Investing & Buying into the Driver-less Car Revolution


Clients and prospects talk to me all the time about their current car ownership picture and future purchase needs. Most seem wedded to the traditional model of one car per spouse, plus a car for each licensed child living at home. While the use of car sharing services such as Uber and Lyft are going full tilt, not many are thinking about the coming driver-less revolution. Most are not quite ready to give up their current car ownership habits.

But if you’re in the market for a new or used car either now or in the near future, or just interested in investing in the future of autonomous auto-making, this might help change your thinking about being a multiple or even single-car family. I’ve borrowed much of a recent write-up from Jon D. Markman (used with permission).

From ownership to propulsion and operation, car making is at a point of inflection. Power brokers are scrambling to find new business models, and slow the process.

CNBC ran a story a few weeks ago about public frustration with Alphabet’s (Google) 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 Motor, 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 five-trillion dollar oil industry.

None of these deep-pocketed interests benefit from cars quickly becoming more safe, reliable or electric. They need to slow down the process, while they look for and find new business models. Stories that promote the myth that new technologies are less safe, and ultimately will do more harm than good, are a help to them.

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 ride-along human observer did not take the wheel. Video captured from the vehicle showed her looking down at her smartphone moments before impact.

Although, the tragedy became an indictment of autonomous vehicle technology, the National Highway Traffic Safety Administration reported that 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 above mentioned CNBC story, Arizona drivers complained Alphabet’s autonomous-vehicles (AV) 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.

Driverless Car Revolution 2018-09-25

As a long time writer, 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 image above is a Renault concept car for an autonomous ride-hailing service.)

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. Volkswagen, now the largest carmaker by volume, plans to offer 80 new electric vehicles by 2025. Even Dyson, best known for its snazzy vacuums and fans, is going to build electric cars.

It’s why Volvo and BMW are experimenting with vehicle subscriptions. For a single fee, subscribers get to change cars whenever they want, insurance and maintenance included.

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 part supplier in the world, is working with Nvidia (NVDA) to build the trunk mounted supercomputers to power autonomous vehicle software.

And it’s why chip and processor giant Intel (INTC) bought Mobileye, which makes software for autonomous driving, last year for about $15 billion. Back then, Intel also announced that it planned to build a fleet of 100 highly automated vehicles to test in the U.S., Europe and Israel. Two million vehicles from car makers BMW, Nissan and Volkswagen will use technology from Mobileye to build high-definition maps throughout 2018. Those maps would then be used by autonomous vehicles for navigation.

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. Even if you’re not a potential investor in the driverless-car revolution, you might think twice about buying that next or second car to park in your garage. Heck, you might even add a monthly car “subscription” to your Apple Music and Netflix subscriptions one day.

If you would like to review your current investment portfolio or discuss any other financial planning matters, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fee-only fiduciary financial planning firm that always puts your interests first. If you are not a client yet, an initial consultation is complimentary and there is never any pressure or hidden sales pitch. We start with a specific assessment of your personal situation. There is no rush and no cookie-cutter approach. Each client is different, and so is your financial plan and investment objectives.

TheMoneyGeek thanks guest writer Jon D. Markman of Markman Capital Insights for his contribution to this post.

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