We recently compiled a list of the 10 Best Autonomous Driving Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Toyota Motor Corporation (NYSE:TM) stands against the other best autonomous driving stocks to buy.
The vision of fleets of driverless cars seamlessly transporting passengers has captivated consumers and driven billions in investment over recent years. Imagine summoning a driverless car with a tap on your phone, enjoying a stress-free, congestion-free commute. After years of anticipation and extensive development, self-driving car technology is finally becoming a reality. Vehicles equipped with advanced driver-assist systems (ADAS) and partial self-driving capabilities are now hitting the market, signaling the start of the race toward full autonomy.
Simultaneously, the robotaxi market is maturing, with commercial driverless services now active across the U.S. and China. Leading players in this space collectively operate over 2,000 robotaxis, gathering data to refine AI systems, ensuring safety, and serving mobility-as-a-service customers. According to IDTechEx, the autonomous vehicles market is poised for rapid growth, with projections indicating robotaxi vehicle sales could reach $174 billion by 2045, representing a compound annual growth rate (CAGR) of 37% starting in 2025.
According to a 2021 McKinsey survey, consumers are eager for autonomous driving (AD) features and willing to pay a premium. Ranked from Level 0-5 based on capabilities, growing demand for these systems could unlock billions in revenue. While vehicles equipped with Level 2 autonomy are widely known, the firm projects that widespread adoption of vehicles equipped with Level 4 capabilities will begin around 2026, with initial applications expected to focus on autonomous parking, with highway driving following shortly thereafter. Overall, McKinsey projects that the ADAS and AD market for passenger cars could generate $300 billion to $400 billion by 2035. The firm also highlights the far-reaching impact autonomous vehicles could have on various industries. For instance, by significantly reducing car accidents, advanced driver technology could lower the demand for roadside assistance and vehicle repairs, potentially challenging businesses in those sectors as adoption increases. Additionally, self-driving cars may eliminate the need for high insurance premiums, as liability for accidents could shift away from individual drivers. This could pave the way for new business-to-business insurance models tailored to autonomous travel.
Adding momentum, Bloomberg reports that President-elect Donald Trump’s transition team plans to prioritize a federal framework for self-driving vehicles within the Transportation Department. Currently, the National Highway Traffic Safety Administration (NHTSA) permits manufacturers to deploy 2,500 self-driving vehicles annually under exemptions. However, broader adoption of autonomous vehicles will likely require congressional action to establish comprehensive guidelines. Grayson Brulte, founder of The Road to Autonomy, a data and analysis firm specializing in self-driving technology, remarked:
“The companies want clarity on vehicles with no pedals and no steering wheel. There could be a fight over this, but if a federal framework is implemented, it could usher in the autonomy economy.”
Additionally, if new regulations permit the broader deployment of vehicles without human controls, it could significantly benefit Elon Musk. Musk, who has become an influential figure within the president-elect’s inner circle, has staked the EV maker’s future on self-driving technology and artificial intelligence. During his company’s recent quarterly earnings call, Musk expressed his intention to advocate for a streamlined federal approval process for autonomous vehicles, leveraging his position within the Trump administration to advance the regulatory framework for AV adoption.
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Our Methodology
In this article, we examined screeners and ETFs to identify leading companies actively engaged in the autonomous vehicle market. We ranked the top 10 stocks in ascending order based on hedge fund sentiment as of Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Toyota Motor Corporation (NYSE:TM)
Number of Hedge Fund Holders: 18
Toyota Motor Corporation (NYSE:TM) is among the world’s largest automotive manufacturers, producing a wide range of vehicles, including hybrids, electric vehicles (EVs), and traditional internal combustion engine models. The company also earns revenue through financing and leasing services and is at the forefront of developing autonomous driving technologies such as its Chauffeur and Guardian systems.
Earlier in November, Toyota Motor Corporation (NYSE:TM) partnered with Nippon Telegraph and Telephone Corp. (NTT) to form a joint venture, committing ¥500 billion ($3.3 billion) by 2030 to advance artificial intelligence applications for autonomous driving. The initiative aims to create a “society with zero traffic accidents” by integrating mobility and telecommunications technologies. The companies plan to launch the project in Japan, with global deployment to follow. Central to the initiative is Toyota’s development of software-defined vehicles (SDVs), which prioritize safety and security. These vehicles require robust high-speed communication networks, AI for processing vast data, and advanced computing infrastructure. Leveraging NTT’s telecommunications expertise, the joint venture plans to launch a “Mobility AI Platform” in 2025 to connect people, vehicles, and infrastructure, with societal implementation expected within three years.
In its second quarter, Toyota Motor Corporation (NYSE:TM) reported mixed financial results. Sales reached ¥11.44 trillion ($76.29 billion), slightly exceeding analyst expectations of ¥11.41 trillion. Operating income stood at ¥1.15 trillion, but the quarter marked Toyota’s first profit decline in two years. Sales volumes dropped 20% year-over-year, with 2.3 million vehicles sold compared to 2.41 million in the same period last year. Additionally, Toyota Motor Corporation (NYSE:TM) revised its full-year vehicle production target to 10.85 million, down from 10.95 million.
Overall, TM ranks 10th on our list of best autonomous driving stocks to buy according to hedge funds. While we acknowledge the potential of TM, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
