The self-driving car revolution: who will be the winners?
Driverless cars were once the stuff of science fiction. But thanks to huge strides in technology and billions of pounds in investments, the first driverless cars are already being tested on the roads. How can investors get a piece of the action?
Across the US, Sweden, Germany, China, the UK and Australia, driverless cars have been extensively tested, and most experts are predicting that self-driving cars will be available to the general public as early as 2020.
Among the world’s most established car brands, the race is on to become the first company to bring driverless technology to the masses. Over the past year, automotive firms and software companies have been teaming up and testing the cutting-edge sensors and algorithms that will make self-driving cars safe, affordable and user-friendly. If reports are to be believed, driverless cars are just a few years away, and this emerging sector has the potential to become one of the major growth stories of the 21st century. This would make self-driving cars a highly attractive prospect for savvy investors. And there is no shortage of options available, if you know where to look.
The advent of the driverless car, as well as the electric car, is shaking up the automotive industry. Long dominated by experts in the combustion engine like Ford, Toyota, Volkswagen, Renault and Nissan, the auto industry has new challengers like Tesla entering the fray. Meanwhile, some of the tech giants developing the required software for driverless cars may feel they can have a go at launching their own vehicles. The more established car manufacturers are fighting back, and won’t give up this space easily.
The listed companies investing in driverless technology
A huge number of companies are already working on driverless cars and the supporting technology. These listed companies are all eligible for investments via a stocks and shares ISA. However, this is a rapidly changing field as a result of merger and acquisition (M&A) activity, government regulations, and new technology. If you are investing in these stocks as a way of gaining exposure to the self-driving car revolution, be prepared to review your allocations on a regular basis.
Year-to-date performance (to 31 Aug 2017)
What is it doing with driverless technology?
CEO Tim Cook recently said that the firm was developing driverless software that would be “the mother of all AI.
|Audi||Deutsche Borse||+26.39%||Already created a “level three” driverless car, which can apparently drive at 60mph in heavy traffic without human interaction.|
|Baidu||Nasdaq||+38.71%||Has partnered with more than 50 global companies to bring its Apollo self-driving vehicle to the roads.|
|BMW||Deutsche Borse||-8.25%||Debuted its first self-driving prototype in 2016, and aims to have self-driving cars on the road by 2021.|
|Bosch||National stock exchange of India||+5.70%||Partnered with Daimler to create self-driving software and algorithms for Daimler-owned Mercedes Benz.|
|Daimler||Deutsche Borse||+3.01%||Focusing its attentions on the Mercedes Benz brand, and is working with Bosch on driverless software. Intends to create the first ‘robo-taxis’.|
|Fiat Chrysler||New York Stock Exchange||+65.90%||Supplies Google with vehicles to test its driverless technology, and recently announced plans to partner with BMW and Intel in an effort to bring driverless cars to the roads sooner.|
|Ford||New York Stock Exchange||-4.95%||Made a $1bn investment in an AI company earlier this year, and told shareholders that it expects to profit from driverless cars by 2021.|
|General Motors||New York Stock Exchange||+7.06%||Has invested in Uber rival Lyft. Has already tested hundreds of driverless cars across the US.|
|Nasdaq||+21.70%||At the forefront of driverless technology. Created an autonomous self-driving company in 2016 called Waymo, which focuses only on self-driving cars. Already testing on public roads in Arizona.|
|Honda||Tokyo Stock Exchange||-2.99%||Plans to have ‘Level 3’ automated cars on the road by 2020, and fully driverless cars available by 2025. Has been in talks with Waymo about working together.|
|Intel||Nasdaq||-1.09%||Recently acquired MobileEye, a sensor and camera manufacturer which already works with a number of car manufacturers.|
|NVIDIA||Nasdaq||+59.13%||Has created a series of sensors which are integral in the development of driverless technology. Provides the self-driving AI in Tesla cars, and partnered with Toyota, Volvo and Tesla.|
|Tesla||Nasdaq||+66.55%||Has been testing driverless cars across America for years. Last year a number of crashes were blamed on software errors, and one person was killed when their self-driving car failed to spot the white side of a tractor. These issues have since been repaired and upcoming Model 3 cars will come pre-loaded with driverless technology (provided by NVIDIA).|
|Toyota||New York Stock Exchange||-1.92%||Launched a billion-dollar programme in 2015 to develop self-driving cars. Debuted its first prototype earlier this year, and has since partnered with NVIDIA to bring its driverless cars to the roads by 2020.|
|Volvo||Stockholm Stock Exchange||+49.93%||Launched a billion-dollar programme in 2015 to develop self-driving cars. Debuted its first prototype earlier this year, and has since partnered with NVIDIA to bring its driverless cars to the roads by 2020.|
How to invest in the self-driving revolution
- Buy stocks
If you really believe in the future of driverless cars, now is the time to start investing in the companies which stand to benefit. These range from tech firms such as Google (via its wholly-owned subsidiary Waymo), NVIDIA and Baidu, to car companies such as Ford, GM, Honda, Toyota, Daimler, and Tesla.
- Buy an ETF
Exchange traded funds (ETFs) offer a great way to invest in a niche sector or market that piques your interest. While there is no ETF dedicated to driverless cars just yet, it is possible to get exposure to the sector by seeking out ETFs which are weighted towards car and tech companies. The First Trust NASDAQ Global Auto Index Fund invests in a number of global car companies, and its top five holdings (GM, Toyota, Daimler, Ford and Honda) are all developing self-driving cars.
The Industrial Innovation ETF by ARK Invest is heavily weighted towards Tesla and NVIDIA – two companies at the forefront of driverless technology. The First Trust NASDAQ Clean Edge Green Energy Index Fund is a tech-focused fund that is also weighted towards Tesla, as well as a number of tech firms which supply parts for driverless cars. You can use our ETF screener to find the right ETFs for you.
- Buy a driverless car
It’s currently illegal to drive a driverless car on public roads, with some exceptions if you are based in Nevada, Florida, California or Michigan. But according to some analysts, there will be ten million driverless cars on the road by 2020, and the big brands are already preparing for the driverless revolution. Tesla’s upcoming Model 3 will come pre-loaded with driverless technology, and Renault-Nissan has started adding self-driving features to its latest vehicles with the aim of making all its cars driverless by 2020. Meanwhile, Volvo is currently looking for volunteers in Sweden, China and the UK to test-drive its self-driving cars.
You might not be able to buy a driverless car from your local dealership, but if you want to be one of the first ‘driverless’ drivers, this is your chance.