What to Consider Before Investing in Autonomous Cars

Richard Parker  |

Ford  (F), GM  (FM), Tesla  (TSLA) and many other companies are testing self-driving cars. As technology improves, autonomous vehicles will become a mainstream reality. By 2040, experts predict that most cars on the road will be self-driving. If you are interested in investing in autonomous vehicles now, then consider the following information before taking the leap.

Technology Background

Before making an investment, it is crucial to understand more about the technology involved in creating self-driving cars. Autonomous cars are able to drive with no human intervention. Owners become passengers as the cars navigate streets on their own. Most autonomous vehicles rely on a combination of artificial intelligence (AI), software and machine learning. The cars also require a lot of hardware such as computers, radar, cameras and sensors, so they can monitor their surroundings and collect data. The most important thing to keep in mind is that the technology is constantly evolving. Investing in companies that cannot keep up with the changes can quickly turn into a problem.

Ford plans to sell fully self-driving cars by 2021, but you can already buy an almost autonomous Volvo XC60 that has technology to help you avoid collisions with radar and cameras. Not only can it warn you about a potential hazard in the road, but it can also brake for you. The Volvo can help you stay in your lane on the road with steer assist technology.

Buying the Tesla Model S gives you access to some of the self-driving tech that future cars may have. Its autopilot features with multiple cameras, radar and sensors help keep you safe on the road. Tesla's current cars can give you a taste of what is to come with advanced technology.

Potential Market Size

A report from Intel predicts that the self-driving market will reach $7 trillion by 2050. Boston Consulting Group has a more conservative estimate that the market will be $77 billion by 2035. The growth will affect both personal and business ownership of cars. For instance, self-driving trucks that make deliveries, without any human involvement, could transform shipping and freight. There are also unexplored areas of the market that could lead to new businesses opening.

Liability Car Insurance Questions

Although autonomous vehicles have a lot of potential, there are also some hurdles. For instance, questions remain about how owners will handle liability car insurance. This type of coverage protects car owners in the event of an accident that causes bodily injury or property damage. Who is responsible for damage if a self-driving car you own hits a person?

This may seem like a small problem, but it has the potential to affect the entire industry and your investments. For example, some experts have proposed that auto manufacturers should be responsible for all damages caused during an accident that involves the car they made. This means that brands like Ford, GM, Toyota and others would have to pay medical bills and other expenses if a self-driving car crashes into a tree.

Moving the insurance burden from individuals to carmakers could be costly and complicated. However, there is already some precedent for it. Volvo and Mercedes-Benz accept responsibility if their cars' self-driving systems cause accidents. As you think about investing in autonomous vehicles, consider the potential of an insurance shift like this.

Car Ownership vs. Ride Sharing

When you think about investing in the industry, it is tempting to focus on car manufacturers like Tesla. However, you should not ignore ride-sharing companies like Lyft and Uber. For instance, Ford partnered with Lyft to work on autonomous vehicles recently, and Uber tested its own self-driving cars for a while. Ride-sharing companies will also be an important part of the autonomous industry.

When autonomous cars become common, some people will still want to have their own vehicle, but others may switch to ride sharing full-time. Renting cars, ride-hailing and other non-ownership models will become more popular because companies will not have to worry about getting drivers. Imagine ordering a car on your phone and having it automatically drive to your location to pick you up without a human inside. Not only will more people feel safe doing this, but they will also avoid having to make annoying small talk with a driver.

Looking Ahead

Although you may not see fully automated cars on the road next year, this technology is not slowing down or going away. Investors may want to keep a close eye on the top players in this industry and watch out for any newcomers. Autonomous driving is a hot market that is set to grow in the future. Consider how many car manufacturers are already integrating partial self-driving features into their vehicles, and it is easy to see the potential. The public is also getting used to the idea of having a car take more control. Soon, few will object to becoming a passenger while the car drives itself.

DISCLOSURE: N/A


The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
TSLA Tesla Motors Inc. 368.95 3.80 1.04 4,256,041 Trade
GM General Motors Company 35.25 0.83 2.41 6,267,806 Trade
F Ford Motor Company 8.57 0.05 0.64 22,650,981 Trade

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