The Rise Of Electric Vehicles And Autonomous Driving Technology - A Contrarian Perspective

May 30, 2017 1:33 PM ETBMWYY, GM, INTC, F, GOOGL, GOOG, TSLA, AAPL109 Comments


  • New reports point to significant disruption in traditional sectors such as the vehicle and energy industries.
  • Electric Vehicles (EV) and adoption of Autonomous Driving seen leading the disruption.
  • Bold prediction regarding the potential for disruption is depressing sentiment and valuations for traditional companies in these sectors.
  • In the first of three articles, we assess whether the negative sentiment towards these sectors is warranted and whether it is providing a contrarian investment opportunity.

The rise of electric vehicles (EVs) and predictions that they will come to dominate in the next decade is a narrative emerging as a key long-term headwind for investors in traditional companies in the vehicle and energy industries. This article is the first in a series of three articles where we consider these predictions and assess whether the negative sentiment towards these sectors assumed to be most negatively impacted, may in fact provide a contrarian investment opportunity. For value conscious investors, favourable risk vs. reward opportunities often arise precisely when sentiment towards any specific industry or asset class is depressed.

Two leading 'thought leaders' on clean energy are Tony Seba and James Ariba. In their recent report entitled "Rethinking Transportation 2020-2030," they further make the bold prediction that EVs will displace traditional internal combustion engine or "ICE" vehicles. They also contend that the widespread adoption of autonomous driving vehicles (AVs) and Transport as a Service (TaaS) will disrupt and partially displace the traditional vehicle industry.

Some of the startling predictions being made in this report include the following:

  • 95% of US passenger miles traveled will be served by on-demand AVs owned by fleets not individuals or TaaS providers such as Uber (UBER) by 2030.
  • Total passenger miles will grow from 4trn to 6trn. These TaaS vehicle fleets will almost entirely consist of EVs.
  • In 2030, traditional ICE vehicles will still represent 40% of the total US vehicle fleet, but will provide just 5% of total passenger miles. The prediction is based on TaaS services being significantly more economical for consumers than owning their own vehicle.
  • The report forecasts annual savings of $5,600 per household. 10x higher utilization rates per AV and longer vehicle mile lifetimes implies that far fewer vehicles will be required to service the same number of annual passenger miles.

This article was written by

Leandro is a Director and Founder of Blue Quadrant Capital Management. He is the portfolio manager for the Blue Quadrant Capital Growth Fund, multi-strategy hedge fund, and the Blue Quadrant MET Worldwide Flexible Fund, a long-only unit trust. He has extensive experience in the industry having worked previously as a research analyst and portfolio manager. Leandro graduated from the University of Cape Town with a BCom (Honors) in accounting and economics. In 2007, he attained the Chartered Financial Analyst (CFA) designation.

Disclosure: I am/we are long F, GM. 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.

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