Betting on cars – how to invest in motor innovation without getting a flat

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“Never look back unless you are planning to go that way,” Henry David Thoreau once said. Investing in the future is an exciting prospect, but a daunting one as well. And what could be more of a ride than investing in motor vehicles?

But the road can be a bumpy one, even if it is a fast ride, so prudence is paramount when investing in all things motor.

Here are four of the biggest draws for investing in the future of cars:

Electric

According to Allan Gray, Bloomberg forecasts that EV sales will increase from a record of 1.1 million in 2017 to 11 million in 2025 and reach 30 million by 2030. Sounds great, right?

Not so fast – electric vehicles are, like most new technologies, still prohibitively expensive to make and not available to the mass market yet. This means that even if electric cars were to go mainstream, they would be making a loss for investors for some years to come. Except perhaps for Tesla, but that is a big perhaps.

Also, in developing nations like South Africa, the infrastructure just isn’t ready – the Champs-Elysées may have plug points for electric cars, but Jan Smuts and Chapman’s Peak certainly don’t.

Hybrid

This is the other major problem with investing in all things electric – hybrid cars from mainstream motor companies like Jaguar and Mercedes mean far lower fuel emissions comparative to electric cars, yet at a fraction of electric cars’ price.

“…the consumer appeal for electric cars is based on their lower carbon emissions and lower running costs – something that hybrid cars (that are propelled by a petrol or diesel engine with an electric motor) also offer [and] traditional automakers are well placed to compete in this segment,” says Allan Gray’s investment analyst Sibabalwe Kasi.

Self-driving

The most talked-about and Asimov-like motor innovation of the moment is driverless vehicles. It’s arguably one of the more difficult trends to take seriously for those in developing nations who have only ever seen them in Sci-Fi movies, but it could be a real meal ticket for early bird investors if done right.

“The autonomous vehicle (AV) market is going to take years to mature, but a lot of progress is already being made — and investors should start taking notice of its growth now. In 2040, an estimated 33 million driverless vehicles will be sold annually, and Intel and Strategy Analytics predict that self-driving vehicles and their services will create a $7 trillion industry by 2050,” says respected US finance site The Motley Fool.

However, patience is the name of the game here. “While all of these companies have lots of potential in the AV space, it’s going to take years for them to begin seeing sizable contributions to their bottom lines. That doesn’t mean that self-driving cars aren’t coming or that they won’t be transformative when they do; it just means that investors should temper their expectations as this new market unfold,” The Motley Fool concludes.

Car sharing

Another potential avenue for investment isn’t in cars themselves at all, but in the companies behind the ongoing ride sharing revolution. Big name companies like Daimler and BMW are betting on a future in which almost no one in urban spaces will own a car soon – and it’s a compelling gamble.

In an ever more environmentally conscious world with diminishing fossil fuel resources and more strict emission laws, owning your own car may not be normal forever. This is especially true in a future where self-driving cars dominate the roads. If your car could drive itself to you to fetch you from work, why should you pay a larger sum to have that car ‘service’ only you, when you could pay a fraction of the cost and still be picked up whenever you wanted, like your own driverless Uber?

So, which choice is best? It’s up to you, you’re the driver of your own investment, er, vehicles… Just ensure you have an advisor who knows their stuff in the passenger seat.

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