Currently, Tesla Motors Inc (NASDAQ:TSLA) is the only company serially producing a full-sized EV, the Model S. The Nissan Leaf and Ford Motor Company (NYSE:F) Focus are notable EVs, though they’re both smaller than the Model S (the Leaf is a mid-sized hatchback and the Focus a compact or semi-compact hatchback), and have considerably shorter battery charge ranges. Yes, the Tesla is pricier, too. However, prices across the board will come down as companies sell more EVs, and benefit from economies of scale. Besides, it makes sense higher-end vehicles will be the first to offer fully or partially self-driving systems since early systems will likely be costly.
Tesla CEO Elon Musk told Bloomberg last week that he is talking to Google Inc (NASDAQ:GOOG) about its driverless systems. Musk said he prefers the term “auto pilot.” (This is smart as “auto pilot” gives the message that the human is in control, and an option he/she may wish to activate.) You could also gleam from his comments that he doesn’t believe people will en masse embrace giving up all their driving — and I agree.
As per the technology, Musk said:
“The problem with Google Inc (NASDAQ:GOOG)’s current approach is that the sensor system is too expensive.”
“I think Tesla will most likely develop its own autopilot system for the car, as I think it should be camera-based, not Lidar-based. However, it is also possible that we do something jointly with Google Inc (NASDAQ:GOOG).”
Takeaway: If this scenario proves correct, manufacturers of larger vehicles would profit. Tesla is currently the only company serially producing a full-sized EV, the Model S. And Musk’s comments indicate Tesla will likely be among the first automakers to offer driverless systems, or “auto pilots.” This should bolster the bull argument for Tesla.
2. Stuff for the “portable room”
What would you want in your self-driving vehicle?
A. Coffee maker
I’d want a coffee maker in mine – and I think others will too. A single-serve coffee maker seems the best fit for an in-car coffee maker. So, potential winners here could include Keurig maker Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR).
B. Entertainment
Auto manufacturers have been “gadgeting up” autos for a while. An early leader among U.S. automakers was Ford Motor Company (NYSE:F) with its SYNC system. Driverless vehicles will accelerate this trend. People will be doing what they do on planes — watching movies, using computers to do work, etc. Apple Inc. (NASDAQ:AAPL), Google, and others’ battle to “win the car” will intensify.
3. Fewer cars needed
This would affect car manufactures and have ripple effects throughout the supply chain.
The average vehicle is idle — parked – more than 90% of the time. Thus, there’s much wasted capacity. Currently, a vehicle needs to be wherever the driver is – sitting in a work parking lot, etc. That will change with driverless vehicles.
While I think the number of vehicles will fall somewhat when driverless vehicles become mainstream, I don’t think the number will fall nearly as drastically as some predict. A family having, say, three vehicles might cut down to two. But I don’t think many of those will be cutting down to one, even if logistically possible, because schedule coordination becomes an issue.
And I don’t think we’ll see a significant increase in those forgoing car ownership in the U.S., as some are predicting, even if using automated services is more cost-effective. Technology moves fast, but human nature doesn’t change much. I don’t think many people will want to feel dependent upon an outside service, no matter how dependable. Additionally, you can’t customize a non-owned service vehicle, or keep stuff in it.
Takeaway: Car ownership in the U.S. is not going to drop significantly for a long time, in my opinion. So, I don’t prescribe to this as a bearish argument for the auto industry, as a whole.
Stay ‘tuned’ for Part 2.
The article Driverless Vehicles: What Are The Investment Implications? (Part 1) originally appeared on Fool.com and is written by BA McKenna.
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