Three Ways to Profit from Driverless Cars
Crash Car Cash
There are few trends in today's market that you know absolutely without a doubt are going to happen. One of them is that self-driving cars are not only coming — they're coming fast.
In fact, this trend is moving like a rocket ship. The compound annual growth rate of these cars is estimated to be 135%.
That's fantastic growth. In comparison, the CAGR of the S&P 500 in 2014 was 13.80%, which in itself was pretty impressive.
The big names in auto-autos are Google and Tesla. Both of these companies might make fortunes over the next few years, but it won't be because of their self-driving divisions.
No, much like the Levi Strauss who sold jeans and John Studebaker who sold wheelbarrows to the gold miners during the California gold rush of 1849, the people who sell the parts for self-diving cars will see the fat profit margins as cash comes rolling in.
You can split your parts suppliers into a number of categories. There will be the general parts suppliers who already work with the major car supply companies, like Delphi (NYSE: DLPH).
There will also be profits in mapping companies like Garmin, microchip companies, and software groups. Software will become more important as cars talk to one another.
Already, major luxury brands use many driver-assist features such as breaking, lane changes, and pedestrian sensing. Soon you'll be able to lock onto the car in front of you like Maverick from Top Gun. He breaks, you break. He goes, you go. Think about that tonight as you do the two-pedal, taillight-nightmare dance home.
As more features are added, the line to Level 4 fully autonomous cars will blur. Already, sales for sensors are soaring. German parts maker Bosch says Advanced Driver Assistance Systems (ADAS) sales will hit $1 billion next year. Business Insider says ADAS will be an $87 billion market in the next decade.
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But the real growth kicker will be the bureaucrats. Right now, the National Highway Traffic Safety Administration (NHTSA) has mandated backup safety cameras for next year and has toughened crash-test rating standards.
The new crash test will require more crash-avoidance technologies.
According to USA Today, one of the changes is:
A new rating to gauge a vehicle's use of nine advanced technologies such as forward collision warning, automatic emergency braking and lane departure warning.
That's significant for the automotive industry because it could prod manufacturers to turn often-optional but highly profitable safety systems into standard technology.
I've found three undervalued, little-known companies that will make huge money on the parts and systems in the ADAS or autonomous cars systems over the next 10 years.
But don't wait. These companies won't be cheap for long. Car sales are having a record year.
For your profits,
Since 1995, Christian DeHaemer has specialized in frontier market opportunities. He has traveled extensively and invested in places as varied as Cuba, Mongolia, and Kenya. Chris believes the best way to make money is to get there first with the most. Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor's page.
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