Just for kicks, I started looking through some old MoneyWire articles.
It’s hard to believe I’ve been writing these for four years now. I appreciate you taking the time to read them, and I hope I have helped you learn more about hypergrowth investing and the massive themes taking us into the future.
One of the first articles I wrote was “Time to Start Making Money In Self-Driving Vehicles.”
Well, here we are four years later, and chances you are you haven’t even ridden in an autonomous vehicle (AV) yet.
So … is this real or just another promise that fizzed out?
I’ll let Barron’s answer that question with the cover story headline from the most recent issue…
Go inside the magazine to the story itself, and the headline says, “Self-Driving Cars Are Closer Than You Think.”
Well, there you go.
And just because the whole world isn’t driving AVs yet doesn’t mean the stocks haven’t been profitable.
We have six stocks in our Transportation 2.0 Portfolio in my Investment Opportunities service, and they are up 120% on average. All are up since I recommended them, with gains ranging from 20% to 410%.
Innovative hypergrowth trends that reshape an entire industry and our future don’t happen overnight. They take time. AVs bring multiple technologies together, including advanced sensors, sophisticated cameras, reliable and fast 5G wireless connectivity (which is essential), and next-generation batteries to power everything.
So yes, we were early to the trend. But as long-term investors, we want to be early. That can require patience, but if you see what’s coming, the patience is worth it.
If you’re still skeptical, this line from the Barron’s article might jumped out at you….
“But amid the broken promises, a fully automated car is closer than investors might realize.”
It goes on to say…
“…Autonomous driving is closer to reality than ever before. In Las Vegas, some of the newest Lyft robotaxis, built by an Aptiv (NYSE:APTV)-Hyundai Motor (OTCMKTS:HYMTF) joint venture called Motional, are autonomous, with no safety drivers. Lyft plans to add more cities to its AV fleet by 2023. Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Waymo has fully driverless cars on the road in Arizona. And General Motors (NYSE:GM) is testing its self-driving taxis in San Francisco. The auto industry now has a credible path, backed by capital, to bring AVs to the masses. There are a lot of opportunities for investors, too, just not in the most obvious spots.”
Bingo.
Part of the problem is some confusion over what exactly “fully automated” means. Tesla (NASDAQ:TSLA) has a “full self-driving mode” (which it calls FSD), but it’s really not fully self-driving according to the accepted standard. Here are the five levels of automation:
Level 1: Humans are almost fully responsible for the control of the car, but there are some autonomous features in the vehicle. They include accelerating (cruise control) and park assist. The vehicle is only able to perform one function at a time. Check.
Level 2: Partial automation. The major difference in level two is that more than one automated function can be performed simultaneously. For example, the car can control speed and steering via cruise control with lane centering. The driver must still be on alert to take back control. Check.
Level 3: The vehicle can control most driving functions. Human drivers are still necessary, but they are able to let the vehicle control speed, steering, and road monitoring without assistance. The driver will only be needed in certain situations. This is about where we are now.
Level 4: Near full automation, often referred to as high automation. The vehicle can start and stop, drive itself, park, and complete a trip. This is the level at which the vehicle will be able to drive you to work and back. However, it will not be equipped to cover every possible situation, and the driver may have to assist in some instances such as severe weather or an unmapped location.
Level 5: This is it. Full automation. No human is needed. The vehicle will pick you up, take you where you need to go, and then find a parking spot or head off to its next pickup. This is the race currently under way.
Tesla is one of the leaders in the race toward full autonomy, but it has taken a bit of a curious departure in the technology it uses. It relies on cameras to navigate the vehicle, whereas most other companies adopt LiDAR technology.
LiDAR is an acronym for “light detection and ranging.” Light pulses off surrounding objects — cars, pedestrians, curbs, etc. — and then returns to a sensor that calculates distance to the object based on how long it took the pulse to return. Repeating this process millions of times per second creates a precise, real-time 3D map of the surrounding environment.
One obstacle in the early stages has been cost, which is often the case in hypergrowth mega-trends. As the Barron’s article states, LiDAR sensors can run $500 to $1,000 each. But progress is being made. Back in 1999, Aptiv was one of the first to put radar in a car at a cost of $3,000. Now, the sensors cost just the tens of dollars.
I think Tesla is taking a chance, and the longer CEO Elon Musk talks about full self-driving without really delivering it, the more his proclamations will fall on deaf ears. I like Tesla, but more for its battery and battery-storage potential than for its autonomous vehicles.
We are on the cusp of a demarcation not seen since the automobile was invented more than 100 years ago. AVs will be more convenient (you can work or watch a movie while you’re traveling), safer (all the systems will result in fewer accidents), and more energy efficient and environmentally friendly thanks to their battery power.
We stand early in a new chapter that will again reshape the world we live in. What’s coming is big. That’s why the biggest companies in the world are going after it. And it will create huge winners and huge losers.
On the date of publication, Matthew McCall did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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