Analysts at Bank of America Merrill Lynch have looked at the investment landscape and divided it into five broad categories that they have called “A Transforming World.” They have just released an update to their quarterly overview of Buy-rated names with material exposure to three transformative investment themes. The firm calls these Primer Picks.
One of their thematic overviews comes in the broad category of Innovation and includes an overview of several technologies, including cybersecurity, future mobility, robots and artificial intelligence, smart cities, and virtual, augmented and mixed reality.
Here we take a look at the analysts’ view of the future mobility market and at some of their Primer Picks in the sector.
Merrill Lynch commented on four aspects of the future mobility sector:
Sustainable mobility: $7tn transport mkt facing disruption: With over 1.2bn cars on the roads today, transport is a behemoth sector generating c.US$7tn in vehicle sales, supplies, and services. We believe that the sector is highly inefficient with 95% of cars parked at any one point, cars costing up to US$8.5k/year to own and operate, vehicles accounting for 1.2mn deaths p.a. and generating 23% of C02 emissions.
4 game-changers: electric, autonomous, connected, shared: In a world of exponential change as per Moore’s law, transport is a problem being solved at a tech pace. We believe that the convergent and mutually reinforcing trends of electrification, autonomous driving, the Internet of Cars (IoC) and the sharing economy will drive a fundamental shift from today’s car-centric travel to a platform-centric model whereby transport becomes a utility. Future Mobility – including an integrated, on-demand electric fleet of autonomous taxis – can generate US$3.8tn of total positive impact in the next 10Y and lead to a “world of zeros”, including a 59% decline in vehicle demand, 87% fewer accidents, 54% fewer parking spots, and 85% lower emissions.
Knock-on impacts: peak oil, cheaper insurance, jobs at risk: The disruptive impacts will reverberate well beyond vehicles. Ramifications for commodities are significant, with electric vehicles having the potential to bring peak oil demand forward to 2030E. The effects will also be felt in insurance, with autonomous driving able to reduce motor premiums by 60% by 2040E, and real estate, with 5.7bn km2 of land able to be reclaimed in the US alone. Moreover, they could result in job disintermediation, with 70+ professions and businesses at risk of being made obsolete.
$1.5tn Future Mobility mkt by 2030E: four entry points: We see the Future Mobility market growing to US$1.5tn by 2030E (vs US$30bn today), and highlight four entry points for investors wishing to play the theme: 1) Electrification; 2) Autonomous Driving; 3) Internet of Cars (IoC); and 4) Shared Mobility. We anticipate fast growth for disruptive technologies such as sensors, semiconductors, radar, cameras, LiDAR, precision mapping, artificial intelligence (AI), vehicle-compute hardware, batteries and storage, and infotainment, as well as for disruptive business models such as ride-hailing and carsharing.
The analysts’ Buy-rated Primer Picks include autonomous driving-centered firms like Qualcomm Corp. (NASDAQ: QCOM), NVIDIA Corp. (NASDAQ: NVDA) and Intel Corp. (NASDAQ: INTC); electrification firms like Switzerland-based TE Connectivity Ltd. (NYSE: TEL) and Tesla Inc. (NASDAQ: TSLA); and connected car providers like Alphabet Inc. (NASDAQ: GOOGL), which Merrill Lynch also includes in its shared mobility group. The company specifies exposure to these stocks as “medium.”
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