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Buy Facebook, not Ford, ahead of driverless cars boom

Buy Facebook, not Ford, ahead of driverless cars boom

by Michelle McGagh Sep 07, 2017 at 14:35


Technology giants rather than car makers will be the big beneficiaries of the revolution in the auto industry, according to Legal & General Investment Management.

LGIM strategist Lars Kreckel said the electric car revolution could trigger the next ‘super cycle’ as technology plays an even bigger role in the vehicles of tomorrow.

Kreckel said the changes would bring about a number of investment opportunities for those willing to jump on board.

Technology would help improve motor safety, reducing the 3,500 daily motor fatalities in the world, of which 93% are caused by human error, he said.

Technologically advanced vehicles will also help reduce environmental impact, and driverless technology will allow people to multi-task in their cars. Kreckel said 400 billion hours a year were wasted driving and people could spend that time in a more ‘productive’ way.

‘The auto sector is ripe for change,’ he said. ‘It is an area where a lot of technological trends come together...technology has the ability to make substantial improvements.’

Shaunak Mazumder, fund manager on the LGIM Inflation Plus team, added that car makers, or ‘original equipment manufacturers’ could stand to benefit from the changes, but only provided they make dramatic changes to their businesses.

‘OEMs need to dramatically shift their manufacturing facilities to adapt towards electric or hybrid solutions,’ said Mazumder. ‘They will also need to become more tech-focused, going beyond their traditional roles as manufacturers. If they can successfully transition, a few companies could become bigger and more profitable than before.’

He said a safer bet to benefit from the changes would be the ‘tech bell-weathers’ such as Google, Apple, Facebook and micro-chip maker ARM.

These will not only create the technology to power a new generation of vehicles but also from freed up time that will allow people to ‘scroll Facebook or like on Instagram’.

The cost of electric cars has been a sticking point for the market. Mazumder pointed to batteries making up 35% of the cost of electric cars, which he said ‘needs to come down for [electric cars] to become a viable solution’.

Currently electric vehicles are 40% more expensive than petrol cars and 20% more expensive than diesel cars.

‘By 2020 the battery costs fall dramatically and by 2025 [electric vehicles will have] cost parity with petrol or diesel cars,’ he said.

On top of this, there are environmental pressures to reduce the number of traditional cars with combustion engines on the road, with the UK government to ban the sale of diesel and petrol cars from 2040.

Kreckel said it paid to ‘be humble’ when predicting the number of electric cars that would be sold as ‘the visibility is not great’ and the market has been dogged by production limitation problems, such as those facing Tesla.

‘We have to be careful when making predictions on how many electric cars will be sold,’ he said. ‘But [predicted] adoption rates are getting sooner and bigger.’

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Comments  (4)

  • Roger Savage: 

    "400 billion hours a year were wasted driving and people could spend that time in a more ‘productive’ way... that will allow people to ‘scroll Facebook or like on Instagram"

    So freed up time really just equates to wasting time on something else infinitely more pointless.

    Time whilst driving needn't be wasted if you have a brain. You can think things through, listen to an audio book, etc... When you get tired of that or get on a better road, you can enjoy driving a car along a decent road.

    Give me the thrill of driving a proper car over pointless obsession with social media tat that people use to blindly (moronically, frankly) hand over their personal details and thoughts to corporate entities / governments.

    21:34 on 07 September 2017

  • Mark Stringer: 

    Couldn't agree more, Roger Savage in respect of the social media zombies. Like the self driving vehicle nonsense this electric revolution will in my opinion not see the light of day in my lifetime. I wonder what would happen when everyone plugs into the grid to charge their Mickey Mouse cars every evening at the same time.

    Maybe an integrated public transport investment would be a better option to help remove some vehicles from the roads.

    00:18 on 10 September 2017

  • Pulpos: 

    Most men & many women love driving and this activity actually trains your brain to be alert in the day and I agree with Roger.

    Thre are many futuristic/sci-fi films showing electric trams without a driver and flying cabs in the city, as it is almost impossible to travel in an overcrowded city.

    Unfortunately, fiction is becoming reality and we will have to get used to the changes.I agree with Mark that to avoid pollution, traffic accidents/daily fatalities to cyclists,etc .integrated public transport is a serious option in all major towns and the Dpt of Transport should use this opportunity to start planning electric nets and manufacturing electric buses/trams and banning all cars from inner cities.

    17:29 on 11 September 2017

  • Mark Stringer: 

    I'm sorry but I just don't see it; the electric car revolution nor the self driving vehicles in my lifetime that has any significant impact. I'm sixty.

    Maybe around that open lunatic asylum in California; silicon valley or some previously inhabited farmland in China that has been cleansed there will be a ring of roads or a few green obsessives in Germany.

    The carbon footprint ( loathe that stupid tag) should be called amount of pollution it takes to produce a battery then ship it around the world to run a car for 100 miles.

    I do see Tesla potentially as the first company to have $1 trillion of debt and still be trading on the stock market

    We can't even organise cycle lanes, trains that run on time, fast broadband nationally or national coverage of mobile phone signals let alone a lane for self driving cars or the infrastructure to charge electric vehicles en masse.

    I imagine the taxpayer will get very heavily involved like all of these blue sky ideas and some will get rich (already have) off of it.

    BMW tried to sell me an i3 electric car during a service visit a few years ago for the bargain price of £38,000 second hand!! Great for local shopping trips.

    My friends father had an Audi minicab in the 1970's that ran on LPG today I would be hard pressed to travel across the south east and if needed fill up on LPG 40 years later.

    I would be delighted to increase my tax contribution if this was as Pulpos says "a serious option in all major towns" for electric public transport.

    Maybe I will be proved wrong, I just hope that the king's new clothes come with a receipt.

    20:08 on 11 September 2017

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