Autonomous driving is the wave of the future, but in some ways, it’s already here, for better or worse. Tesla Motors Inc (NASDAQ:TSLA) is picking up quite a lot of bad publicity for autonomous cars as it tries to blaze a trail in what most auto analysts agree is the next step. In fact, the auto industry is now going through a time when innovation and disruption are at the highest level it has seen in a long time, and calls are now starting for not just autonomous driving but also mobility or shared miles—a business model similar to what Uber and Lyft are doing, except with cars that are specifically designed for this purpose.
Problems autonomous cars would solve
Morgan Stanley analyst Adam Jonas and a vast team put together a pair of reports on autonomous cars. One is a list of the companies they believe are the “best positioned in a world moving toward shared mobility, autonomous driving, and electrification.” Jonas in particular has long been pushing for mobility business models, especially for Tesla, as he tries to shift the narrative from the number of vehicles sold to trillions of miles driven.
He feels that one of the key arguments for shared mobility and autonomous vehicles is the underutilization of vehicles. He and his team explained in their September 22 report titled “The Shared Autonomous 30” that cars are only being used 4% of the day. They add that the “available seat-mile utilization” rate sits at “barely 1%.” On top of this we have the problem of fossil fuel use as cars slurp up 500 billion gallons of fuel every year, which accounts for 45% of the world’s oil demand.
Welcome to our latest issue of issue of ValueWalk’s hedge fund update. Below subscribers can find an excerpt in text and the full issue in PDF format. Please send us your feedback! Featuring hedge fund assets near $4 trillion, hedge funds slash their exposure to the big five tech companies, and Rokos Capital's worst-ever loss. Read More
Opportunities in autonomous driving
The Morgan Stanley team compares shared, autonomous driving to “a drug that could save 1.3 million miles and prevent serious or incapacitating injury to tens of millions of people annually.” They also note that shared, autonomous vehicles would unlock more than 600 billion hours spent in a vehicle, amounting to 68 million years of time per year, thus creating an “economic opportunity for content and data worth potentially trillions of dollars.”
Aside from the automakers themselves, there are plenty of opportunities within the autonomous vehicle industry. Of course Tesla and Mobileye (which is ending its supplier relationship with Tesla) were on the list of stocks the Morgan Stanley team sees as potential winners in the auto industry of tomorrow. Aside from potentially benefiting from the changes autonomous vehicles bring, they note that new competitors will arise, along with new challenges, such as attracting and retaining top talent.
What might change in an autonomous driving world?
They also believe auto dealers might no longer sell cars but instead become fully focused on services in what they describe as a “highly consolidated group of mega-fleet managers.” They also note that autonomous trucks could enable transportation companies to cut costs, while lithium producers must step up to the increased need, although a key problem now is that there isn’t adequate supply for a greater fleet of EVs. They’re also disinclined to produce more without EVs making up a greater chunk of global auto sales.
Also more electric vehicles will tax the electric grid, potentially amounting to about one-third of energy demand in the U.S. Semiconductors, IT hardware/ software/ internet/ media are also areas of opportunity in autonomous, electrified driving, the Morgan Stanley team feels, with big names such as Apple, Microsoft, IBM, Amazon, Alphabet and Facebook being named as potential beneficiaries.
Here’s their list of the top 30 stocks they feel offer exposure to “shared mobility, autonomous driving, and electrification,” although they note that these stocks are not pure plays in the areas of shared or autonomous mobility.