NEWS  /  Analysis

China-made Unmanned Vehicle's Price Drops to $4,300 Amid Shortage of Human Hands for Delivery

By   xinyue  Jul 05, 2024, 4:13 a.m. ET
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The new models saw rapid uptake, with the first batch of 2,100 units sold out quickly. “I initially estimated we’d sell three to five hundred units,” said Kong.

AsianFin--The first half of 2024 saw China handle 80 billion express parcels, averaging over 13 billion parcels per month, according to the State Post Bureau. This surge in parcel volume starkly contrasts with the labor shortage in the logistics industry.

The "Blue Book of Society" by the Chinese Academy of Social Sciences shows that couriers work an average of 70.7 hours per week and consistently rank among the top three most in-demand jobs by the Ministry of Human Resources and Social Security.

To address this shortage, companies have been exploring the use of unmanned vehicles for sorting and delivery. Internet giants like JD.com, Meituan, and Alibaba, along with tech startups like Neolix and Zelostech, have invested heavily in unmanned logistics.

"Our initial product tests covered various scenarios, including campus delivery, food delivery, community group buying, and sanitation. However, cost analysis showed that logistics transportation was the most suitable for mass deployment and quick return on investment," said Kong Qi, the founder and CEO of Zelostech, in an interview with TMTPost.

Recognizing the commercial potential in logistics, Kong left JD.com to start Zelostech in August 2021. Kong, an expert in autonomous driving technology, previously worked at Baidu’s Silicon Valley R&D center and later as Vice President and Chief Scientist at JD.com, where he oversaw the development of JD’s unmanned vehicles from version 1.0 to 4.0.

The core elements of unmanned delivery vehicle costs include the hardware and software of the vehicle, operational costs, and operational efficiency. These costs vary significantly based on the vehicle model, sensor configurations, and computing platforms. However, overall, the cost of unmanned logistics vehicles has been decreasing.

According to estimates by EqualOcean Intelligence, when the unit price of an unmanned delivery vehicle is around 150,000 yuan ($21,000), the monthly comprehensive cost is comparable to human labor costs. When the price drops to 80,000 yuan ($11,000), it is cheaper than human labor, and only when it stands at 50,000 yuan ($7,000), will companies make profits.

Yu Enyuan, the founder of Neolix, had predicted that by 2024, the total cost of unmanned vehicles could drop to around $10,000. However, the pace of actual price reductions has been even faster.

On June 28, Zelostech launched four models: Z2, Z5, Z8, and Z10. The new Z5 has a base price of 49,800 yuan ($6,900), while the Z2 costs 39,800 yuan ($5,500). The Z5 2024 model, primarily used in gated campuses and urban logistics, and the Z2, designed for narrow spaces like campuses and residential areas, represent significant cost reductions.

Larger models like the Z8 and Z10, with higher load capacities and longer ranges, are priced at 79,800 yuan ($11,000) and 89,800 yuan ($12,400) respectively. These are used for loading docks, industrial logistics, mining, and long-distance transportation.

Previously, customers had to pay 220,000 yuan ($31,000) upfront for a vehicle. Now, the base price of 49,800 yuan for the Z5 can be supplemented with quarterly FSD software services at 7,000 yuan ($1,000) per quarter, reducing the monthly cost to just over 2,000 yuan ($280).

Industry sources have indicated that the most expensive parts of an unmanned logistics vehicle are the sensors, the wire-controlled chassis, and the computing platform. While Zelostech has not disclosed specific cost-reduction methods, co-founder Zhang Xuchen explained that cost savings are achieved through optimized hardware and software and through bulk ordering, akin to traditional manufacturing methods.

Currently, Zelostech serves clients in over 100 cities, reducing operational costs for them by an average of 62% and delivering over 100 million parcel orders cumulatively.

The new models saw rapid uptake, with the first batch of 2,100 units sold out quickly. “I initially estimated we’d sell three to five hundred units,” said Kong.

Despite cost reductions, regulatory hurdles remain a significant barrier to the widespread adoption of unmanned logistics vehicles. "The main obstacle to large-scale deployment is the lack of nationwide road access rights," said Chu Wenqiang, head of external relations at Zelostech.

Like manned vehicles, unmanned vehicles require road access rights. Beijing issued the first "Unmanned Delivery Vehicle Management Implementation Rules" in 2021, granting the first vehicle codes for unmanned delivery vehicles and permitting them to operate on public roads in demonstration areas.

Cities like Beijing, Shanghai, Guangzhou, and Shenzhen have introduced pilot policies for autonomous driving. For instance, Qingdao issued a policy in March, granting road rights for low-speed unmanned vehicles, and Jining is developing an autonomous logistics network for diverse logistics scenarios.

Currently, the certification process for unmanned logistics vehicles varies. In some areas, companies must pass specific mileage and hardware/software tests before a joint group from various governmental departments issues a vehicle code. In other cases, operational qualification is granted through meeting minutes.

While the national government encourages industry development and has implemented supportive policies, explosive growth in the sector will require top-level legislative action. In addition to domestic efforts, Zelostech has signed a memorandum of cooperation with NTUC FairPrice in Singapore to launch an autonomous delivery project, and they are exploring markets in Japan and the Middle East.

McKinsey predicts that by 2025, annual sales of low-speed autonomous vehicles in China will reach 190,000 units, with 80,000 in the logistics sector. The commercial model for unmanned delivery is beginning to take shape, with further development dependent on progress in business models and road access rights.