derryl

3 Scenarios for The Future of the Auto Industry

Come hell or high water the US auto sector is not going into perdition. I would not put any skin into this game until the direction emerges because I am not a betting man, but betting against the Big 3 is a loser. I don't know how it will happen, but Detroit is going to be the NEXT BIG THING. I think it will be electrics, but there may be a meantime of gas/electric hybrids or natural gas engines.

Somebody, and it will be an American, is going to invent a revolutionary energy storage system that makes what we know as "batteries" obsolete. It may already exist in somebody's garage or in their head. Detroit, who already has the manufacturing capacity and dealer infrastructure in place, will buy the idea for a billion dollar song and commercialize it.

15 years from now you will be driving an electric car made in Detroit. Budget models will do 80 mph and cost under $15000. The Tesla can already do 125 mph. You will gas up by plugging into the electrical outlet on your house.

This is not science fiction. This is what is going to happen next. If anyone had told me 20 years ago that there would be a major new market for a device that played songs and showed video on a 2" screen I would have said they were delusional. And I would have missed out on a billion dollar opportunity.

Well, I did miss out on the iPod, but I guarantee you I am paying attention now to the emergence of electric cars. I saw a report a few months ago that Canada's Zenn electric car company has partnered with some American guy who has come up with a post-battery electric storage system that can recharge in under 10 minutes. I saw another report about a Japanese guy who has invented a way to power an electric car with water as the fuel.

We are living in revolutionary times. Old things are dying and new things are being born. "The Oil Companies" are not going to kill you or suppress your technology, but they will buy any good idea that will preserve their cashflow in an economy where oil is only one of a number of viable energy options. Just as Detroit is the only player positioned to remake the auto industry, so Big Oil is the only player positioned to remake the energy industry.

So in the medium term buy big oil. Right now they have the only game in town. For gamblers buy alt-tech car and energy companies. One of them will become Microsoft. More will be bought out. Some will be losers. But it's going to be one helluva ride!