Can You Profit From the Growth of Connected Cars?

As far as investing in future technologies go, investors nowadays have several tempting options to pick from. For instance, the Virtual & Augmented Reality market, drone market, connected cars market, etc are all expected to grow substantially in the years to come and will be worth hundreds of billions of dollars combined.

I think investors can profit greatly from these technological advancements by picking the right companies. In one of my previous articles, I disclosed my best picks from the VR and AR market. In this article, I will be focusing on the connected cars space.

Giant Automakers and tech firms believe that connected cars are intended to rule the roads in a little while and make way for self-driving cars to substitute human drivers.
Mobileye (MBLY) plays a significant role in designing driver assistance and safety features. In addition, it is the only pure-play ADAS company and investors looking to benefit from this market don’t have many other options.

According to a report from BI Intelligence, the percentage of new cars sold with internet connectivity will reach 75 percent in 2020, a surge of 62 percent compared to 13 percent last year. Along with this, as per the report from McKinsey Research firm, connected cars will account for approximately 22 percent of total vehicles running on the road by 2020, a surge of 12 percent compared to that in 2015.

At present, BMW, AUDI, and Mercedes-Benz are the top three most connected auto manufacturers globally, whereas NVIDIA and Qualcomm account for the top two major hardware players, as they are putting a lot of effort into designing new application processors for connected cars. In 2015, all the major auto manufacturers used NVIDIA’s Tegra processors. On the other hand, Qualcomm has also been selling its latest Snapdragon A chips in a similar market.

As per the projection from PWC, throughout the next five years, the overall connected car market will reach $123 billion from $113 billion. Basically, PWC divides the connected car market into six small divisions like mobility management, well-being, safety, entertainment, driver assistance, and, vehicle management.

The research firm also suggests that the safety and driver assistance market will together account for approximately 70 percent of the entire connected car market by 2020. In that market, Mobileye will be a key player as it manufactures collision avoidance systems for around 85 percent of the key automakers worldwide.

Mobileye’s systems connect cameras and radars with the braking system to avoid object collision and are projected to floor the way for manufacture of autonomous and semi-autonomous cars. That being said, I think shares of Mobileye are currently overvalued and investors should wait on the sidelines for a better entry point.

Disclosure: I don't hold a position in any of the stocks mentioned in the article.
Published on Apr 6, 2016
By Prudent Investor

Copyrighted 2020. Content published with author's permission.

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