Regulatory hurdles
Skeptics believe that self-driving technology could be dangerous on the road, as a mix of automated cars operating with regular drivers could prove problematic. But Google Inc (NASDAQ:GOOG) believes that this technology is the next step for cars. Chairman Eric Schmidt has said that he finds it preposterous that we still operate our vehicles. “It’s really an error that we’re allowed to drive the car,” Schmidt said at a conference last year.
Four states have approved self-driving vehicles: Nevada, Florida, California and Texas. Although Google Inc (NASDAQ:GOOG) has approached other automakers about its system, none have been interested. That Tesla Motors Inc (NASDAQ:TSLA) is reaching out to Google tells you how differently it thinks when compared to the rest of the auto industry.
General Motors knows
That might be because companies like General Motors Company (NYSE:GM) realize how difficult and expensive it might be to implement a self-driving system. General Motors Company (NYSE:GM) is more focused on global growth than being an innovator in a whiz-bang feature like self-driving. Take its Volt electric vehicle: General Motors is just trying to find ways to cut costs on that experiment to keep it alive.
What General Motors wants to focus on is Asia. It is building a new plant in China for its Cadillac brand, a business unit that has a particular amount of cache in that region. General Motors is a stock for those who don’t understand how a car company ebbs and flows with the economy. Given that, I don’t feel like General Motors Company (NYSE:GM) is a great investment no matter what it is able to accomplish in Asia.
Google doesn’t want to be a carmaker
The General Motors example shows why the automotive industry is not always the best market to be in. It’s interesting to see Google Inc (NASDAQ:GOOG) as the innovator of this technology. It clearly feels like it has potential in self-driving technology. It really boils down to its desire to make money from this concept.
But Google Inc (NASDAQ:GOOG) doesn’t want to be a car manufacturer. It already does very well in advertising — it realizes that there may be a day when that market begins to tail off. I see Google and I think of how it can improve many industries with its technology. It reminds me of (International Business Machines Corp. NYSE:IBM) in a way, because that company has been able to look far ahead and take the right gambles. All the while, it shed old businesses while creating new and futuristic ones. That’s Google’s model too, and makes it a valuable investment proposition.
Cost
Musk is adamant that the cost of self-driving technology will need to come down. As a result, Tesla may decide to forgo Google and come up with its own system. “I think Tesla will most likely develop its own autopilot system for the car, as I think it should be camera-based,” said Musk. That would be cheaper than the laser sensing technology that Google Inc (NASDAQ:GOOG) is using.
A base Model S sedan costs $62,400. Adding in an autopilot system would raise the price significantly. Tesla Motors Inc (NASDAQ:TSLA) has long faced questions about its ability to stay in business ever since it announced it would mass-produce electric cars. But those who are tired of the traditional auto industry see Tesla as an excellent long-term investment in transportation.
Bottom line: don’t disregard what Musk says. Remember, he’s the same guy who launched the first successful private rocket into space.
Daniel Cawrey has no position in any stocks mentioned. The Motley Fool recommends General Motors, Google, and Tesla Motors . The Motley Fool owns shares of Google and Tesla Motors .
