What should you think of when contemplating “the car of the tomorrow?” Should you think about Tesla Motors Inc (NASDAQ:TSLA) and its next-generation, luxury all-electric Model S “D” supercar? Or, should you think about Apple Inc. (NASDAQ:AAPL) and the “iCar”?
Wait, Apple is going to make a car?
Well, maybe not just yet, but a recent story in the Wall Street Journal that Apple has hundreds of engineers working on a top-secret electric car project did arouse the curiosity of auto industry watchers, futurists and most importantly, investors around the globe.
For traditional automakers such as Ford Motor Company (NYSE:F), General Motors Company (NYSE:GM), Toyota Motor Corp (ADR) (NYSE:TM) and Volkswagen AG (ADR) (OTCMKTS:VLKAY), the prospect of a technology giant such as Apple coming into the car market might just be a very real threat to the decades of dominance from Detroit, Japan and Germany.
Tesla’s über-cool, cultish appeal might not scare big automakers, but a company with the bankroll, track record and marketing prowess such as Apple may very well keep auto executives tossing and turning at night.
Of course, it’s not just Apple that’s flirting with the car of the tomorrow. Last year, Google Inc (NASDAQ:GOOGL,NASDAQ:GOOG) introduced its self-driving car prototype. The search giant has been working on the vehicle for some time, but we first heard of its existence in 2010. Four years later the company has an actual working driverless vehicle, and though the car won’t win any accolades for style or performance, it could represent a game-changing turn on the road to the car of tomorrow.
For investors looking for stocks to buy in the car of tomorrow space, Apple and Google certainly should be considered. And while both of these tech stalwarts will have to wait a long time, if ever, before they ever see any real revenue from their respective automotive operations, there’s still plenty of great reasons to own both of these stellar stock performers.
Car of Tomorrow Stocks
Yet what about other stocks to buy that could profit from the car of tomorrow?
The key concept is technological innovation, as automakers continue developing new models with hitherto unseen high-tech features.
I’ve already mentioned the trend toward self-driving vehicles, and though this concept is enough to make a “car guy” like me cringe, the early tech adopter in me must admit that self-driving vehicles will appeal to many other early adopters — particularly the type of buyers who would be attracted to an all-electric vehicle in the first place.
One company poised to profit from this self-driving trend is Mobileye NV (NYSE:MBLY). Mobileye designs and develops software and other technologies for camera-based advanced driver assistance systems. MBLY’s software algorithms and “EyeQ” systems interpret data from the camera’s visual field. That data is then related to the driver via warning displays and signals in order to avoid collisions with other vehicles, or with bicyclists, pedestrians, or whatever comes near the car.
If self-driving vehicles are ever going to be mainstream cars of tomorrow, they will have to include technology such as that provided by Mobileye.
Another technology infiltrating nearly every new automobile is onboard cameras. Honda Motor Co Ltd (ADR) (NYSE:HMC) now offers backup cameras as standard equipment on all new models, and this is a trend that I suspect will be copied by nearly every automaker’s future offerings.
One company that makes the computer chips for these devices is Ambarella Inc (NASDAQ:AMBA). Ambarella’s dashboard camera technology also can be used as an aid to driver assistance systems, i.e. technology used in self-driving vehicles.
Yet another important technological feature of the car of tomorrow will be ultra lightweight. If all-electric, or hybrid electric, self-driving vehicles are to succeed, they also have to be made of lighter materials than the hefty steel vehicles of the 20th century. For safety sake, these vehicles also will have to be strong enough to withstand collisions.
A company working on so-called multi-material lightweight vehicles is Magna International Inc. (USA) (NYSE:MGA). In late January, the automotive component systems maker announced that it had completed validation testing on what it calls its multi-material lightweight vehicle, or MMLV, concept that it developed in cooperation with Ford and the U.S. Department of Energy.
Perhaps not coincidentally, Magna also is the parent company of Magna Steyr, the contract car component manufacturer that just so happened to have reportedly met with Apple in Austria recently. Although Magna hasn’t commented on the meeting, I think it’s safe to at least speculate that there was some discussion of lightweight automotive materials and Apple’s not-so-secret auto project.
The Bottom Line
For investors looking for stocks to buy for the car of tomorrow, start with Apple and Google, then move on to Mobileye, Ambarella and Magna International. And, if you’re intrepid enough, throw Tesla on that buy list too.
As of this writing, Jim Woods was long AAPL, GOOGL and TSLA.
