Driverless cars could hit investments
New technologies are constantly disrupting the business models of established business and opening the door to fast growing start-ups. Daniel Kieser, managing director of Shareclarity, that analyses companies on the New Zealand and Australian share markets, looks at the potential impact of autonomous vehicles.
Driverless technologies are advancing every day, and you don’t need to look far for proof of it. The world’s first self-piloted, electric air taxi is being tested in Christchurch, with creators Kitty Hawk aiming for it be commercially available within six years.
As new technologies emerge, so too does the debate around whether vehicles like this will one day displace conventional modes of transport. Investors need to consider how their portfolios might perform in a driverless world – the industries that may be impacted and the risks and opportunities for publicly listed companies.
Driverless vehicles are predicted to be used 10 times more than conventional vehicles and many believe they will be owned by corporates rather than individuals under a transport-as-a-service model. Combined, these factors have the potential to reduce the demand for new vehicles and with it, car yards, vehicle review websites and advertising platforms.
While it’s hard to imagine many favourable scenarios for companies like Trade Me and The Colonial Motor Company, they could be better prepared for change than their Australian peers. Trade Me for example has more diverse revenues than Carsales.com and unlike many other dealerships, The Colonial Motor Company owns its own inner-city premises that it could repurpose or sell if the demand for conventional vehicles were to fall.
Courier & Logistics Companies
Last year Tesla unveiled a new electric truck with driverless functionality. It’s the first of its kind and has the potential to reduce demand for truck drivers, improve their safety and reduce congestion on the roads. Mainfreight provides cross-country supply chain services and has already benefitted from higher domestic and global trade, lower fuel prices and technology advances. Driverless trucks may simply add to this.
Other companies may not fare as well. Developments like Uber’s in-car drone delivery service, UberRUSH, could disrupt metropolitan postal providers. Given that 86% of packages fall within the weight tolerance of existing drone technology, this could make Uber a direct competitor to courier companies like Freightways.
Airlines & Public Transport Providers
Another expected benefit of driverless vehicles is their on-demand, door-to-door convenience, which comes in stark contrast to the scheduled, station-to-station timetables of trains and busses. Add the novelty of flying taxis, like Kitty Hawk or Uber Elevate, and the future of urban transportation could look very different.
Without getting carried away, the risk of disruption to capital-intensive businesses like Infratil’s NZ Bus may be higher than previously thought. Companies like Air New Zealand may also be exposed to new competition on its shorter routes, but the opportunity to extend its customer experience to-the-door using driverless vehicles could outweigh these risks.
Recently, the focus of discussion among retail businesses (and media) has been on the growing threat of online providers, particularly Amazon. Driverless technologies could however offset some risk for retailers like The Warehouse Group, Harvey Norman and Woolworths, especially with the extra disposable cash if people no longer buy, run, maintain and insure their own cars. They could also sublease their suburban carparks overnight to driverless vehicle providers. Not only would they be closer to their morning passengers, but they could be loaded with products for early delivery en route to collecting their first passengers – a system even Amazon would be envious of with its centralised distribution model.
Some of the best investments are made by exploring an impending change and identifying the impacts and opportunities beyond the obvious. Driverless vehicles are already being tested on public roads and all of the major vehicle manufacturers are investing in driverless technologies. Now is the time to test your portfolio and investment strategies against their possible impact.
The views expressed in this article are those of Daniel Kieser, managing director at Shareclarity Limited. They are provided for general information only and are not intended to be financial advice.
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