The Company That Will Win the Self-Driving Car Race
Over the last year, self-driving cars have fallen out of fashion for investors.
They come up occasionally, but the hype is nothing like what I saw in 2016.
In 2016, the Consumer Electronics Show might as well have been rebranded as a car show. Self-driving technology was all anyone wanted to talk about.
Fast-forward to 2017, and self-driving car tech seemed to be mentioned far less frequently. No longer were self-driving cars center stage. Lyft made a gallant effort to attract attention, offering autonomous rides to wearied conference attendees.
But compared to the level of hype in 2016, these efforts seemed half-hearted. Defeated.
And I suppose that’s fair. It's been a crazy year in tech. From Bitcoin to artificial intelligence, investors have had a lot thrown at them.
Outside of that, self-driving cars have been a long time coming. They've taken some time to reach the testing phase after the initial market hype.
It also doesn't help that the "testing" phase comes with its own set of issues.
And one of those issues is headlines like this:
On March 19th, a self-driving Uber vehicle killed 49-year-old Elaine Herzberg as she pushed her bike across the street.
This tragedy is a blow to Uber's self-driving car ambitions, making people question the safety of autonomous cars.
That said, these safety concerns and the lack of hype should not distract investors from self-driving cars.
Rather, these events should serve as a wake-up call, turning investors away from companies like Uber and toward the actual car companies leading the self-driving car race.
These companies are not Uber and Tesla. They are companies that have been working under the radar for years.
And now it's time for them to take to the streets.
The Future of Self-Driving Cars Isn’t Uber or Any Silicon Valley Company
As we get closer to the world's first functional self-driving car, it's become increasingly apparent that Silicon Valley darlings like Uber are not cut out for the task of producing it.
Uber started the race strong and offered investors a fresh new face and charming underdog story.
That said, the company lacks some of the crucial ingredients necessary to develop and bring a self-driving car to market.
One of those ingredients is money.
Like most groundbreaking and innovative technologies, self-driving cars are expensive to produce.
In fact, by 2017, over $80 billion had been invested in the development of self-driving cars. And that is just development. Billions of dollars more will be needed for marketing, production, and testing.
Beyond those immediate costs, it’s also likely that it will take several more years for a self-driving car program to reach commercial viability. That means a company has to bleed a lot of money before it starts to see any profits.
And for Uber, that simply isn't an option anymore.
At its current spend rate, barring some turn in fortune, Uber will run out of money by 2019. And when you consider the company's tarnished reputation, wooing investors for the needed sum is looking more and more like a moonshot.
This leaves Uber with a few options.
For one, it can abandon its self-driving car mission completely and focus on improving its ride-sharing model.
Or Uber could potentially sell its research to, or even partner with, a bigger company that has the funds and infrastructure to bring Uber's self-driving car vision to market.
And that brings us to the next point of this article: the hidden players of the self-driving car race.
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It’s Time for the Giants to Play Their Hand
The self-driving car industry can be summed up in one quote:
Any time there’s a paradigm shift like this, there’s an opportunity for new giants to emerge — but also for incumbents to adopt the new approach.
That quote came from Elad Gil, a famous startup investor and a major player in Google's early mobile products. Gil sees what many investors don't: that emerging industries can create new giants and also empower existing giants.
When it comes to self-driving cars, new giants will likely be formed out of picks-and-shovels companies that prove crucial to self-driving car development.
These companies will be the first generation of self-driving car suppliers, building the software and hardware needed to bring the cars to market.
That said, existing giants also stand to benefit.
In fact, it's looking more and more like established auto giants are going to be the winners of the self-driving car race.
Don't believe me? Just take a quick look at California DMV's 2017 Autonomous Vehicle Disengagement Reports.
As the home base for many self-driving car tests, California has vigorous standards for self-driving vehicles. One of the metrics California's DMV tracks is called "disengagement," which is the amount of times a human driver has to take control of an autonomous vehicle.
Using disengagement rates as an indicator, California places General Motors at the head of the pack.
And this seems accurate since the company is planning to launch its first car without a steering wheel or pedals in 2019.
General Motors is an industry giant with over 100 years of experience bringing products to market. And when it comes to the self-driving car race, it has equally experienced peers to compete with.
Navigant Research ranked over 18 car companies to see who would win the self-driving car race. According to that ranking, GM is at the top, along with Ford and BMW.
Giants Are Big... But Not for Profits
Of course, to the average investor, Ford or General Motors winning the self-driving car race doesn't mean much.
Ford and General Motors are already market heavyweights, and in being so, they don't have as much room for dynamic growth.
The companies that will likely deliver the biggest profits in the self-driving car race are the small and agile suppliers who will make their names on this emerging technology. Those are the next generation of giants.
Here at Wealth Daily, we are keeping an eye on these picks-and-shovels suppliers.
In fact, just recently, our lead technology analyst unearthed a picks-and-shovels company so powerful that it could kill could kill agro giant Monsanto. You can unlock our research presentation on that company here.
Stay tuned for more updates on the companies powering the self-driving car industry.
@AlexandraPerryC on Twitter
Alexandra Perry is a contributing analyst for Wealth Daily and Energy and Capital. She has multiple years of experience working with startup companies, primarily focusing on artificial intelligence, cybersecurity, alternative energy, and biotech. Her take on investing is simple: a new age of investor can make monumental returns by investing in emerging industries and foundational startup ventures.
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