Investors might be looking in the wrong place for exposure to the revolution in driverless and electronic cars if they’re pouring over previews of the A$110,000 Tesla Model X.
We have seen valuation multiples of futuristic car makers reach sky-high levels and more recently the rising value of battery raw materials such as lithium and copper. This appears to reflect the growing buzz surrounding this potential answer to the effects of transport upon the climate and congestion.
But the mass-adoption of autonomous vehicles will take much longer than generally assumed due to financial, safety and cultural roadblocks. Therefore there is a long way to go before investors are likely to reap the benefits of investing in the car manufacturers which are essentially selling the dream of a futuristic road trip.
The exciting investment opportunity here and now lies not in trying to select the winning manufacturer of electric cars, but rather in the less glamorous infrastructure required to support the technology, according to the latest paper published by AMP Capital’s Global Listed Infrastructure team.
“The adoption of autonomous vehicles will be much more gradual than the earlier technological leap from the horse and cart to the motorised car, which took little more than a decade,” notes Andy Jones, AMP Capital’s Global Listed Infrastructure Analyst and Portfolio Manager.
“Autonomous vehicles have the potential to ease congestion by driving much closer together, which vastly increases the capacity of existing road space when shared,” says Jones.
“But this won’t happen until the vast majority of cars are driverless,” he argues. “Until then you can answer e-mails but you won’t get to work any quicker,” he adds.
“The biggest obstacle to the driverless car future is the huge up-front infrastructure cost; merely ensuring road markings and road signs can be read by automatic cameras in driverless cars will cost tens of billions of dollars” Jones explains.
Also unclear is whether we are ready to give up our cars and share driverless ones with others. 25-year old occasional drivers in Surry Hills happily use goget, however when they are 35 and ferrying two kids and a muddy dog around the outer suburbs, they may well want their own.
“People will go driverless, but it will take longer than the experts expect, so we may well see more managed lanes,” Jones believes.
These are new lanes built beside freeways that charge tolls which increase as roads get busier so that traffic flows freely. This also increases the speed of traffic on the original freeway.
In the US, managed lanes have speeded up traffic whilst raising tolls that pay for construction.
“Transport infrastructure companies which understand how much commuters will pay to save time are in a great position, so investors should be thinking about infrastructure, rather than cars” Jones notes.
While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided.