Lately, self-driving cars make a very hot topic. When cars are part of conversation, people can't help but talk about either electric cars or self-driving cars. In the last few years, the car technology has improved so much that many things that sounded like crazy ideas a few years ago are now being considered by the car industry as viable options. I believe that when self-driving cars start hitting the market, Nokia (NYSE:NOK) will be one of the companies to benefit most from it.
Nokia's mapping division is called HERE, and it has ongoing partnerships with some of the world's greatest car companies, such as Toyota (NYSE:TM), Ford (NYSE:F), BMW and Daimler. HERE mainly offers navigation and GPS services, but that's not the only thing that the company offers. In fact, Nokia's subsidy offers several products and services that will come very handy when self-driving cars hit the road.
Currently, Nokia is working with Mercedes producer Daimler to create a smart map that will integrate with the cloud and the users will be able to mark their favorite locations or share routes with their friends through the cloud network. These maps will have more details than regular maps, and will include information like lane width, road signs, traffic light locations, road constructions and high density traffic areas. This will be a very important tool to be used in self-driving car concept.
Presented at the Frankfurt Motor Show last week, these maps will have 3 dimensions and become the stepping stone for the self-driving cars that are to be produced later on. A self-driving car has to be "aware" of many things going on around it at the same time. It has to be able to keep a safe distance with the cars in front of it, avoid hitting pedestrians or animals that might jump on the road, be 100% up to date with road constructions, and lane closures and watch out for any sudden moves of other cars. Nokia's smart mapping concept helps cars be aware of their surroundings and this is a very crucial part of self-driving cars. As I said before, precision and being up to date is very important and Nokia will attempt to accomplish that through cloud networks.
Continental Corporation and Magneti Marelli are two important companies in the business of automotive system integration. These two companies recently entered into a partnership with Nokia. Magnetti Marelli will integrate important content such as parking information, fuel prices and real-time traffic data to Nokia's smart maps. Continental Corporation will be working on adding 3D Landmarks, satellite imagery and split screen features to these maps. For example, if two people are trying to meet in a common place, they will be able to synch their routes by using their car dashboard or any other smart devices such as smart phones.
There are different timetables being mentioned for self-driving cars. For example, Tesla's (NASDAQ:TSLA) CEO Elon Musk says that self-driving cars could be possible in as little as 3 years, whereas, other estimates range between 5 to 15 years. Once the technology is fully tested, it will have to gain regulatory approval in many countries before it can be commercialized. Regardless of how much time it will take for us to get self-driving cars, no one questions their possibility. We all know that sooner or later self-driving cars will hit the streets and Nokia will become a major part of this story. When it comes to self-driving car technology, most people mention the name Google (NASDAQ:GOOG), but there is serious competition in front of Google in the name of Nokia.
As I mentioned in the past before, Nokia doesn't tell us much about the business model of its mapping business. Even in the company's 284-page annual report, there is very little, if any, mention of how HERE generates revenues. The report briefly talks about internal and external clients without mentioning any specifics (keep in mind that Google, another major interactive map provider, also doesn't disclose a lot of information regarding its mapping business). We know that HERE has several partnerships going on with companies like Toyota (where Nokia Maps beat Google Maps in a bidding war), Daimler, Ford, BMW, Volkswagen among many others. In fact, Tesla is the only major car company that comes to my mind that hasn't signed a partnership with Nokia's mapping business unit.
At the end of the day, all of Nokia's hard work in the mapping business might be leading to one point, self-driving cars. As I mentioned above, self-driving cars will involve very complex and sensitive technologies that not many companies possess. If Nokia can pull this off, it can turn its mapping business around.
These days, online maps are highly interactive. For example, if one is craving sushi, he or she can go to Google Maps, center the map around where they are and search for sushi. Then they can read other people's reviews and recommendations regarding that place. The more people use an interactive map, the more information it will have. Think of interactive maps as a library of ever-growing content. The more content there is on a map, the more people will be using it. This is just like the whole "app" argument. The more people use a phone, the more apps will be developed for it, and the more apps are developed for a phone, the more people will use it. Mapping business is a great way to earn money from partnerships as well as advertisements. I don't think Nokia's maps are used widely enough to warrant a lot of advertisement revenue; however, as Windows Phone and integrated navigation systems increase in usage, Nokia will gain more power.
If self-driving cars are the future, this is great news for companies like Nokia. Not only Nokia produces great mapping technology, but also the company enjoys great partnerships with pretty much every major car company in the world. In the future, Nokia's mapping business might turn into something very similar to its networking business in terms of winning contracts and bringing home money.
Disclosure: I am long F. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.