Autonomous vehicle stocks are one of the more exciting subsectors of the automotive market at large. Investors know that vehicle autonomy promises an exciting new paradigm in transportation. For one, autonomous vehicles may be able to increase the safety of transportation.
Secondly, drivers are excited about the ability to free up their attention with the freedom that vehicle autonomy offers. It’s safe to say many commuters would be happy to take a nap to or from work. The same commuters might envision catching up on that novel they’ve been enjoying. Whatever the case, the time saved has mass appeal.
Conversely, there are real concerns: primarily, safety. But beyond the pros and cons, investors really want to know about the companies leading this revolution and their respective stocks.
The companies below are making investments, producing technology and leading the way forward in this new normal. Consider them now because these autonomous vehicle stocks are in position to grow as this form of transpiration is increasingly adopted:
- Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL)
- Tesla (NASDAQ:TSLA)
- Veoneer (NYSE:VNE)
- Aptiv (NYSE:APTV)
- Baidu (NASDAQ:BIDU)
- Toyota (NYSE:TM)
- GM (NYSE:GM)
Autonomous Vehicle Stocks: Alphabet (GOOG, GOOGL)
Alphabet’s Waymo subsidiary is a definitive leader in vehicle autonomy. Rumors and speculation that Waymo may one day spin off from the Mountain View giant persist. The subsidiary did raise its first ever outside funding in early March. CEO John Krafcik stated outright that a future spin off is a possibility. But for now, a play on Waymo is a play on Google and all that it encompasses.
The Waymo project itself began back in 2009 so the subsidiary will have mountains of data on autonomy. That alone is very valuable, and Google’s big data ability should lead to even more valuable insights.
Waymo has a project called Waymo One, which is currently being tested in Phoenix. It might be best described as Uber (NYSE:UBER) autonomous. It is a self-driving car hailing service, and if you live in the area, you can download the app and try it.
The subsidiary’s Waymo Via service focuses on Class 8 trucks and logistics. Those trucks are being tested across Southwestern U.S. states currently. Waymo also touts the fact that it has the “world’s most experienced driver” with 10 million miles of autonomous driving experience. This is of course across their fleet of autonomous vehicles. I believe this is what truly separates Waymo and Google — the richest dataset combined with Google’s world-class data scientists.
For now, the only play is a play on GOOG stock. It’s a great stock in its own right, but it’s also very diversified. Therefore, Waymo can’t exactly pop until it is spun-off. Once a Waymo IPO is announced though, you can bet investors will be lining up.
The latest news about Tesla in regard to vehicle autonomy relates to so-called “Full Self-Driving.” Elon Musk has pushed ahead and released the vehicle update which is being tested in a select group of vehicles. The company says the update will soon be available on “hundreds of thousands of its cars,” making full vehicle autonomy one step closer.
Other industry players contend that Tesla’s update does not make their vehicles fully autonomous because a driver is still required to be present in the vehicle. The news is not without other concerns as well. The update is being tested on consumers rather than in the controlled manner that Waymo and GM have undertaken with their respective pilot programs.
Nevertheless, early response to that beta test seems positive and Tesla has forged ahead with a purchasable upgrade. However, it does look like the option will not be cheap, as Tesla has priced the upgrade at $10,000.
$10,000 also happens to be the reason that Tesla doesn’t use Light Detection and Ranging (Lidar) devices on its vehicles. It is the only vehicle maker pursuing autonomy that uses computer vision sensors and not Lidar. Lidar relies on lasers to build accurate models of a vehicle’s surroundings. Computer vision is essentially a form of AI in which computers are trained to see the world as the human eye does.
TSLA stock has stumbled in the past few days, but I expect it to continue to be well received by the markets as a pioneer. The company is light years ahead of EV peers and despite valuation concerns, there’s a good case to justify Tesla prices.
Veoneer is a company focused on vehicle safety. The company produces various safety equipment and in the autonomous vehicle space it focuses on ADAS. ADAS is an acronym for advanced driving assistance systems. The company sees a compound annual growth rate of 12% between 2019 and 2025 in its total addressable market.
The company produces LIDAR systems, radar, crash sensors, vehicle restraint systems and many other components. While the company’s financials continue to be weak, the company is making strides in the right direction. The company did see operating cash flows turn positive in Q3 2020. In Q3 2019, the company posted an operating loss of $61 million. In any case, the company is profitable, posting $54 million in profits for Q3.
Analysts predominantly rate it a hold, but the company should be able to sell more of its safety products as vehicle autonomy takes off.
Aptiv has an autonomous driving joint venture with Hyundai (OTCMKTS:HYMTF) called Motional. The company has provided over 100,000 rides through its ride hailing service. If you’re in Las Vegas and have the Lyft (NASDAQ:LYFT) app downloaded you can hail one of the Aptiv/Hyundai Motional vehicles.
The $4 billion venture will yield lots of valuable data and has a goal of level 4 and 5 autonomous vehicle commercialization. Level 4 automation means that vehicles will not require human interaction most of the time, but will still be overridable by humans. Level 5 automation refers to full driving automation and will have neither steering wheels nor brake and accelerator pedals.
Aptiv has been working in vehicle autonomy since 2015 and also operates across many areas of the EV and automotive market. From an investment perspective the company looks very promising. The company plans to allocate 10-15% of long-term capital to dividends, and between 45-55% toward M&A and share buybacks.
This investor prioritization is perhaps part of the reason analysts are so keen on its shares, with it being overwhelmingly rated a buy.
Baidu is primarily known as the “Google of China.” If that’s true, then Baidu’s answer to Waymo is Apollo. The Apollo subsidiary has a “Robotaxi” and “Apollo Minibus,” which operate with level 4 autonomy, and a developer platform among other things. The company also has a valet parking product, which will be released in China fitted in a Weltmeister vehicle. The app will allow drivers to park and summon their vehicle remotely.
To date, Apollo has transported 100,000 passengers over 6 million km without an accident, which certainly attests to its safety. Baidu CEO Robin Li predicts that full autonomous vehicle commercialization will begin in 2025.
Investors who have interest in Waymo should also consider Baidu. The Chinese automobile market is the world’s largest, which gives Baidu a distinct advantage. Both of these companies are search engine first, with autonomous vehicles playing a less important role currently. And both companies are well regarded by analysts. Likewise, both Apollo and Waymo are subsidiary projects of larger firms, and not pure-play, dedicated stocks. Yet, if and when spin-offs occur, interest in both will be strong.
Toyota’s vehicle autonomy strategy is to build a mobility platform, use big data and create new mobility services. One such project in that realm is called the Guardian System. The system is a kit, called an ADK (Autonomous Driving Kit), which is mated to mass produced vehicles. The ADK turns the vehicle into a level 4 autonomous vehicle.
The Guardian system has been in development for several years and is marketed for its safety features. The system can override potentially lethal mistakes behind the wheel with its advanced AI and sensors. The Guardian System was developed with teens in mind as 35% of teen deaths occur in traffic accidents. The same system is marketed toward older drivers under its “Chauffeur” mode.
General Motors (GM)
GM’s autonomous vehicle unit Cruise announced on Oct. 15 that it was granted self-driving permission in San Francisco. The permit allows Cruise vehicles to operate without a human driver behind the wheel. Cruise cars will be limited to 30 miles per hour, but will be operable at any time of day within the city.
The company also has a vehicle called the Cruise Origin which is a driverless, steering-wheel-free shuttle. This allows design to be completely focused on the passenger opening new design possibilities. GM is the majority owner of Cruise, but both Softbank (OTCMKTS:SFTBY) and Honda (NYSE:HMC) are heavily invested in the company as well. So, any potential play in Cruise is done through an investment into GM stock. GM itself has risen nicely out of the novel coronavirus pandemic although it is still down slightly year-to-date.
The company’s Super Cruise systems have been well-received, as reported by Consumer Reports. By several metrics they are superior to Tesla’s self-driving systems.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.