Caterpillar bets on self-driving machines impervious to pandemics

In this news, we discuss the Caterpillar bets on self-driving machines impervious to pandemics.

CHICAGO (Reuters) – Question: How can a company like Caterpillar try to counter declining sales of bulldozers and trucks during a pandemic that has made every human being a potential vector of disease?

Answer: Cut off human operators, maybe?

Caterpillar’s autonomous driving technology, which can be bolted to existing machines, is helping the U.S. heavy equipment maker mitigate the heavy impact of the coronavirus crisis on sales of its traditional workhorses.

With customers large and small looking to protect their operations from future disruptions, demand has increased for machines that do not require human operators on board.

Sales of Caterpillar’s stand-alone technology for mining operations have grown at a double-digit percentage this year compared to 2019, according to previously unpublished internal company data shared with Reuters.

By contrast, sales of its yellow bulldozers, mining trucks and other equipment have been down for nine months, a trend that is also hitting its main rivals including Japan’s Komatsu Ltd and US player Deere & Co.

Fred Rio, global product manager for Caterpillar’s digital and construction technology division, told Reuters that remote control technology, which allows users to operate machines from several miles away, would be available for construction. . sites in January.

The company is also working with space agencies to use satellite technology to allow an operator sitting in the United States to communicate remotely with machines at work. sites in Africa, for example, or elsewhere in the world, he said.

However, Caterpillar’s automation strategy did not originate during the COVID-19 era. The company stepped up its investments in these technologies when it emerged from the longest downturn in its history in 2017, as part of a plan to increase recurring revenue from lucrative sales of services.

But those are the early days, and this technology remains a niche part of Caterpillar’s operations. While that doesn’t shatter tech sales revenue, the growing demand is unlikely to have a major impact anytime soon on the group’s revenue, which stood at around $ 54 billion last year.

It’s also a costly business, with the company pumping billions into R&D as a whole. Yet it is not clear whether the demand for autonomous and remote technologies will hold up in a post-pandemic world, when in the long run there is a risk that a technology-related productivity improvement could lower. sales of new equipment.

‘HE BECAME CRAZY’

Nonetheless, autonomous technology helps Caterpillar win equipment contracts with customers who previously did not buy many of their machines.

Last year, Rio Tinto hired the company to supply self-driving trucks, self-driving drills, loaders and other machinery for the construction of the Koodaideri iron ore mine in Australia, which is expected to be operational this year. next.

Rio Tinto declined to comment on the equipment deal.

The mining industry has already adopted certain technologies for autonomous trucks and the remote control of dump-load transport machines. However, the suspension of activities around the world following government-mandated lockdowns at the height of COVID-19, as well as recent outbreaks of infections in coal mines in Poland, have accelerated the deployment of these technologies.

Anthony Cook, general manager of autonomous transportation systems at Caterpillar rival Komatsu, said many customers have presented their spending plans in the wake of the pandemic with the aim of removing drivers from mining trucks.

He said the COVID-19 crisis had not touched the fortunes of his stand-alone business: “If anything, it got crazier.”

CATERPILLAR’S IN SPACE

Caterpillar and Komatsu have the lion’s share of the global autonomous transportation systems market.

But Illinois-based Caterpillar has a competitive advantage, some analysts say, because its technology can be modernized on equipment from competitors, making it a better solution for mixed fleets. Komatsu’s technology currently only works with its own machines.

Cook of Komatsu said that if modernization provided a short-term solution, his company was developing technology that allowed different brands of equipment to work together “safely and efficiently,” which he added would provide long term benefits.

But Jim Hawkins, general manager of Caterpillar’s resource industries division, said the ability to modernize has helped boost sales as mining companies can purchase the hardware and software needed to keep machines running autonomously. without paying the much higher cost of overhauling their entire fleet.

It’s a selling point at a time when miners grapple with the commercial uncertainty caused by the virus.

Caterpillar sells standalone technology separately from its machines. While modernization of existing fleets has been the main driver of growth so far, Hawkins says an increasing number of customers are now ordering ready-to-use mining trucks.

The company charges recurring hardware, software, and license fees to mining customers. In total, the technology could cost anywhere from $ 50 million to hundreds of millions of dollars, depending on the size of the fleet and the length of the contract, Hawkins said.

All of these applications are part of the company’s efforts to increase revenue from services, which tend to be tougher and more profitable than equipment sales. It aims to increase service sales to $ 28 billion by 2026 from $ 18 billion in 2019.

Rob Wertheimer, machinery analyst at Melius Research, said the need for mining companies to replace an aging mining fleet and their growing demand for autonomous upgrades should help Caterpillar, with its technology giving it a “differential” advantage over its competitors. .

“Strategically they are in a better place,” he added.

Reporting by Rajesh Kumar Singh; Editing by Joe White and Pravin Char

Original © Thomson Reuters Corporation

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