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The self-driving car industry is developing rapidly, and companies are competing not just to perfect the technology first, but also to figure out and execute the type of autonomous vehicle model that’s most likely to be profitable and accepted by the general public.

Originating as Google’s self-driving car project, Waymo remains a frontrunner in bringing consumer-owned fully autonomous vehicles to market. But another startup, with interestingly similar origins, has the potential to shift the industry — and help bring us to an autonomously driven future.

Enter Nuro

Remaining stealthily in development for the past several years, the startup Nuro was founded by two engineers who contributed to Google’s self-driving car project back when it was still a part of Google. But instead of trying to automate a fleet of taxis, provide hands-free transportation for individual commuters, or replace truck drivers for cross-country trips, Nuro is focusing on an entirely different segment.

The company differentiates itself by designing a unique vehicle with a unique purpose: last-mile delivery of goods. These small, efficient, and packable vehicles are meant for users to load with groceries, packages, gifts, or other goods for transport over short distances. Hypothetically, merchants could employ these cars as errand-running vehicles, grabbing a week’s worth of groceries for a consumer just a couple miles away after they place an order, or as extension delivery vehicles, connecting with distribution centers to handle the final leg of the journey for most packages.

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It’s an interesting model, for sure, hybridizing typical self-driving car projects with a concept similar to drone delivery. Considering McKinsey’s estimate that last-mile delivery costs about $86 billion each year and is growing sharply every year, there’s clearly a place for this type of service.

The vehicles produced by the company bear little resemblance to other solutions. They aren’t sidewalk-bound drones, like Starship Technologies’ rover-looking prototypes, nor are they simply consumer vehicles outfitted with delivery gear. Engineers designed the prototype for Nuro’s operations, internally referred to as R1, from the ground up. There’s no driver seat, since drivers won’t use the vehicle; nor are there any internal controls that you might see on a conventional or semi-autonomous vehicle like a gas pedal or gearshift. Instead, there are four compartments and a wide range of sensors, including lidar, cameras, and radars.

Nuro has a permit to start road testing later this year in California, but it will take time before it starts testing in other states.

The challenges

That said, the company has some kinks to work out with the business model.

For example, how will Nuro handle customer notification of delivery? Assuming these vehicles park in a driveway or in front of an establishment, would it send a text message to the recipient and hope they come down in a reasonable amount of time? If nobody’s home, does the vehicle stay there? If so, that means losing availability and valuable time.

How will these vehicles protect against identity theft? Onboard biometric scanners could feasibly ensure that the only people able to access the vehicle’s cargo are those previously authorized to do so. But how reliable are they, considering how easy it is to replicate a fingerprint?

Nuro also needs to worry about the competition. The company has an interesting model, but is it going to be the one that consumers and lawmakers prefer? Take Starship Technologies (mentioned earlier) as an example. The company has had its sidewalk drone in development longer, last year reaching the milestone of 100,000 km of driving over 100 different cities. The drone doesn’t require on-road travel, which means it would be easier to regulate (and potentially safer), and would require lower fuel costs as well, in trade for lower carrying capacity.

And what if customers want to select their groceries or pick up their package by hand? Given the low hassle of being a passenger in a fully autonomous vehicle, it may be worth it to accompany your vehicle on these types of errands. Considering that fully autonomous vehicles are expected to become consumer-ready by the early 2020s, that’s a major logistical threat.

The main effects

Here are just some of the ways Nuro could effect (or at least be an indicator of) change in the autonomous vehicle industry:

  • Function-oriented vehicle design. Nuro didn’t take an existing vehicle and simply upgrade it to be capable of driving itself. Instead, the company designed a prototype from the ground up for one specific purpose: autonomous delivery. Other companies will likely follow suit, choosing to develop their own models for other functions rather than merely evolving a form already on the market.
  • Driverless, passengerless operation. The R1 is equipped to function not only without a driver, but without a passenger as well. In a way, this makes it more dronelike than carlike. It’s inherently safer with this structure, and is therefore more likely to face less strict laws and faster public acceptance. If that’s the case, cars like these could be the perfect stepping stones to convince consumers and lawmakers that self-driving cars are ready to carry human passengers en masse.
  • Heightened specialization. Nuro also sets a tone for the industry to demand more specialization. Rather than developing a vehicle designed for multiple purposes or producing a technology that’s applicable to any vehicle, it’s focused on one area: last-mile delivery. Look for more startups to make the transition to an exclusive, specialty focus.

In any case, Nuro looks to be an exciting competitor in the autonomous driving arena. It remains to be seen exactly how autonomous vehicles will continue to advance and what impact they’ll have on consumers and the economy at large, but with billions of dollars at stake and millions of consumers and investors interested in the outcomes, the race will likely grow even more complex and sophisticated in the near future.

Anna Johansson is a freelance writer who contributes to Forbes, Inc., Entrepreneur, and The Huffington Post. 

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