- Matt Soule, the co-founder and CEO of Parallel Systems, worked at SpaceX for 13 years and left in July 2019.
- Moving freight by rail takes far less energy than moving the same freight by long haul truck. Also, the autonomous rail car pods open up the possibility for micro-terminals, which have potential to make railroad transportation more targeted in delivery goods.
- The Los Angeles pre-revenue start-up is revealing itself publicly on Wednesday and announcing a $50 million Series A funding raise led by Anthos Capital.
Three former SpaceX engineers are launching a company to design and build electric self-powered train cars, in a bid to improve efficiency and lower emissions in the freight rail system.
Freight trains are a lot more energy-efficient than trucking. Thanks in part to better aerodynamics, moving one unit of freight by train takes one-quarter the energy required to move it by truck, said CEO and founder Matt Soule told CNBC.
"But because of how rail is architected, it has its operational and economic limits," said Soule . "But if you can break through those barriers and allow rail to serve more of these markets — that's the opportunity."
Moving the freight system from diesel to electric power could also play a major part in reducing the carbon emissions that cause global climate change. Transportation accounts for 29% of the total greenhouse gas emissions in the United States, according to a report issued by the Environmental Protection Agency in Dec. 2021. Almost a quarter of that comes from medium and heavy duty trucks.
"We think it's very relevant to focus on energy usage reduction," Soule told CNBC.
Soule got the idea in an unusual way.
At SpaceX, where he started in 2006, Soule was the Head of Avionics, meaning "we made the electronics that made the rocket fly straight." After he left in 2019, Soule was waiting to meet a friend, technologist and product designer Brian Ignaut, for coffee, and watching YouTube on his phone. The selection algorithm randomly served him a video on freight trains. That got him thinking about the potential in the freight train system and the need to reduce its carbon emissions.
By Thanksgiving 2019, the idea for the company was coming together, and in January 2020, Soule went on to launch the company two other SpaceX employees, John Howard and Ben Stabler. The trio kept mostly quiet about what they were doing until Wednesday, when they revealed the company to the press and announced a $50 million funding round led by Anthos Capital.
The company is just in the prototype stage and has no customers or revenue yet. With the new round of funding, Parallel Systems, which was running on $3.6 million in seed funding, will build a fleet of rail vehicles, execute advanced testing programs, and grow the team.
So far, with its staff of about 25 engineers from tech companies like Google, Tesla, and Uber, Parallel Systems has built several prototypes and tested tested its first-generation vehicle on a closed track in the Los Angeles area.
The vehicles works in pairs. Each pair carries one standard shipping container — the same box that goes on flatbed trucks and gets loaded in and out of ships in port cities across the globe.
The cars carrying the containers are each self-powered, but the system will work best if the cars are linked together. So instead of having a long freight train powered by a few diesel locomotives, Parallel Systems envisions a "platoon" of 10 to 50 self-powered freight cars, Soule told CNBC.
That's a lot shorter than traditional freight trains, which can run up to 200 cars or more. Today, freight trains favor length because the more a single train can haul, the cheaper the cost becomes to move each unit full of stuff. But parking and unloading them is a big chore, Soule told CNBC.
A very long train requires a very big train terminal for unloading and loading freight. That can be a problem because ports and places where freight is loaded are often in urban areas, like Los Angeles, where land and space are at a premium.
Autonomous train platoons could improve train terminal logistics and lower those costs.
"Since the vehicles self-position under the crane and self-clear, the terminal dwell time and required land capacity is much smaller," explained Dean Wise, a former vice president of network strategy at BNSF Railway who advises the company.
Making the cars electric does not necessarily make the system totally green -- it depends on how the electricity that powers that part of the grid is created, as Soule readily admits.
But an electric rail car at least has the potential to emit zero greenhouse gases, while diesel trains will always emit some.
Moreover, because electric rail vehicles use 25% as much energy as a long-haul truck, their batteries only need 25% of the storage capacity that would be required for a long-haul electric truck. Soule said the company hasn't yet decided what kind of batteries to use, but is looking at storage technologies from the utility space.
For Soule, transitioning from his previous post at SpaceX means getting used to overseeing and moving forward the whole company and getting used to being a salesman.
But he says it's been encouraging seeing industry veterans react to the prototypes, Soule said.
"No matter how many PowerPoint presentations we give them, as soon as they come see it in person, you can see the lightbulb come on," Soule said.
Wise says the former SpaceX engineers have latched on to an idea that others in the industry had been imagining.
"At BNSF, we had brainstormed that a self-powered autonomous rail vehicle would be a game-changer, dramatically improving rail's ability to compete with the highway, and defend against the looming challenge of autonomous trucks — now acknowledged by most as a matter of when, not if," Wise told CNBC.
So far, Parallel Systems has had calls with 30 "major companies" in the space, including class one railroads, shortline rail holding companies, motor carriers, ocean carriers, ports, and industrial shippers, Wise said.
"The clincher for me was that these conversations were universally positive and uncovered additional value, refinements, and potential applications, leading to several companies seeking strategic development partnerships and investment opportunities with Parallel," said Wise.