TRANSPORTATION AND LOGISTICS BRIEFING: Tesla falls short of Model 3 production goals — Ola raises $2 billion to combat Uber — Walmart acquires Parcel for same-day delivery push

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TESLA FAILS TO MEET MODEL 3 PRODUCTION GOALS: Tesla built only 260 of its much-hyped Model 3s in Q3 2017, far below its production target of 1,600 Model 3s for the quarter, The Wall Street Journal reports. Tesla has a history of missing its own production targets, but the miss indicates that the company faces enormous challenges ahead with its first foray into mass-market vehicles.

The Model 3 is the linchpin in Tesla’s strategy to transition from a niche, luxury automaker to a mass-market one that competes with the likes of GM and Ford. Tesla’s Model S sedans and Model X SUVs are luxury vehicles priced well out of the reach of the average consumer, and Tesla has yet to make more than 100,000 vehicles in a single year. In contrast, the $35,000 Model 3 is a mass market sedan that Tesla plans to produce at much higher volumes than the Model S or Model X.

Tesla has said that it expects Model 3 deliveries to follow a sharp S curve, just as Model S and Model X deliveries did after those vehicles were launched. The electric automaker’s previous guidance said that it expected to produce only 100 Model 3s in August and 1,500 in September, with production increasing sharply to reach 5,000 per week by the end of the year. Following that production timeline, the company advised customers placing Model 3 reservations this past summer to expect at least a year-long wait for their vehicles. For context, more than 450,000 customers have paid a $1,000 deposit to reserve one already.

The miss raises serious questions about when those customers will receive their Model 3s. Tesla said that some manufacturing subsystems at its California and Nevada factories took longer to get up and running than expected, and added that it is confident it can deal with the issues in the near term. Even if that’s the case, the company will have to accelerate production efforts to meet its guidance — a tall task given its ambitious targets. That will make Q4 production crucial to ensuring the company doesn’t fall too far behind its customers’ delivery expectations, particularly as mainstream automakers like Ford and GM start to accelerate their own electric vehicle production efforts. More than 63,000 customers have already cancelled their reservations, and further production delays could make that number rise in the coming months.

Tesla Shipments Q3 17

INDIAN RIDE-HAILING COMPANY OLA CLOSING IN ON NEW FUNDING: Ola, India’s largest ride-hailing company, is close to completing a new $2 billion funding round, according to Bloomberg. Investors in the funding round reportedly include Chinese internet holding company Tencent, Japanese telco Softbank, and a handful of US institutional investors. It’s not yet known what this new funding round would value the company at.

Founded back in 2010, Ola quickly rose to the top of the Indian ride-hailing market and cracked into the market’s immense potential. The firm was founded in Mumbai by a pair of former Microsoft employees, and by late 2014 it counted 40,000 cabs in its network, 33,000 registered users, and $250-$300 million in gross bookings on an annualized basis. Since then, the company has expanded to other cities, helping it earn about $120 million USD in 2016.

However, the company faces immense competition from Uber, which regards India as its second most important market. The world’s largest ride-hailing company moved into the country in 2013. Since then, Uber has risen to become Ola’s chief competitor, and numbers suggest it has pulled nearly even with the domestic company. Ola had 5.9 million monthly active users in the country in May 2017, while Uber had 5.5 million MAU, according to App Annie. Uber has achieved this growth through aggressive driver recruitment, expanding into smaller cities, and undercutting Ola’s prices.

The new funding could help Ola fight back against Uber’s expansion and move towards more sustainable growth. Ola lost about $350 million USD last year, a figure it’s trying to reduce by scaling back incentives for drivers and discounts to customers. With this new funding, the firm will likely look to broaden its reach within India — the country’s top seven or eight cities account for much of the company’s growth. Attracting users in smaller cities could help the company expand its customer base and put it on a more sustainable path for growth, rather than engaging in a price war with Uber in the country’s largest metropolitan areas.

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WALMART ACQUIRES SAME-DAY DELIVERY STARTUP PARCEL: Walmart announced that it is acquiring Brooklyn-based startup Parcel in order to offer same-day delivery in New York City, Recode reports. Parcel handles same-day deliveries for a variety of companies in New York City, including Bonobos, which Walmart recently acquired, as well as meal-kit delivery companies like Chef’d. Walmart and Parcel did not disclose the price for the acquisition, although one source told Recode the price tag was less than $10 million.

Parcel offers a software platform for managing last-mile deliveries in New York, allowing companies to deliver goods more quickly and efficiently. The acquisition will allow Walmart and Jet.com customers in New York City to get same-day delivery on grocery orders and general merchandise. Parcel’s platform allows companies and their customers to receive real-time updates on delivery times. Additionally, Parcel has compiled data about every building the company has delivered to in New York City that can help speed up deliveries by giving couriers information such as the location of service entrances. Deliveries are made from Parcel’s warehouse in Brooklyn and carried out by the company’s fleet of leased delivery trucks operated by professional couriers.

Same-day delivery is becoming a competitive advantage for retailers. One study released earlier this year by research firm L2 found that one quarter of US consumers surveyed would abandon a shopping cart if same-day delivery was not offered. Additionally, a recent McKinsey report predicted that same-day delivery will account for more than $200 billion in online sales — nearly 25% of the entire US e-commerce market — by 2025. Walmart could expand Parcel’s platform and services to more cities to grow its same-day delivery network to match Amazon Prime Now, which provides two-hour deliveries in more than 30 US cities. Walmart’s move follows Target’s recent acquisition of Grand Junction, another company that offers a platform for managing last-mile deliveries. The data and analytics capabilities in these platforms can help these retailers optimize their urban deliveries for speed and efficiency, making same-day delivery more viable and cost-effective.

In other news...

GM will introduce two new electric vehicles (EVs) in the US over the next eighteen months and 20 around the world within six years, according to The Wall Street Journal. However, it’s unknown what type of vehicles they would launch, or what they’d cost. The move comes as rival Ford created a new team to help it form partnerships with suppliers for EVs, a sign that the largest automakers in the US are significantly ramping up their efforts to expand their EV lineups.
Arity, an automotive data analytics startup owned by Allstate, launched Shared Mobility Solutions, a new software platform designed to help car-sharing, ride-sharing, and ride-hailing companies boost the efficiency of their services. The tool can analyze vehicle data on fuel consumption, miles driven, and maintenance costs, as well as consumer mobility behavior such as the time, location, and length of rides. The company hopes Shared Mobility Solutions will help clients reduce costs, decrease the down time between rides, and improve driver retention.
US trucking demand has been surging, straining fleet capacity at large operators and leading to rapid increases in pricing. Booming demand is being driven by several factors including e-commerce growth, higher manufacturing output, and and increased activity in the housing and construction sectors. The hurricanes that hit Texas and Florida last month only exacerbated shortages, causing major volatility in spot trucking rates. Per mile rates for shipments from Charlotte to Florida jumped 42 cents to $3.32 the week of September 16. With capacity at large truck operators dwindling, shippers need to tap into the growing number of small operators with just a handful of trucks. This could lead to growing use of platforms like Uber Freight and Convoy that can help connect shippers with these smaller trucking fleets.

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