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Mobileye Outpaces Google (NASDAQ: GOOG)

Written By Jason Stutman

Posted July 8, 2013

When I was 18, I pulled what was quite possibly the dumbest stunt of my entire life.self driving

I left a party, drunk, and attempted to make my way home.

It only took a few minutes before the front end of my 1995 Nissan Maxima was wrapped around a tree.

When the cops arrived, they didn’t ask if I had been drinking – they just kept insisting that I must have been tired. And though I appreciated the gesture back then, I know now that I should have been arrested.

After all, I could have killed someone. I’m incredibly lucky that I didn’t. The $5,000 hit I took was nothing compared to what else could have been lost.

Besides this financial cost, I also felt a strong sense of shame for some time following the accident. See, my close friend had passed away a few years earlier due to reckless driving, and I had become one of the people I had come to despise.

Human Error

Human error kills thousands of individuals in the United States every year. At the time of my accident, that number was near an all-time high of 43,000 deaths per year. Fortunately, the motor vehicle death rate has experienced a significant downtrend over the last ten years.

In 2012, motor vehicle deaths in the U.S. were down to 25,000 from 43,000 in 2002 – a 42 percent decrease in just a decade.

And I can assure you this isn’t because drivers suddenly got more responsible – there are still plenty of idiots like 18-year-old me driving on the road today. The fact is, the number of annual motor vehicle accidents has remained constant, hovering around 11 million accidents per year.

In other words, accidents are just as prominent, but they are far less dangerous. This increased safety can largely be attributed to the development and increased adoption of technology such as anti-lock brakes, airbags, seat belt monitoring systems, etc.

And though these technologies will reduce the dangerous effects of a crash, they generally will not prevent accidents from occurring in the first place. That is, automobile safety has mainly been protective rather than preventative – a trend that is rapidly changing.

What if technology could reduce the annual rate of accidents?

Robotic Perfection

300,000 miles – that’s how far Google’s (NASDAQ: GOOG) self-driving vehicles have traveled on California roads with zero accidents under computer control. Just let that sink in: zero accidents.

If that doesn’t blow your mind, maybe this will: industry experts expect driver-less cars to hit the mainstream in about 5 years for highway travel and 10 years for fully autonomous navigation.

The self-driving vehicle market is going to disrupt the automotive industry as we know it, and savvy, well-positioned investors are going to reap the benefits.

Mobileye is an Israeli and Dutch technology company that makes driver assisted technologies. The company expects driver-less cars to hit the roads as early as 2016 and announced agreements to sell $400 million in equity to leading institutional investors on July 7, 2013.

Mobileye is valued at $1.5 billion (pre-money valuation) and has already seen large investments from Goldman Sachs (NYSE: GS) and Blackstone Group (NYSE: BX).

The $400 million investment by leading financial investors further establishes Mobileye as the industry leader in autonomous and assistive driving systems.

Mobileye already contracts with 19 automakers worldwide, and its technologies are accepted by many insurance companies. With its self-driving technology costing significantly less than Google’s $70,000 system, Mobileye is strongly positioned to capitalize on this new market.

And though Mobileye remains a private company, there is already a large growth opportunity for public investors in this space. STMicroelectronics (NYSE: STM) develops and manufactures the processor chips for Mobileye, and Mobileye holds a wide range of patents directly connected to these processors.

If Mobileye continues to lead the self-driving car market, STMicroelectronics will very likely be along for the ride. If that happens, investors are going to want a seat too. 

Turning progress to profits,

  JS Sig

Jason Stutman

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