Driver Shortages in Japan are Ushering in The Autonomy Economy
March 10, 2024
This Week in The Autonomy Economy, The Road to Autonomy Index returned 0.27%, Japan’s economy is preparing for a seismic change in the country’s trucking and logistics sector and in Los Angeles, an individual attempted to take a Waymo autonomous vehicle for a joyride.
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Driver Shortages in Japan are Ushering in The Autonomy Economy
Japan is facing a nationwide driver shortage as a result of an ageing population and new labor rules set to take effect on April 1, 2024. The stricter enforcement of labor overtime rules will create a 14% shortfall in trucking capacity this year and a 34% shortfall in fiscal 2030 according to Japan’s government.
To try and offset the shortage of truck drivers, the Japanese government adopted an ordinance on February 27th to increase the speed limit for trucks weighing 8 tons or more on expressways to 90 kilometers per hour (55 mph) from 80 kph (50 mph) at present, effective on April 1. A five miles per hour difference will not make up for the shortfall in drivers.
Bank of America is forecasting that the shortage of truck drivers is likely to grow further even with the change in the speed limit.
The effective job openings-to-applicants ratio for truck drivers is already about twice the all-industry average, highlighting the chronic nature of labor shortages in the sector (Exhibit 6). Yet, an even more serious issue is the ageing of truck drivers.
According to the Ministry of Health, Labour and Welfare’s 2022 Basic Survey on Wage Structure, the average age of workers in the “transport and postal activities” industry is 47.7 years, significantly higher than the average of 43.7 years for all workers.
More importantly, when looking at the age distribution of workers in the trucking industry, those under 29 account for only 8.6%, while just 15.6% are in their 30s. Both ratios are far lower than the all-industry average (Exhibit 7). This suggests that harsh working conditions may be deterring younger workers from joining the industry.
Meanwhile, those in their 50s make up 32.9%, and those aged 60 and over comprise 13.0%, well above the all-industry averages. If the influx of younger workers continues to be limited, we expect the shortage of truck drivers to become more acute over the next several years as drivers in their 60s gradually retire.
In fact, the aforementioned simulation by NX Logistics Research Institute and Consulting estimated that, due to the driver shortage alone, domestic trucking capacity will decrease by 19.5% by 2030, and when combined with the cap on overtime hours, the shortage could amount to as much as 34.1%.
– Takayasu Kudo, Japan and Asia Economist, Bank of America (Trucking Crisis: Driver Shortage to Prompt Industry Reforms Report, January 25, 2024)
The regulations being implemented in Japan are helping to usher in the autonomy economy. Japan’s government is opening the door to automation and once that door is open, there is no turning back.
Trucking and logistics companies are turning to automation to make up for the driver shortage as they have no other choice. As over 99% of Japan’s 63,000 trucking companies have 200 or fewer employees with 49% being micro-enterprises with fewer than 10 workers according to the Japan Trucking Association (March 2022).
Mitsui Trading Co (and its subsidiary T2) aims to launch automated driving on highway between Kansai and Kanto region, which accounts majority of mid to long term transport, by 2026. In the longer term, we expect the implementation of automated driving into mid to long distance transport to accelerate, resulting in a dramatic change in the industry dynamics.
– Takayasu Kudo, Japan and Asia Economist, Bank of America (Trucking Crisis: Driver Shortage to Prompt Industry Reforms Report, January 25, 2024)
The driver shortage is not just limited to truck drivers, it is also effecting forklift operators. The number of individuals who have successfully completed the courses for a forklift license in 2022, was down 22% compared to the recent peak of 2008. (To operate a forklift, an individual with a driver’s license attends a lecture for a day and practices driving and operating a forklift for three days).
Mitsubishi Logisnext, a Japanese forklift maker is experiencing an increasing number of inquiries from warehouse operators about self-driving forklifts, even though they cost significantly more.
A typical midsize forklift sells for roughly JPY¥2 million yen ($13,300), an autonomous one costs as much as JPY¥15 million yen ($101,995), including the expense of installing networking infrastructure within the warehouse.
When there is a labor shortage, automation fills the shortfall and eventually replaces the labor. This is exactly what is happening in Japan. It will become a global trend that ushers in the autonomy economy.
Today, autonomy is going to shore up the Japanese supply chain. Tomorrow, it will be the single most important technology for the country’s economy.
Our take: The Future is Bright. The Future is Autonomous. Japan is on the verge of ushering in the autonomy economy.
Attempted Waymo Heist in LA
In a scene strait straight out of a Jason Statham action movie, an individual in downtown LA tried to steal a Waymo vehicle. There was no joyride or even a ride for that matter. Even though the suspect hopped in the driver’s seat and tried to disengage the Waymo driver and take a joyride, the system would not disengage and the “driver” was arrested.
But could you imagine a scene in a movie were someone steals a Waymo vehicle and goes on a joyride through LA while being chased by Jason Statham? It could happen, it’s Hollywood after all.
Our take: Perhaps the suspect was an actor trying out for SNL.
Waymo parent Alphabet is a The Road to Autonomy Index component company
Social Buzz
Fully Autonomous in Austin
Saswat Panigrahi, Chief Product Officer, Waymo announced on X that the company began driving fully autonomous on March 6th in Austin, Texas. This is Waymo’s 4th city, expanding their ODD by 43 square miles.
As Waymo continues to expand (is Miami next?), it’s time for the company to begin focusing on the economics of the business. As we wrote last week, we have questions about the business of Waymo, and we will continue to urge Ruth Porat, President & Chief Investment Officer of Alphabet to share details on the business.
What Waymo is accomplishing is nothing short of impressive. As much as it is impressive, it’s time to know if Waymo can become a free-standing business. How many cities, how many vehicles and how many hours a day of paid rides will it take to break-even and then eventually become profitable? It’s time for Alphabet to disclose these metrics to investors.
Our take: Waymo has done a fantastic job developing the Waymo driver and scaling the product, but can it become a business?
Waymo parent Alphabet is a The Road to Autonomy Index component company
Expanding SuperVision in China
Mobileye is expanding their autonomous driving SuperVision system to urban roads in China.
What Mobileye demonstrated in the video appears to be a direct competitor to Tesla FSD. The market for L2 systems that are capable of hiring levels of automation is still in its infancy with Qualcomm now entering in the market.
Our take: Deploying autonomous driving technology in China by a non-Chinese company is a risk. We will be watching to see how Mobileye navigates that risk and how the company’s SuperVision system evolves.
Mobileye and Tesla are The Road to Autonomy Index component companies
Following The Rules of The Road
On a rainy night in downtown Los Angeles, a Waymo vehicle properly followed the rules of the road and responded to a parking enforcement officer’s hand signal.
What was demonstrated in the video by a rider (not a Waymo or Alphabet employee) should be shared by Waymo with the public and first responders. The video could help to demystify the technology and increase public trust in autonomous vehicles.
The narrative being spread by special interests in California about autonomous vehicles not responding to law enfoemcnet and being unsafe is factually incorrect. This video clearly demonstrates that the Waymo driver is cognizant of it’s surroundings.
Our take: The Waymo driver is the most advanced autonomous vehicle on the road today.
Waymo parent Alphabet is a The Road to Autonomy Index component company
The Road to Autonomy Index® / Weekly Performance
The Road to Autonomy Index® is a high-definition lens into the emerging world of autonomous vehicles. It is the world’s first and only pure-play index designed to measure the performance of the autonomous vehicle/truck market.
For the week of March 4, 2024, The Road to Autonomy Index returned 0.27%, the S&P 500 declined 0.20% and the NASDAQ 100 declined 1.34%. The Road to Autonomy Index outperformed the S&P 500 by 0.47% and outperformed the NASDAQ 100 by 1.61%.
The top performing stocks in The Road to Autonomy Index this week were:
- Goodyear Tire and Rubber Company returned 5.33%
- Glencore returned 5.31%
- NVIDIA returned 3.98%
S&P Dow Jones Indices is the custom calculation agent for The Road to Autonomy Index
Follow The Road to Autonomy Index on Google Finance
The Road to Autonomy Index Component Companies
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The Road to Autonomy podcast hosted by Grayson Brulte is a podcast featuring unconventional conversations about the future of mobility and the emerging autonomy economy. New episodes every Tuesday.
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The Rise and Fall of Digital Freight Brokerages and the Growth of Autonomous Trucking
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A weekly newsletter featuring insight and commentary on the autonomy economy™ and how the financial markets are viewing its emergence.
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