The railroad industry was one of the first to disrupt how the world worked with technology, but lately, innovation in freight railroading has amounted to little more than longer and longer trains.
That has led many railroads to abandon shorter routes, ceding a chunk of the $1 trillion surface freight market to trucking companies. But as diesel prices reach record highs, some of those very trucking companies are going bust, leaving a hole in the market. Recently, at least 16 trucking companies went bankrupt over only a few weeks.
Parallel Systems might have a way to keep freight moving while allowing railroads to recapture market share. The startup has developed a rail vehicle capable of moving over several tons of freight as far as 500 miles without an operator. If the company can scale production of its Panther vehicles, it stands to make railroads profitable over short hauls once again.
“Less than 500 miles is hard for railroads to do competitively,” Matt Soule, co-founder and CEO of Parallel Systems, told TechCrunch. “Our technology allows them to take some of that trucking, and it’s for the public’s benefit.”
Because it runs on railroads, Parallel’s vehicle doesn’t contribute to traffic congestion, and because it’s battery powered, it doesn’t pollute. To scale manufacturing of its third-generation vehicle and speed the commercial rollout, Parallel Systems has raised a $100 million Series C led by AVP, with participation from Hillspire, Agility Global, Cobalt Capital, Anthos Capital, Congruent Ventures, Riot Capital, and Collaborative Fund.
Soule and his co-founders started Parallel Systems in 2020 after years at SpaceX, where they designed rocket avionics systems.
Parallel’s vehicles can travel either independently or in platoons, which tend to be shorter than typical trains. It’s an approach that bucks the prevailing strategy used by railroads, known as precision railroading: As the railroad industry has matured, investor pressure has driven companies to build longer trains and operate them on fixed schedules, which helps spread some costs like labor across more freight.
As railroads have pulled back from smaller routes, trucking companies have stepped in. Today, some 60% of freight trips in the U.S. are under 500 miles, and trucking companies handle a majority of those.
But more trucks on the road means more congestion, and nowhere is that more apparent than at ports. “If you ever go to the Port of Savannah, you see the truck lines coming in and out of the port — it’s insanity,” Soule said.
Unlike traditional train cars, Parallel’s vehicles don’t have couplers, instead forming uncoupled platoons that move down the rails. The coupler-free design means that, once a platoon reaches a train yard, the vehicles can split up without needing human intervention. And after the Panther is cleared to operate on a section of track, its sensors monitor the rails to ensure the track ahead is clear of obstacles.
Trucking companies have been intrigued by Parallel, despite the fact that the startup is claiming part of a business they currently own. Drayage companies, which move freight short distances, make money for each load they deliver, but they don’t get to charge more when a truck gets stuck in a traffic jam, even at a port where such congestion is common. By moving freight closer to a customer’s door, Parallel allows trucking companies to make more deliveries per day. “They want certainty, they want to be able to move,” Soule said.
Parallel obtained approval a year-and-a-half ago from the Federal Railroad Administration to operate near the Port of Savannah in Georgia, where it has been operating on 160 miles of track to prove the safety of its system.
“We’ve been verifying all the safety controls and operating practices that are best evaluated in a real-world setting with a path toward our first commercial payload coming up very soon,” Soule said.
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