Investment firm Kerrisdale Capital has initiated a short position on Aurora Innovation Inc. AUR, arguing in a new report that the autonomous trucking company will “never become a viable commercial operation.” The report, titled “A Dead End” and published last Tuesday, claims Aurora’s business model is fundamentally flawed and its profit potential is “puny.”
Check out AUR’s stock price over here.
Aurora’s Self-Drive Trucks Incapable Of Point-to-Point Shipping
Kerrisdale contends that Aurora’s technology is incapable of true point-to-point autonomous shipping. Instead, it is limited to a “hub-and-spoke” system where driverless trucks handle only the middle highway miles, while manned trucks are required for the expensive and time-consuming first and last legs of the journey, known as drayage.
“Manned drayage is expensive and slow, and hub-and-spoke networks are inferior to direct manned shipping,” Kerrisdale stated in a thread on X, formerly known as Twitter. The firm argues that these logistical hurdles make autonomous trucking “slower, more expensive, and less reliable than point-to-point manned trucking for any freight moving under 1500 miles.”
Aurora’s Total Addressable Market: A ‘Fantasy’
The report sharply criticizes Aurora’s market projections, labeling its claimed Total Addressable Market (TAM) of 200 billion miles a “fantasy.” The report further states, “The economics of Aurora’s autonomous business model are hopeless.”
Kerrisdale asserts the actual market for which Aurora’s model might be competitive is merely a tenth of that size. This, the firm calculates, creates a total market of about $10 billion—less than Aurora’s current market capitalization of $13 billion.
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Drayage Costs Make Aurora’s Model Uncompetitive
Furthermore, Kerrisdale alleges that Aurora has misled investors about significant hidden costs. The report cites conversations with Aurora’s own OEM partners, who allegedly expect the specialized autonomous trucks to be at least 50% more expensive than standard models.
Benzinga has contacted Aurora Innovation for comment and will update this story with any response.
It also points to the “hefty real-world costs of building an autonomous trucking ecosystem,” arguing that the billions in required investment for terminals have not materialized because no one is willing to fund it.
Kerrisdale concludes that Aurora faces a small market, huge required investments, and a profit pool that must be shared with numerous partners. “Aurora investors should expect a decade of continuous dilution before arriving at a dead end,” the report warns.
Price Action
The stock has fallen 5.49% over the last five sessions, but it ended 2.91% higher on Friday. It was down 1.31% year-to-date and 37.44% over the last year.
Benzinga’s Edge Stock Rankings indicate that AUR maintains a stronger price trend in the short term but a weaker price trend over the medium and long terms. However, the stock scores poorly on value rankings. Additional performance details are available here.
The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, rose on Friday. The SPY was up 1.54% at $645.31, while the QQQ also advanced 1.54% to $571.97, according to Benzinga Pro data.
On Monday, the futures of the S&P 500, Dow Jones, and Nasdaq 100 indices were trading lower.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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