Autonomous isn't only for the Roads

Issue 16 (23/05/2024): Revving up the farming world, Monarch Tractors debuts fully autonomous electric tractors - a potential gamechanger. But can the startup plow past roadblocks?

We have heard a lot in the news about Waymo, Cruise, Nuro and even Zoox and if you are around the Bay Area, you may have even seen autonomous vehicles on our roads. Although they are exciting for what the future may hold, this article focuses on a less orthodox solution for autonomous vehicles.

Whilst the world has focused on autonomous road vehicles, there have been more unique applications for farming, off road, and mining. Some industries are more fleshed out than others, but regardless of the progress, it’s exciting to think about such applications and how they may develop in the coming years. I’ll be taking a look at a few of these industries in the coming weeks, but the one I want to dive into first is farming. 

Farming may be one of if not the oldest industry and occupation in the world. The earliest evidence of cultivated crops was about 12,000 years ago where the transition from nomadic hunter-gatherer lifestyle went into permanent farming and settlements to ensure a more reliable food supply. Since then, there have been numerous innovations to increase crop yields, output better crops, and more efficient farming practices. At the beginning of the 19th century, over 90% of the US population was directly engaged in producing the food and fiber that fed and clothed the country. 200 years later, this number has fallen to 2% thanks to the innovations.

The first breakthrough occurred in the mid-1800s, when horse-powered machines augmented the energy that humans put into farm work. John Deere, the current powerhouse in motorized farming equipment innovated the steel plough which mitigated a lot of effort on the farming side. Soon after, in the 1890s, horses were replaced with internal combustion engine powered vehicles such as the tractor that further elevated the efficiency. Most recently, however, and perhaps among the biggest breakthroughs, are genetically modified plants with altered genomes that changed plants growing times, potential yields, sizes, among other tenets that increased the overall crop output in farms to keep up with national and global demand. This innovation occurred in the 1960s.

Fast forward 80 years and we are yet to have a significant shift in the tides, until now? It’s hard to double down on the notion that what Monarch Tractors is the next big thing - but for the sake of curiosity, let’s pretend it might be…

Monarch Tractors

Introducing Monarch Tractors, who have raised over $116 million and are valued just shy of $300 million. Monarch Tractor’s MK-V is the first completely autonomous electric tractor in the small range that is powered by AI. It’s optimized for berry farms, orchards and vineyards and provides between 40-70 horsepower and about 14 hours of runtime. If you were to use one, it’s as you are removing 14 cars from the road in terms of emissions and estimates operational expense savings of up to $18,000. Although this sounds too good to be true, it does come at a cost of about twice of their diesel counterparts brought by John Deere - the current industry incumbent. However, Monarch is currently in the process of lobbying to gain government subsidies to help democratize farming - which is their ultimate aim that may provide savings of up to 80% for the farmers.

Figure 1: Praveen Penmetsa (CEO and Co-Founder of Monarch Tractors)

What does Monarch Tractors Do?

Well, the most important thing is that they do what any tractor does - as good as any tractor does it. It’s imperative for Praveen Penmetsa, the CEO of Monarch Tractors, to ensure that farmers face no transitional utility costs or reduction in the quality of the basic requirements of a tractor. Mr Penmetsa’s priority is to figure out “How do we make farming sustainable and farmers profitable” at its core.

On top of the basic necessities, it’s able to gather copious amounts of data that the farmers can take advantage of using the app or the website on farmers computers. It tracks everything from organising the farm, predicting yield, and ensuring quality adherence to each and every crop. The tractors act as generators as well, should the farmers need power in the fields. Penmetsa explains that they are “aiming for a closed-loop system” when it comes to power to “increase rural grid resiliency” - something I, personally, can get behind as company value. Monarch estimates that ten Monarch tractors combined can store roughly 1 megawatt of energy.

Not to mention the fact that it’s driverless? Where cars on our regulated roads are estimating centimeters of offset when trying to achieve full self driving, how does a tractor achieve that in bumpy, muddy, undocumented terrain? It’s estimated that tractor rollovers causes an average of 130 deaths annually - occurring on seasoned operators - let’s see how Monarch ensures it mitigates these potential challenges.

How do they Make Money?

Monarch has three streams of realised revenue:

1. Selling tractors

2. Subscriptions to the Connect and Automate Platforms 

3. Licensing Revenue 

The first two remain quite simple - you sell tractors, and you provide a service for the data that the tractor collects for farmers to leverage. The third is where I think Monarch may have something interesting on their hands. In 2021, Monarch agreed to its first licensing deal with CNH Industrial where they license Monarch’s electrification and autonomous technologies onto their own tractors. Monarch’s press release states the following:

“Electrification and machine automation are key tenets of CNH Industrial’s strategy to become an even stronger technology leader in agriculture and drive customer value”

Figure 2: The Monarch Tractor MK-V Model

Challenges

Challenges there are many but I would argue that they potentially may pose as opportunities if Monarch veers carefully. 

Low Margin Industry

Farming remains notoriously difficult to squeeze out margins, which suggests that the farmers need their ROI relatively quickly when purchasing new capital such as a tractor. The CEO himself, Mr Penmetsa declared during Decoder (hosted by The Verge) that farmers need their payback period to be in mere months, not years. He declares soon after that saving money on Diesel as well as the autonomous nature of the vehicle remain massive “unlocks” to offset the costs and bring value. Mr Penmetsa remains confident that Monarch can provide a return from day one.

Transition Costs?

Turns out, Monarch isn’t like those companies that tries to stuff useless features into a product and puts a bow on it. They focused on the basics first before going the extra mile. So the transition costs remain very small, just like buying a new tractor… even though it may be twice as expensive. That’s the only downside - albeit a rather large one. 

The CEO put it simply - “farmers get 40 iterations,- that’s 40 seasons” of farming. He continues by saying “you can use the same implements that you have on your farm today” suggesting that you can farm the exact same way as previously. The only hope is to swap the existing tractor for a Monarch one. Operationally there is no change - which sounds very convincing.

Simply put, you will not have any new challenges by using Monarch and if you really wanted to use it just as a tractor, it would do the job splendidly. 

Durability and Repairability

They look to be the Android of agriculture, which simply translates to open source and modularity. The batteries and roofs of the tractors are replaceable which allows for future proofing the tractor a little more. Farmers are not eager to replace these machines often, typically each may last upwards of a decade if not more, and therefore, Monarch prides itself on making durable tractors. If a new chemistry is invented to create better batteries - Monarch will ensure they remain modular and said battery can be replaced with ease even with older model tractors in their line. 

But I am worried on the customer adoption side that may hinder the durability of these tractors. Farmers remain skeptical to adopt new technologies, especially ones that are twice as expensive as the incumbent. Relying on government subsidies may be an interesting opportunity to reduce these transition costs in the short term, which is only when the benefits of durability and repairability come in. 

Safety

Of course safety remains a huge concern. Tractors endure extremely shock loads in farms and can experience up to 2.5 feet of shaking when traveling. These would set off any alarm for Autonomous Vehicles (AVs) on the road and cause the program to stop, the car to shut down, and the system to not work. So how does a tractor with much finer margins for error and much larger complications to estimate actually work autonomously?

These tractors are driver optional, which is the first mitigation factor - however, with the data generated by use, the tractors get a very good understanding of their terrain, often enough to make individualized safety precautions depending on the type of job, farmland landscape, and location. Monarch also provides setup, teaching, and farmer education to ensure swift onboarding. These tractors are also geographically fenced to ensure that it doesn’t go out of control or veer off the farmland.

Lack of Electric Infrastructure

Personally, this was the largest challenge I thought of - but it also presents one of the biggest opportunities for Monarch. Like the biggest issue in traditional EV in roads, farming faces a similar challenge of a lack of electric infrastructure. How Monarch plans to counter this is by providing a solar and tractor package to farmers, enabling farmers to charge their tractors using solar energy. What this does is it achieves a three pronged solution. First, it enables farmers to use the tractor as intended. Additionally, the more interesting results of this is that the tractor then acts as a mobile generator as well as an energy storage device. The former allows the farmer to bring the tractor to the fields and plug in other devices whilst the latter may be a revenue generating opportunity by storing energy to either sell, send back to the grid, or just reduce their electricity bills. 

Although electric infrastructure is paramount, especially in rural areas which Monarch hopes to one day penetrate, this is a surefire method to provide a bandage solution - something that makes me excited for Monarch’s future innovations in developing electric infrastructure. 

Long Term Regulatory and Legal Hurdles

Autonomous and Electric tractors don’t face many regulations, unlike their road legal counterparts. Each country has their specific set of rules and regulations for the new models of Lucid Air, Tesla Model 3, or Mercedes EQS. However, tractors don’t face the same scrutiny. Like every regulatory body, I assume the lag time of 10 years will catch up to the industry and enable the start of a few regulatory complications regarding autonomous tractor usage. Although not a short term issue, it remains good food for thought. 

Dependence on Government Subsidies

These tractors are expensive, oftentimes twice as expensive as the existing tractors. Monarch is leaning on government subsidies to reduce up to 80% of the costs for the farmers - however, for how long can this remain sustainable. Either Monarch needs to quickly reduce its prices as the company begins to scale or convince farmers of the added value for the heavier price tag. This remains an immediate challenge which I hope Monarch can rectify soon.

Long Term Possibilities?

I won’t bore you with the existing trends and the trajectory of the company. However, as someone who calls a rural town in India home, it’s hard to imagine a $100k machine in my grand-uncle’s farms. Here is where scaling as a service for infrastructure deployment comes in. Imagine a company owning a large fleet of these tractors, and farmers are able to rent them hourly to use whenever required. This significantly would reduce the costs and still provide all the benefits that Monarch boasts about. Especially in rural areas where ownership of these tractors may not be a solution, infrastructure created to rent affordably would be highly beneficial. 

Beyond just renting the tractors, Monarch could offer full-service autonomous farming operations. They could manage and operate entire farms autonomously using their tractor fleets and agricultural data/analytics. Furthermore, with all the data their tractors collect, Monarch could build out a robust data/analytics platform and services around precision agriculture, crop monitoring, yield optimization, among other things.

However, what I may be most excited about is how Monarch continues to think about electrification of the grid systems in farms, especially in rural areas of each country.

Concluding Remarks

Farming has and will continue to be an area that I keep a close eye on, especially the applications in rural areas in India. I’m excited for a “reinventing the wheel” approach that Monarch is taking without reinventing the wheel in what already works - the tractor. They are innovating on how to elevate that experience, make it safer, and at the end, fulfil the mission of “How do we make farming sustainable and farmers profitable”, and I’m led to believe that they might be onto something.