- The self-driving car companies are already worth more than the auto firms they want to displace.
- You can buy into this, through Google and Apple, without putting capital at major risk.
- It’s not about cars, but transportation systems.
New York Times writer John Markoff was in the Atlanta area recently, talking about his reporting on self-driving cars.
A decade ago they were a joke, he said, showing the results of a 2006 “test drive” of such cars in the California desert, which ended with hulks of non-functioning hardware scattered across the landscape. He then talked about his reporting on Google’s self-driving car efforts in 2010, how he was amazed to find them on freeways, and actually functioning.
The Power of Tesla
Since 2010, of course, we have had Tesla (NASDAQ:TSLA). It came public in July, 2010, trading at about $20/share. It now trades at $260/share. The company is still losing money, but it is succeeding at delivering cars with self-driving features luxury buyers love – the consumer testing magazine Consumer Reports gave one a perfect score recently.
Tesla has audacity, and hopes to deliver a $35,000 car within two years, and 500,000 cars in 2020. It doesn’t just build factories – it builds “gigafactories.” CEO Elon Musk has succeeded Apple NASDAQ:AAPL) legend Steve Jobs and Microsoft (NASDAQ:MSFT) co-founder Bill Gates as the country’s most compelling business leader.
Google As An Ingredient
If Musk can do it, then, why can’t Google (NASDAQ:GOOG)? Their self-driving software has been test-driven for a half-decade. They were at this week’s Frankfurt Auto Show, and it seemed their aim was not to replace other car companies but to partner with them.
Such a strategy minimizes Google’s capital commitment. It lets it focus on the high-margin software business, evolving Waze, the traffic app it bought a few years ago for $1 billion, into more than just Google Maps. The question is, can it find partners before all the auto makers go their own way?
Apple Can Do Anything
Apple is worth $660 billion – that’s six times more than General Motors (NYSE:GM), Ford (NYSE:F) and Fiat (OTC:FIATY) combined. That is three times more than what Toyota (NYSE:TM) is worth, five times more than what Volkswagon (OTC:VLKAY) is worth. If manufacturing facilities and mechanical engineering are needed, Apple can buy it quite easily.
The question for investors is, why should it? Why, if the car industry is worth so little, should Google or Apple want to be bothered with it? And why should you be interested?
It’s because Apple, like Google, like Tesla, is not trying to buy a piece of the car market. They’re trying to buy a place in transportation systems. Self-driving cars are going to transform global transportation over the next 10 years, they’re going to control the commerce and movement of the whole western world. You can get in on that opportunity, without the normal stock risk of an auto company, with Google. You can get all that, and a real return, with Apple.
Then why not play?