I see four main structural trends shaping this Zeitgeist – sharing platforms, autonomous driving, electrification, and connectivity. These four topics are inextricably linked and together have the potential to reinforce and accelerate one another.
Massive tail fins and blinking chromed trimming – back in the 1950s people were already dreaming of simply getting into a car and being driven to their destination. Without studying a map or having to concentrate the whole time on the traffic. Back then it was a vision. And today? Evidently a realistic goal. A trip where investors may be along for the ride.
“Whether we like it or not, slowly but surely robots are taking over the job of driving,” a 1958 edition of Popular Science magazine said, as reported recently in “Süddeutsche Zeitung”. Back then, the focus was on cruise controls and similar assistance systems. Today, technology is far more advanced. In 2005, for example, a VW SUV crossed the Mojave desert in the US. Without a driver. Automatic parking is now a standard in numerous vehicles. And that probably marks but the beginning of a far-reaching development that will culminate with self-driving cars. Offering countless benefits.
First and foremost for the driver, who can sit back and devote his/her time to something different such as preparing a meeting or simply relaxing. Get in, drive off, sit back and relax, as it were. And traffic flow will improve as computers respond faster than humans, avoiding accidents and thus gridlock. And this could also bring down the cost of transport.
A Herculean technological task, as the car would then have to do everything that drivers have hitherto done: get a handle on the weather, keep an eye on the road, the traffic and the surroundings. Above all, the other cars and what they are doing: braking, accelerating, turning, or breaking the rules. Will a computer be able to achieve all of that?
A lot of computing capacity s required. For example, Volvo intends this year to run fleet trials with a computer platform as powerful as 150 Apple MacBook Pros. And BMW plans to hire 500 IT experts in 2017 alone – all of them AI specialists. That possibly shows that it is certainly not just the classical carmakers that will benefit from the trend. The tech titans from Silicon Valley are busy developing driverless cars. Google, for example, has teamed up with Fiat Chrysler, Toyota will soon be allying with Honda. And the semiconductor industry should also profit from rising demand for chips. Forecasts suggest that between 2017 and 2025, the sector should grow by 60 percent a year.
Experts like PWC think the winners will be the tech companies, plus specialists who make sensors and maps, plus ride-share companies like Uber, plus in-car entertainment! Their combined revenues could grow to $600bn worldwide by 2030. Losers will be the old-fashioned auto companies, who will stagnate despite those gizmos, and insurers, as premiums collapse.
JP Morgan estimates, that by 2025, the total market for semiconductors in semi- and fully autonomous cars will reach $7.3bn with annual growth rates above 60%.
The small Swiss city Sion have already adopted autonomous buses to drive people. Furthermore, connectivity and app, allow passengers to check on timetables, locate the bus next passage.
Some specialists companies have price-earnings ratios close to or even below the general market. There aren't many of them, because some already got bought out by old-fashioned car companies.
Two obstacles ahead
Customers seem to be convinced. A study shows that of 2,000 Americans polled, more than three quarters would at least contemplate buying a self-driving car. In 2015, in a white paper the Verband Deutscher Verkehrsunternehmen (VDV) therefore called self-driving vehicles a game changer. As they blur the classical line between transportation systems. After all, the self-driving car could be a taxi, a bus or a private vehicle – all rolled into one.
However, there are still two main obstacles to the driverless future or road traffic ahead of us. First, the price. For the relevant sensors and detectors are still costly. Which is why the new technology is likely to be introduced from the top down, so sector experts assume, starting with luxury limos and ending with shopping compacts. Second, there are countless political requirements to be met. After all, self-driving cars are by no means allowed on streets everywhere. Precisely this situation makes the relevant equities a zeitgeist investment. Because technological and social developments should ensure that self-driving cars became a matter of course, sooner or later. Good for early-bird investors locking into the idea. And it is less the classic carmakers that will benefit and more those companies that, for example, provide the required semi-conductor technology.
Self-driving vehicles will soon be driving – and who will be along for the ride? From the investor viewpoint: not necessarily the carmakers, but above all the firms that contribute important components for this new type of mobility.
Autonomous vehicle will be part of a public investment revolution to begin with: public transportation in inner cities, collecting garbages in suburbs. These could be the first areas of deployment of such vehicles.
Published on 23.03.2017
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