success after it. You made really strong argument about how they could speed up regulation or generate brand awareness in the current context. However, I think they should be very careful in how they deploy its resources. If the product or regulation gets rushed and there is an incident involving a Nuro car, there could be negative long term consequences. They should be very deliberate in how they invest their resources thinking beyond the lockdowns, as you mentioned the company is not ready to scale productions and operations quickly, and one mistake could be very costly for their future. Anyway, given the amount of funding and how their product is well positioned for the covid crisis, and all the other points your mentioned, I agree they have a bright future in front of them.

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