For years, UPS has been gesturing toward a future where some of its delivery vehicles are electric, autonomous, or drones. Now, the delivery giant is taking steps to make that happen with a trio of announcements designed to boost the company’s profile — and maybe its stock, too — ahead of its quarterly earnings report. It’s the latest sign of UPS’s ambition to future-proof its business, especially as Amazon builds out its own delivery infrastructure.
The first announcement concerns a pilot project with Waymo, the Alphabet subsidiary and leading operator of self-driving vehicles. UPS will use some of Waymo’s self-driving Chrysler Pacifica minivans to shuttle packages between some of its stores in the Metro Phoenix area and its hub in Tempe, Arizona. The minivans won’t be fully driverless; Waymo says it will keep trained safety drivers in the front seat to monitor operations. Despite the limited nature of the pilot, both Waymo and UPS say a “long-term plan” between the companies remains possible.
The pilot, which will kick off this quarter, is designed to “explore customer and operational benefits and illustrate how the Waymo Driver can deliver on behalf of clients safely, efficiently, and, eventually, at scale,” Waymo’s chief operating officer Tekedra Mawakana said in a blog post.
The partnership will not be exclusive. Waymo has been developing a self-driving system for freight delivery trucks for years now, and it recently identified New Mexico and Texas as possible future routes for its autonomous tractor-trailers. The self-driving operator has also been making deliveries in the Phoenix area for auto retail giant AutoNation. Meanwhile, UPS has quietly hauling cargo between Phoenix and Tucson, Arizona, since May using self-driving trucks designed by a startup called TuSimple. UPS has invested an undisclosed amount in the company as well.
The second announcement relates to electric vehicles. UPS says it will purchase 10,000 electric delivery vans from a UK startup called Arrival, which it will then add to its fleet in the UK, Europe, and North America over the next four years. UPS’s venture capital arm will also make an investment in Arrival of an undisclosed amount.
Arrival only just emerged out of quasi-stealth in recent weeks after announcing a $110 million investment from Hyundai and Kia. Arrival has been working with UPS for several years, first announcing their partnership in 2016. Arrival says that today’s vehicle order and investment will “accelerate deployment of fit-for-purpose electric fleets at scale.”
Not much is known about the company’s Generation 2.0 electric vans, but Arrival has a unique approach to production. Arrival says it has developed a modular skateboard platform that can be adjusted to a vehicle of any weight, type, size, and shape. These vehicles are then assembled by the company’s low-footprint “microfactories,” which will be located to serve local communities. Arrival says its vehicles can go from the drawing board to shipped after just three months, and it claims it will be profitable after delivering just “thousands of units.”
Lastly, UPS says it will bring its drone delivery testing to San Diego. The company has been delivering pharmaceuticals and other lightweight cargo to people’s homes in North Carolina in partnership with CVS Pharmacy as well as Matternet, a drone logistics company. Now, it will start test deliveries with the University of California San Diego health system.
The delivery company has its own drone subsidiary — UPS Flight — and while it’s still focused on small-scale test deliveries, UPS recently received government approval to operate a “drone airline.” The company says it will first use this certification to build a drone delivery network for hospital campuses around the US, starting in San Diego.
All three of these announcements dropped a few days before UPS is expected to report its quarterly earnings. The company’s stock price rose 20 percent over 2019, compared to a 13 percent decline for FedEx’s stock over the same period. Revenues are expected to be $20.58 billion, up 3.7 percent year over year, which should push the company’s stock price higher.