A cofounder of the Softbank-funded startup Nuro reveals how the company plans to make money off its self-driving delivery robots without charging any fees
- Nuro is developing autonomous delivery vehicles and the software that powers them.
- The company's goal is to one day make deliveries free for consumers by removing human drivers from the equation.
- Lower costs would mean the company could fund operations exclusively through fees charged to sellers, Nuro cofounder and president Dave Ferguson said in an interview with Business Insider.
- The company has so far delivered groceries and pizzas to customers of Kroger and Domino's in limited trials, and will partner with Walmart for grocery deliveries.
- Ferguson envisions Nuro's delivery service expanding beyond food into areas like peer-to-peer transactions, similar to those conducted on Craigslist.
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As computer-driven cars that can travel anywhere seem more like science-fiction than a near-term reality, autonomous-driving technology may have the most immediate impact in applications that don't involve giving people rides, like freight transport, and, in the case of the startup Nuro, deliveries.
Founded in 2016 by two former employees of Alphabet's self-driving car program (now called Waymo), Dave Ferguson and Jiajun Zhu, Nuro is developing autonomous delivery vehicles and the software that powers them. Nuro has so far delivered groceries and pizzas to customers of Kroger and Domino's in Scottsdale, Arizona, and Houston, respectively.
On Tuesday, the company announced it will partner with Walmart for grocery deliveries in Houston as well.
Nuro's goal is to one day make deliveries free for consumers by removing human drivers from the equation. Lower costs would mean the company could fund operations exclusively through fees charged to sellers, Ferguson said in an interview with Business Insider.
SoftBank has invested almost $1 billion in Nuro
The delivery market represents an enormous opportunity for companies that can survive, or avoid, the low-margin, incentive-heavy battles being waged by the likes of Uber Eats, DoorDash, and Grubhub. Ferguson has cited two statistics that illustrate the scope of this opportunity: Americans take 220 billion personal vehicle trips each year, over 40% of which involve shopping or running errands.
"It's an unbelievable amount of time and effort that we're spending in our cars driving around to go shopping," he said. "We think we can just do a much, much better job with a service that could do that for you."
At least one major investor appears to agree. Nuro has raised just over $1 billion so far, according to Pitchbook, $940 million of which came from SoftBank, which has also invested in rivals like DoorDash and Uber.
Nuro faces fewer technological challenges than Waymo or Tesla
Part of Nuro's potential lies in the fact that it will not have to master some of the thornier challenges faced by the developers of autonomous vehicles designed to carry passengers. Those companies, like Waymo, Tesla, and the General Motors-backed company, Cruise, have to make sure their vehicles give passengers a safe and comfortable ride.
"If you're driving people around, your vehicle has to be super safe so that it's not running into anything. But it also has to be a very smooth ride for the passengers as well," Ferguson said. "It's the combination of those two, the safety and comfort, that makes it fundamentally so, so hard," to develop the necessary technology.
Nuro doesn't have to worry about comfort, so long as the cargo in its vehicles arrives undamaged. That means the company can potentially ramp up its delivery service more quickly than companies developing autonomous ride-hailing services, Ferguson said. Its grocery delivery trial with Kroger, launched in December 2018, was the first unmanned vehicle service of any kind, according to Ferguson. (Waymo and May Mobility, which debuted autonomous-vehicle services earlier that year, placed safety drivers behind the wheel.)
But there are some concerns specific to Nuro's business model - like how customers will feel about interacting with a driverless vehicle, rather than having a delivery person come to their door, and how drivers will respond to Nuro's vehicles, which are about half the width of a car and have a maximum speed of 25 mph. Ferguson said neither was an issue during the Kroger trial. He credited Uber and Lyft with increasing the comfort customers have with app-based curbside interactions, and said Nuro tries to keep its vehicles on roads with speed limits near 25 mph.
Nuro could one day compete with Craigslist
But there was at least one problem with the first version of Nuro's vehicle, called the R1: The bottom part of its doors didn't open high enough. Users, including a reporter from The New York Times, would often bump their head on the door, Ferguson said, but Nuro has addressed that issue with the second version of its delivery vehicle, the R2, which it will roll out on public roads early next year.
Ferguson envisions Nuro's delivery service expanding beyond food into areas like peer-to-peer transactions, similar to those conducted on Craigslist. Nuro's vehicles could eliminate many of the inconveniences involved in buying something on the website, like having to exchange contact information with the seller, coordinate a pick-up time, and drive to and from the seller's home.
"The friction associated with transactions is typically higher than the value that you're getting" on Craigslist, Ferguson said.
With Nuro, you could theoretically complete that transaction without ever knowing who's selling the item or where it's located.
"Being able to give that time back to everyone across the country so that they can spend it on what they would most like to do instead of being in vehicles, we think that that's a pretty significant contribution," Ferguson said.
- Read more:
- The self-driving car startup Zoox has less money and experience than Waymo. Here's why its CTO thinks it has an edge over the Google spinoff.
- Waymo CEO John Krafcik explains why a parking lot is one of the most difficult environments for a self-driving car
- Passengers in Lyft and Aptiv's self-driving cars have given their rides an average rating of 4.97 out of 5. A Lyft VP gives 3 reasons why.
- I rode in one of Zoox's self-driving cars in San Francisco - and it was more comfortable than the Uber and Lyft I took to and from the airport
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