On Monday 24th April, the government unveiled plans to accelerate its autonomous driving initiatives by investing £13m in a range of projects as part of its modern industrial strategy.
However, from a technological perspective, the self-driving vehicle industry is already well established. In the US, self-driving tractors are already ploughing fields. In Australia, autonomous giant trucks are hauling ore from open cast mines.
The challenges now principally concern affordability, as well as - crucially - perfecting the technology. If you’re an investor looking to play the driverless car revolution, it is these elements which are of real interest.
Delphi is a prominent supplier of automobile technology and a company which is attracting the attention of investment analysts. Delphi says that it has the solutions to the most difficult technological challenges which have long held back full automation including how to deal with crossroads, T-junctions and merging.
Performing these procedures requires highly accurate data, fed instantly by radar, laser-based radar, cameras and wi-fi communication between vehicles.
Radar is cost effective and well established, but the more advanced forms of laser radars are still in their infancy, and it costs the best part of £2,000 to fit out a vehicle with the technology.
Delphi has assembled the most sophisticated autonomous vehicle to date, an Audi which drove itself from San Francisco to New York.
Another name which crops up among those interested in the sector is NVIDIA, a company founded on graphics accelerator chip technology for the gaming market.
NVIDIA is a leader in artificial intelligence, which is essential for autonomous vehicles to operate properly. Autonomous cars cannot rely on static, pre-programmed rules because there are simply too many variables to predict in advance. Instead, driverless vehicles will have to collect and learn from data on the go.
Jeremy Podger, an investment manager at Fidelity International, invests in the company and points towards its dominant industry position as well as its strong cash flows and pricing power. “This is a good example of a clear technology lead with high barriers to entry,” he says.
But what of investors in traditional auto manufacturers? Well, the evidence suggests that in the short and medium term they need not worry too much. Almost a decade on from their near collapse during the 2008 financial crisis, Ford and General Motors are focused on being at the cutting edge of the automotive industry. Their Asian and European counterparts are also investing aggressively in the space.
The biggest risks to those looking to invest in the driverless vehicle theme relate to the ethical and regulatory aspects. Lawmakers in the largest markets (the US, Continental Europe, and China) are, for now, supportive, but then serious accidents involving autonomous cars have been, fortunately, infrequent.
While outstanding questions remain, the automated vehicle theme will undoubtedly prove an outstanding investment opportunity for those who manage to get exposure to the right names at the right prices.
Title Image Credit: AUDI AG (Image Cropped)