Tech firms, not automakers, will rake in big future profits
Investors are betting it won’t be the traditional automakers who profit from tomorrow's cars.
Their margins will shrink as they expensively retool in the years ahead, evolving toward electric and and more autmoted vehciles.
So, who will profit in the years ahead?
Much of the new technology will come from specialty providers, particularly those who make computer systems for vehicles and battery packs for electric cars and hybrids. Traditional automakers lack skills in both.
A Reuters survey of savvy investors found them looking at innovative auto parts companies such as Aptiv in Britain, Valeo in France, and also at Chinese tech suppliers. Among automakers, investment managers favor Japanese companies. They’re growing quickly into tomorrow’s car tech, while German and American car manufacturers lag.
A study by the investment management firm ARK Invest found the sectors primed to profit. Companies that make apps, maps, and voice assistants to summon rides will do well. Think Apple with Siri, and Amazon with Alexa. ARK says this category of provider should average a return of $.02 per automated mile. Tech firms pioneering software platforms for autonomous rides, such as ARK sites Baidu, Aptiv, and Alphabet, also have bright futures, garnering as much as $.10 a mile.
BYD, Magna, NVIDIA and others making chips and other hardware for autonomous taxis will reap about a penny a mile. But the lion’s share of the takings will go to big fleet operators such as Avis, Uber, and local taxi companies that take the plunge.
TREND FORECAST: While fully driverless vehicles won’t be developed for decades to come, the technology that supports autonomous cars will create a trillion-dollar market within a decade. Investors will find a garden of profit opportunities within this emerging economy. Firms such as Tesla and BYD, that cover more than one sector within that economy, will weather growing pains with the least discomfort.