Electric/self-driving cars are beginning to transform the auto industry. Is your portfolio prepared?
On Friday, car manufacturer GM reported it expects its 2018 profit to exceed Wall Street expectations. Better yet, it pointed toward even higher earnings per share in 2019.
Wall Street cheered the announcement, sending GM shares up 7% on the day.
GM’s CEO, Mary Barra, is attempting to position GM for the future. She’s doing this through a restructuring that includes cutting costs, focusing on lucrative products, and expanding into the electric and self-driving vehicle markets. It’s this last initiative we find most interesting.
From Friday’s Wall Street Journal …
GM said it would continue spending heavily on autonomous-vehicle development this year, likely matching the roughly $1 billion it was expected to spend in 2018. Executives reiterated plans to begin a commercial robot-taxi service in an undisclosed U.S. city sometime this year.
The auto maker also is doubling its spending on electric vehicles in coming years, though it hasn’t quantified the investment. On Friday, GM said its luxury Cadillac brand would serve as its “lead electric-vehicle brand” without detailing plans for specific models.
This focus on electric cars extends far beyond GM …
Reuters reports that global automakers are planning to spend an unprecedented amount on the electric vehicle market over the next five to 10 years. That figure? $300 billion. For context, $300 billion is greater than the entire economy of Egypt or Chile.
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***This supports what Matt McCall wrote to his Investment Opportunities subscribers in his most recent research report
Regular Digest readers recognize Matt as our expert analyst who tracks the trends that are reshaping our world — and creating massive investment opportunities in the process. Here’s what he recently wrote to his Investment Opportunities subscribers …
The car as we know it is on the verge of a transformative change not seen since it was invented. In fact, the whole transportation sector is now poised for its version of 2.0.
I’m not exaggerating when I say this will lead to trillions of dollars in money sloshing around in the coming decades.
It all starts with the electric vehicle (EV). Believe it or not, the first such vehicle to be mass produced, the Toyota Prius, has now been out for more than 20 years. More recently, completely electric vehicles like those from Tesla have hit the market. But even with a 20-year history, penetration of EVs remains very low. Only 1.3% of all new vehicles sold around the globe are EVs.
That still small number shows the enormous growth potential in the coming decades. And that growth is already under way. In the first half of 2018, the number of new EVs registered in the U.S. grew 35%. This growth will only increase for decades.
According to the International Energy Agency, electric vehicles will grow from 3 million on the road (in 2017) to 125 million by 2030.
***Despite the buzz around the electric car market, the real investment story is what lies beyond electric cars — self-driving cars
Back to Matt …
As exciting as EVs are, self-driving cars will make the industry even more money. Autonomous vehicles (AVs) are already on our roads in limited numbers, but the story is just now beginning.
UBS estimates that global revenue from self-driving technology could reach $2.8 trillion by 2030. That is massive, and considering it is basically zero at the moment, over $2 trillion will change hands in the next 12 years if UBS is correct.
ARK Investments goes even bigger. It sees the autonomous platform industry being worth more than $4 trillion by 2030.
I see electric and autonomous vehicles as the biggest investment opportunity of the next 20 years for one main reason … the sheer number of dollars we’re looking at. We could see a $7 trillion shift in the transportation industry. That’s more than the economies of 188 of the 190 countries in the world.
For one example of this shift to autonomous and electric vehicles, look to Volkswagen, now the largest car manufacturer in the world. Last quarter, the company announced it will invest approximately $50 billion over the next five years to develop electric cars, self-driving cars and related new technology. Speaking at a press conference about the investment, CEO Herbert Diess described Volkswagen’s strategy as an “electric offensive.”
Or we could look closer to home at Ford. Next year, it will introduce an electric sport utility vehicle with a look influenced by its Mustang. Over the next five years, the company will invest $11 billion to develop 16 battery-powered vehicles and 24 other types of electrified cars. And Ford is claiming it will have its first fully autonomous vehicle in operation by 2021.
We’re not just seeing this shift happening in public companies either. Significant investments are being made in the private markets. According to a Reuters analysis, some 250 startups involved in some aspect of the electrification of cars have seen more than $20 billion in venture capital so far.
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***This electric/self-driving car trend has huge investment implications, but perhaps nowhere more so than in the battery industry
As Matt told his readers, the gamechanger for electric and self-driving cars will be a battery that has a long life, can hold up in high temperatures, and is able to operate in volatile situations. He says the answer is the solid state battery. From Matt:
Major auto manufacturers are also heavily invested in solid state batteries. These are the next step up from the current lithium-ion batteries. They are a much better alternative because they eliminate the risks of fire, explosion, and leakage.
Just how invested are the major car companies in battery research and production? A report from Reuters published last Thursday reveals just how much. Here are just a few examples …
Volkswagen/Audi/Porsche — out of $91B going to electric vehicles, batteries alone will see $57B of that. For Daimler, batteries will get $30B out of a total spend of $42B. And all of Toyota’s $13.5B is earmarked for batteries. Click here to see the entire list.
Here in the Digest, we’ll keep you up to speed as this trend continues to develop, but one thing is certain — the future of the automobile is electric.
If you want more access to Matt and his investment research on electric and self-driving cars, he’s created a free video presentation to help investors better understand how to position themselves. Click here to watch.
Have a good evening,
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