Driverless Cars: Who’s On Board and Where Are They Headed?

We’re getting a glimpse of the future here in my native Western Pennsylvania. Uber customers looking to catch a ride in Pittsburgh can now try one of Uber’s self-driving cars – modifed Volvos – for no charge.self-driving-car driverless car

Of course, there will still be someone at the wheel along with an engineer as Uber tests the limits of the technology. Nevertheless, it looks as if the age of driverless vehicles is fast approaching. That is a good thing since 90% of vehicle crashes are due to human error.

The question on many investors’ minds is this: Which of the many technologies being currently tested for driverless cars will emerge as the winner?

Tesla Is the Target

If there is a company with a bulls-eye squarely on its back, it is Tesla Motors (NASDAQ: TSLA).

It seems that every vehicle maker and technology from the U.S. to Asia to Europe is gunning for the leader in the field, Tesla. The company’s electric vehicles lead the pack whether measured by vehicles sales (16% of the all-electric car market), vehicle range, acceleration or battery cost per kilowatt hour.

BMW (OTC: BAMXY) recently became the first German automaker to launch a marketing campaign specifically aimed at poaching the people who laid out $1,000 to get on Tesla’s waiting list.

BMW has set a goal of 2021 to produce fully self-driving cars. It is working in conjunction with Intel (NASDAQ: INTC) and Mobileye (NYSE: MBLY). BMW has pledged to become “No. 1 in autonomous driving.”

And surely, there will be many ads similar to BMW’s from other automakers to follow as they move forward their plans for autonomous vehicles.

Like Ford (NYSE: F), for instance. It plans, also by 2021, to be producing a mass market self-driving car. Ford has made a number of technology investments including those with Israeli machine learning company SAIPS, vision-processing group Nirenberg Neuroscience and laser-based driverless system firm Velodyne Lidar in conjunction with Baidu (NASDAQ: BIDU).

Other automakers have been busy too: Fiat Chrysler Automobiles (NYSE: FCAU) is working with Alphabet (NASDAQ: GOOG) on self-driving minivans. And let’s not forget Toyota Motors (NYSE: TM), General Motors (NYSE: GM) and Volkswagen (OTC: VLKAY) are moving forward with other transportation innovations in collaboration with Uber, Lyft and Gett respectively.

And Apple (NASDAQ: AAPL) is still rumored to be working on a car.

Autonomous or Semi-Autonomous?

All of the world’s automakers are not going down the same path, however.

Some like BMW and Ford are going the fully autonomous route. Others believe semi-autonomous is the best path. These include the likes of GM, Nissan (OTC: NSANY) and Daimler (OTC: DDAIY).

GM bought Cruise for $581 million and will roll out the Super Cruise lane driving system on the Cadillac CT6 next year. However, its CEO Mary Barra says the company will continue to keep putting steering wheels in its vehicles for the foreseeable future.

Nissan is rolling out a minivan with lane driving technology soon and its Qashqai SUV will also feature the capability later this year.

Is autonomous or semi-autonomous the best way to go? The failure of Tesla’s technology in May, leading to a fatality, seems to point to semi-autonomous. But the catch there is how do you get a driver that is unengaged to become engaged quickly enough to avoid an accident.

So I strongly suspect both types of vehicles will find a market, at least initially. The trend, though, I believe will be toward more and more autonomous vehicles.

The Competition in Driverless Cars

That still doesn’t answer the question as to what companies will be the winners. Obviously, it is still too early in the game to clearly determine a winner.

Tesla remains in front. But what kind of a winner is it?

Looking at the company’s net income level, Tesla has only recorded one profitable quarter since it listed in 2010. The company has to become profitable eventually if it is to survive long-term.

Dark horse possibilities as long-term winners are the German car companies.

Just recently have the Germans begun to truly focus on electric vehicles.

Last year VW, Daimler and BMW spent 11.8 billion, 6 billion and 4.3 billion on research and development. That total of 22 billion dwarfs Tesla’s total of $718 million.

Only about 20% of the German companies’ total R&D was spent on electric cars. But that will likely climb to 40% within five years, according to Evercore ISI. There is at least a possibility then, that by the time electric vehicles become mass market, the Germans will have caught up and passed Tesla.

After all, it is much harder to do what Tesla is attempting – to scale up to become a major automaker – than for the Germans to turn their focus to electric vehicles.

Save

Save

Published by Wyatt Investment Research at