The advent of shared, autonomous and electric mobility offers many growth opportunities in a variety of sectors beyond the auto industry.
The 100-year-old auto industry, engineered for success based on “millions of units sold,” is facing unprecedented technological disruption from shared, autonomous and electric mobility, and has begun to rethink and remodel its business strategies around "trillions of miles traveled."
Shared and automated transport addresses significant inefficiencies in the current industry model. These include: low utilization (on average, cars are used 4% of a day, with an available seat-mile utilization of barely 1%); consumption of finite resources (cars consume 500 billion gallons of fuel a year, accounting for 45% of global oil demand); and public safety (roughly 3,500 traffic fatalities per day globally). It could also unlock more than 600 billion hours per year of driver and passenger time currently spent in vehicles.
This kind of transformation isn’t a flashy two-seater with lots of zoom but limited accommodation. It’s more like a freight train that starts slow, builds momentum, and then pulls a lot of weight for the long haul. “The industry implications for recasting the global mobility model extend far beyond just the auto industry, affecting large tranches of the economy and the investment landscape,” says Adam Jonas, head of auto and shared mobility research at Morgan Stanley. Indeed, “Many of the full benefits of a shared, electric, and autonomous ecosystem may take decades to fully play out,” he says, “but industry developments and investor appreciation of the technological path can have a material impact on share prices of select companies even over a three-year horizon.”
Here’s a look at nine industries that will experience both disruption and opportunity:
- Original equipment manufacturers (OEM) and suppliers to the auto industry will face new competitors with advantages in software, consumer electronics, and cost of capital—and some may struggle to attract and retain the best talent. However, OEMS and suppliers which provide superior technology (hardware, software, integrated experiential design) or quality and scale for key features (fuel efficiency, safety, lightweight materials, etc.) will be well-positioned for long-term growth.
- Auto dealers could stop selling cars altogether and evolve into a 100% service model in a highly consolidated group of mega-fleet managers.
- In the transport sector, autonomous trucks may offer substantial growth and cost-cutting opportunities to fleet operators that can apply the optimal technologies to transform their existing networks.
- For chemicals, lithium producers confront a chicken-and-egg problem where higher demand for electric vehicles can’t be met without a far greater supply of battery-grade lithium, while the supply won't be added until EVs show greater end-market demand. Companies in this space could benefit significantly from higher consumer adoption of electric vehicles.
- Electric utilities would benefit from the shift away from the pump to plug-in charging, as electric vehicles gain more consumer traction. The U.S. car parc consumes around 1,200 terawatt hours of equivalent electrical energy each year. That's around a billion tons of TNT—the energy equivalent of some 60 thousand WWII-era atomic bombs. A transition to electric vehicles could be equal to one-third of total U.S. energy demand.
- The semiconductor industry has benefited for decades from the digitalization of vehicles and driving in general, but autonomous cars represent a sophisticated blend of computer power and artificial intelligence for navigating the countless number of real-world driving scenarios…in real time. Chipmakers that can integrate auto-vision, Internet of Things connectivity, and AI processing, among other key features, will have the edge.
- IT hardware-software and Internet and media companies can get fairly creative about how passengers end up passing their time riding in autonomous cars. After all, 600 billion hours is a lot of time to spend in vehicles that you aren’t driving…. It´s not surprising that so many firms are directing significant strategic efforts and investment toward delivering and monetizing content and data opportunities.
- Telecom and communications systems will be crucial to the shared, autonomous ecosystem, which will require a transformation of the supporting infrastructure to connect vehicles to other vehicles, and vehicles to infrastructure, handling high-volume data reliably and securely. It’s an opportunity to roll out the next generation of mobile networks, with much faster speeds and far less latency.
- The beverage and restaurant sectors may be a somewhat unintended beneficiaries of autonomous vehicles. Yet, it’s worth considering: Passengers in autonomous vehicles won’t just be consuming media, entertainment and next-gen broadband connectivity—they will likely also be eating and drinking, without having to worry about safety.
The rollout of shared/autonomous/electric transport could resemble the spread of the early electric utility grid in the 1880s and 1890s, which grew city-by-city, Jonas says. The first applications should take the form of small fleets, traveling slower than 25 miles per hour, fully autonomous, fully electric, and geographically limited to as little as one square mile. Given a combination of the right public policy, partnerships and positive outcomes for public health and safety, economic development and growth, the new models can adjust, optimize and scale up and out.
Along the way, plenty of other sectors will be figuring out how they can come along for the ride.
Morgan Stanley’s U.S. Research teams worked together to identify 30 companies that they believe are favorably exposed to growth opportunities in a world moving toward shared mobility, autonomous driving, and electrification. Ask your Morgan Stanley representative or Financial Advisor for the full report, “The Shared Autonomous 30” (Sep 22, 2016). Plus, more Ideas.
