From ownership to propulsion and operation, car-making is at a point of inflection. Power brokers are scrambling to find new business models, and to slow the process.
CNBC ran a story last week about public frustration with Alphabet’s self-driving car program in Arizona. The robot vehicles are so cautious that human drivers can’t see their utility.
It’s disinformation passing for common sense. For investors, it’s dangerous.
Global sales of passenger vehicles reached 78.6 million units in 2017. Toyota (TM), the largest manufacturer, logged sales of $265 billion last year. This business is being disrupted right now. The same is true for auto parts, dealer networks, maintenance and repair infrastructure and the $5 trillion oil industry.
|An Associated Press report about an electric car catching fire became a global news story in June.|
None of these deep-pocketed interests benefit from cars quickly becoming more safe, reliable or electric. They need to slow the process while they need to find new business models.
Stories promoting the myth that new technologies are less safe, and ultimately will do more harm than good, are a help to the auto industry.
An Associated Press report about an electric car catching fire became a global news story in June. It helped that the vehicle in question was parked, a Tesla, and owned by a celebrity. However, the story lacked perspective.
In 2015, the most recent year for which records have been kept, the National Fire Protection Association reported approximately 174,000 gasoline vehicle fires. It turns out that gas is flammable — go figure — and prone to spontaneous combustion.
In March, an SUV decked out with the latest sensors, cameras and self-driving software from Uber, struck and killed a pedestrian in Tempe, Arizona. The test vehicle did not slow or swerve. The ridealong human observer did not take the wheel. Video captured from the vehicle showed her looking down at her smartphone moments before impact.
Related story: Tragic Uber crash won’t stop self-driving cars
Although the tragedy became an indictment of autonomous vehicle technology, the National Highway Traffic Safety Administration reported 5,376 pedestrians were killed in traffic crashes in the U.S. in 2015. Some 129,000 were treated for injury.
The numbers are not surprising. Humans are terrible drivers. We are far too easily distracted by children in the backseat, the radio or our smartphones. And we are impatient to a fault.
In the CNBC story, Arizona drivers complained Alphabet’s AVs were operating too safely. They didn’t speed. They proceeded cautiously at intersections. One man admitted to driving illegally to avoid getting stuck behind an AV.
Recent data from the California Department of Motor Vehicles reveals 38 accidents involving moving AVs since 2014. The AV was found at fault in only one case.
As a veteran journalist, I love a good “Dog bites man” story. Everyone does. But the idea that electric cars and AVs are the problem is dangerous, especially for investors.
The automobile industry is headed toward autonomous, electric vehicles. Years from now, owning a car will make no more sense than owning music or movies today.
Most legacy business models must change or ultimately fail. Car-makers know this.
It’s why every leading car-maker is moving production toward electric propulsion.
It’s why iconic car brands are pairing with ride-hailing startups all over the globe. In the future, selling fleets of vehicles and taking a piece of new Mobility-as-a-Service models will be the business.
It’s why Toyota will invest $500 million with Uber to develop autonomous vehicles.
It’s why Bosch, the largest auto-parts supplier in the world, is working with Nvidia (NVDA) to build the trunk-mounted supercomputers to power autonomous vehicle software.
This is the state of the car business. The transition is happening. It’s not hype. It’s real.
Investors are doing themselves real harm buying into the idea the technology is faulty, or decades away from adoption.
Use weakness to add longer-term positions for companies exploiting every part of the stack, including Alphabet, Nvidia, Lear (LEA) and Aptiv (APTV).
Jon D. Markman