The Future of the Truck Stop
What will become of fuel stations in an electric, automated world?
Among Warren Buffet’s recent acquisitions is a majority stake in Pilot, a major gas station and truck stop chain. Business Insider reports that Berkshire Hathaway will soon buy 80% of the firm’s ownership, increasing from its existing share of 39%.
Pilot’s sale price of $11 billion demonstrates its value to the economy. As the publication notes, “the company’s revenue surged from about $20 billion in 2017 to $45 billion last year, and it generates more than $1 billion in annual pre-tax earnings.” Yet it is an interesting time for this investment, because two technological advances could soon change commercial freight trucking, and these disruptions could apply to other suburban and interstate land.
First, is that the energy source for trucks may increasingly go electric. EV adoption has become a priority for carmakers hoping to satiate the demand for “greener” fuel, and for policymakers concerned about the environmental impacts of fossil fuels. To that end, a considerable degree of corporate R&D and investment has gone into electrifying the nation’s truck fleet. While as of 2019 only 2,000 electric trucks were in service (or roughly 0.01% of the overall fleet), one projection claims this will grow to 54,000 (or 0.33%) by 2024. Past 2025, though, analysts expect more rapid adoption, possibly 1/3rd of light-duty trucks by 2030.
This would make sense, because EVs have cost advantages. Research by Berkeley Lab finds that batteries may soon have sufficient range to complete a substantial share of trips at an economical rate. The research concluded that trucks with 375-mile battery distance, which would require six charges based on the average weekly mileage of a commercial truck trip, “has a 13% per mile lower total cost of ownership, with a net savings of $200,000 over the lifetime of the electric truck...The total cost of ownership analysis takes into account the purchase price and operating costs over the lifetime of the truck.”
These savings exceed the average cost of a semi-truck itself, which is $150,000. So, it is hard to imagine electric trucks not becoming more common with time. Firms such as Freightliner, BYD, and others have developed battery power models.
In an electrified trucking future, Pilot would not be obsolete, but their fueling stations would need to shift over to charging. Gas stations would need to do the same. There are already some that have: Circle K announced it is working on an electric truck charging station, for example.
But second, the bigger shift could come from truck automation. While progress has not always been evident to outsiders, there are manufacturers who insist that driverless trucks are coming. According to Forbes, one of them, TuSimple, claims that Level 4 automation—wherein “safety critical functions” can be achieved autonomously—is viable near-term. TuSimple anticipates that its technology can be on the road by 2024.
“TuSimple has gone public....and over 5,700 vehicles have been reserved by sophisticated shippers or carriers in just the first four months,” Forbes notes, arguing that the firm’s claims cannot be dismissed as mere bluster.
This does not mean full autonomy is imminent; Level 4 only functions “under certain conditions,” according to Forbes. But it does suggest a future, possibly in the 2030s, where fewer truckers are needed. This is going to hit Pilot and other truck stops, which rely not only on fuel sales but on providing food, showers and more to truckers.
Granted, if these two innovations (EVs and AVs) arrive en masse to the trucking industry, it would not automatically destroy Pilot. It would, however, speak to the more immediate value that Buffett likely sees in the company: its land.
Pilot has 750 locations across the U.S. and Canada, including key interstate spots. Even if truck stops eventually become obsolete, or change radically due to unpredicted disruption, the land can still be used for everything from hotels to e-commerce warehouses to badly-needed workforce housing. With less need for such land to accommodate polluting vehicles, given the shift to electric trucks, it may be easier to mix uses. Residential options near highways become more popular because air quality is better. Pilot’s Flying J division is already offloading some surplus real estate.
In any case, these issues are not limited to truck stops. The rise of AVs and EVs could influence what happens with every standard gas station in America. Moreover, it will affect suburban real estate at large, which is now heavy with parking and other potentially obsolete business models like indoor malls and car dealerships. But that’s not a bad thing; it opens up the land for more diverse and economically-productive uses.
This article featured additional reporting from Market Urbanism Report content staffer Ethan Finlan.