Imagine cities without places to park.
Stop gasping. In the future, there will be no need.
Tomorrow’s megacities will bear only a passing resemblance to today’s. This transformation starts with self-driving cars. But that is by no means where it will end.
This change is big, long-lasting and important.
It is a change investors need to understand, and take advantage of.
Dan Doctoroff likes to wax poetic about cityscapes of the past. As the former New York deputy mayor, he was in charge of economic development and rebuilding.
He understands how the clickety-clack of horse-drawn buggies, wagons and streetcars shaped America’s great cities. It was the transportation system of the 1900s that pushed frenzied shops close to the sidewalk’s edge, and kept streets narrow despite great population growth.
Today, Doctoroff leads Sidewalk Labs, a subsidiary of Alphabet (GOOGL). The online search giant has been a big investor in cities. Managers know the next infrastructure boom is about to take place as metropolitan areas adapt to an onslaught of new technologies.
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For most people, the point of the spear is going to be self-driving cars. Right now, prototypes are capable of self-navigation. And they drive more safely than humans.
This week Waymo, another Alphabet company, announced plans to buy thousands of additional Fiat Chrysler minivans. The two companies have been working on autonomy since 2016.
Six hundred souped-up, self-driving units are currently operational in 25 cities. Plans to offer fully driverless rides to the public begin in 2018.
Self-driving vehicles, on public roads, are no longer science fiction. They are real. And they change everything.
Automakers will feel it most. As people transition from drivers to riders, the current ownership model is certain to take a hit. Why buy a car when you can summon a ride from your smartphone? As a commuter, you can sleep or catch up on work, social media and entertainment. You can even consume alcohol.
It is no wonder car companies are working overtime to slow the transition, while scrambling to develop mobility-as-a-service business models.
Toyota is pushing back hardest. It created the Toyota Research Institute to “use artificial intelligence … (to make cars) safer, more affordable and more accessible to everyone.” It also wants to expand “the benefit of mobile technology beyond automobiles.”
Gill Pratt, its U.S. chief executive, claims the industry is not even close to fully autonomous vehicles.
I’m sure he would like that to be so.
In 2016, the Japanese behemoth made a $1 trillion bet on semiautonomous vehicles. Its high-tech “Guardian Angel” uses a combination of new sensors, robotics and software to dramatically reduce the chance of accident.
Cars equipped with the package will self-brake and even veer away from trouble if the driver fails.
It’s an impressive innovation. Even though it might be too little, too late.
It’s hard to compete with total hands-free driving …
And the rest of the industry is not waiting.
Many automakers are embracing the Nvidia (NVDA) Drive PX self-driving platform. Jensen Huang, its brash CEO, recently told reporters in Taipei that self-driving cars would become mainstream by 2021.
Incidentally, that’s when Mercedes, BMW, Volvo, Audi and others have promised to show off self-driving cars.
Tesla plans to one-up all of them, with a level-5 car by 2019.
The implications are big.
According to the Financial Times, a study from the Rocky Mountain Institute predicts private car ownership could peak as early as 2020. As ownership drops, city infrastructure will need to adapt to fewer vehicles and less storage.
The Wall Street Journal reported architects, planners and developers have already begun designing city carpark facilities that can be easily converted to office and residential space.
In the past, I have always pointed my members to companies that bet early on self-driving car technology. Nvidia has been a spectacular winner. Under Huang, the company has been completely reimagined. Shares have risen 18-fold since 2013.
There is a reward for getting it right.
There will be other winners. Companies that make sensors, software and storage are certain to be big beneficiaries going forward as the gear hits more cars.
However, focusing on the vehicles is too small.
Reshaping cities is a multiple-year, multitrillion-dollar opportunity.
I have identified an infrastructure company that is certain to win big. It has scale, expertise and the political connections to structure deals over multiple administrations, and regions. Its balance sheet has leverage, and management is dutifully focused on increasing shareholder value.
Another is a global engineering firm with a strong history of revenue growth. Management is already gearing up for this infrastructure cycle.
The bottom line is we are very near a major new infrastructure cycle. Although self-driving cars are the impetus, they are only just the start.
Jon D. Markman