One of the features Tesla has been trying to drive home with consumers is safety. Any time there is ever a violent crash where it seems the driver couldn’t have possibly survived, the EV maker plays it up. Of course on the flip side, whenever there’s a crash that could have involved its Autopilot semi-autonomous driving system, Tesla tries to distance the system from the crash. And then CEO Elon Musk tries to convince people that Autopilot is safer than cars driven by humans.
So why all the emphasis on safety? The automaker may be on to something if Morgan Stanley analyst Adam Jonas is correct. He believes safety and autonomous driving features are the future and that consumers are becoming so concerned about safety that consumers will prefer new cars with better safety features over used ones.
Semi-autonomous driving features to become standard
Jonas and his colleague Paresh Jain wrote the “Autos & Shared Mobility” section of their firm’s extensive report entitled “Key Investor Debates Likely to Drive Stocks in the Coming Year.” They focused on safety features and how they could weigh on the used car market over the next several years. They also believe that automakers could speed up the replacement cycle for cars by marketing new vehicles as 50% to 300% safer than vehicles that are only three years old.
Jonas and Jain believe that “affordable accident avoidance technology” will become standard on almost all cars in the near future. They predict that this new standard technology will result in at least a 50% reduction in accidents for only about $5 per month. They point to recent studies that have showed the benefits from Advanced Driver Assistance Systems, and they believe investors don’t fully appreciate this aspect of the auto market.
The Morgan Stanley team didn’t specifically mention Tesla by name. However, the analysts did opine that General Motors, Ford and Fiat Chrysler could see benefits from boosting consumer awareness of Advanced Driver Assistance Systems. Of course Tesla is different in that it manufactures only all-electric vehicles, but there’s no denying that it has been trying to present its vehicles as being the safest or at least among the safest on the road.
A big win for Mobileye?
Jonas and Jain do see suppliers, especially Mobileye, as being good beneficiaries of the shift toward ADAS. They define the company as “the pure play on active safety and semiautonomous driving.” They note that competition has been a primary concern for the sensor maker, but as ADAS features become more and more in demand, competition might not be a huge concern. They believe investors might be underestimating Mobileye’s potential earnings power and penetration in the medium term.
You may recall that Tesla ditched Mobileye as a supplier earlier this year following crashes that some blamed on the automaker’s Autopilot. The two traded barbs, as the sensor maker called the EV maker too cavalier, and Tesla called Mobileye too slow. The EV maker was rumored to be bringing development of its ADAS sensors in house but then announced a deal with chip maker NVIDIA for chips to use in its Autopilot system.
It remains to be seen just how much of its production the automaker will bring in house, but it seems likely that it will bring even more under its own umbrella.
Shares of Tesla rose by as much as 1.67% to $200.87 during regular trading hours on Friday, while Mobileye shares rose by as much as 1.39% to $35.78.