Electric freight train cars are being designed by three ex-SpaceX engineers.

• As the CEO of Parallel Systems, Matt Soule previously worked at SpaceX for 13 years before leaving in July 2019.
• Rail transport consumes significantly less energy than truck transport for the same freight. Moreover, the use of autonomous rail car pods allows for the establishment of micro-terminals, which can enhance the efficiency of railroad transportation in delivering goods.
• On Wednesday, the Los Angeles pre-revenue start-up will publicly unveil itself and announce a $50 million Series A funding raise led by Anthos Capital.

Three ex-SpaceX engineers are establishing a company to develop electric self-propelled train cars, with the goal of enhancing efficiency and reducing emissions in the freight rail sector.

Moving one unit of freight by train takes one-quarter the energy required to move it by truck, said CEO and founder Matt Soule, thanks to better aerodynamics.

"Rail's operational and economic limitations are due to its architecture, but breaking through those barriers presents an opportunity to serve more markets," said Soule.

The transition of the freight system from diesel to electric power could significantly contribute to decreasing the carbon emissions that lead to global climate change. A report by the Environmental Protection Agency in Dec. 2021 states that transportation accounts for 29% of the total greenhouse gas emissions in the United States, with almost a quarter of that coming from medium and heavy duty trucks.

Soule stated to CNBC that energy usage reduction is highly relevant to focus on.

Soule got the idea in an unusual way.

At SpaceX, where he began working in 2006, Soule was responsible for developing the electronics that enabled the rocket to fly straight. After leaving in 2019, Soule was meeting a friend, technologist and product designer Brian Ignaut, for coffee and browsing YouTube on his phone. A video on freight trains was randomly selected by the algorithm, which sparked Soule's thoughts about the potential of the freight train system and the need to reduce its carbon footprint.

In January 2020, SpaceX employees John Howard, Ben Stabler, and Elon Musk launched a new company. They kept their plans under wraps until Wednesday, when they unveiled the company to the press and announced a $50 million funding round led by Anthos Capital.

Linking ‘platoons’ of self-driving rail cars

Parallel Systems, which has been operating on $3.6 million in seed funding, will use the new round of funding to construct a fleet of rail vehicles, carry out advanced testing, and expand the team.

Parallel Systems, with its team of around 25 engineers from tech companies such as Google, Microsoft, and Tesla, has constructed several prototypes and conducted tests on its first-generation vehicle on a closed track in the Los Angeles area.

Each pair of vehicles carries one standard shipping container, which is used for transport on flatbed trucks and loading/unloading in port cities worldwide.

To optimize the system, Parallel Systems suggests using a group of 10 to 50 self-powered freight cars instead of a long freight train powered by diesel locomotives, as described by Soule to CNBC.

Freight trains are longer than traditional ones, which can carry up to 200 cars. However, this length is preferred because it reduces the cost of moving each unit of cargo. However, parking and unloading them is a significant challenge, as Soule explained to CNBC.

The size of the train terminal needed for unloading and loading freight on a very long train can be a problem, especially in urban areas like Los Angeles where land and space are limited.

Autonomous train platoons could improve train terminal logistics and lower those costs.

According to Dean Wise, a former vice president of network strategy at BNSF Railway, the terminal dwell time and required land capacity are significantly reduced because the vehicles self-position under the crane and self-clear.

The use of electric cars does not guarantee a completely green system, as the source of electricity used to power the grid must also be taken into account, as Soule acknowledges.

Electric rail cars have the potential to emit zero greenhouse gases, while diesel trains will always emit some.

Electric rail vehicles require only 25% of the storage capacity needed for long-haul electric trucks because they use 25% less energy. Soule stated that the company is considering storage technologies from the utility sector for their batteries.

‘You can see the lightbulb come on’

Soule must adjust to managing the entire company and adapting to his new role as a salesperson after leaving SpaceX.

Soule stated that it has been encouraging to see industry veterans' reactions to the prototypes.

As soon as they see the presentation in person, a lightbulb goes off in their head, Soule explained.

The former SpaceX engineers have seized on a concept that others in the industry had been envisioning.

Wise stated to CNBC that at BNSF, we believed that a self-powered autonomous rail vehicle would revolutionize the rail industry, enhancing its competitiveness with highways and preparing for the inevitable challenge of autonomous trucks, which is widely recognized as a matter of when, not if.

Wise stated that 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 stated that the decisive factor for him was that these discussions were consistently positive and revealed additional worth, enhancements, and possible uses, resulting in multiple businesses expressing interest in collaborative growth partnerships and financial investments with Parallel.