There’s a growing realization on Wall Street that self-driving cars are still many years away. That pessimism is weighing far more heavily on traditional automakers than technology companies.
The big picture: Investors are betting the real value of AV companies will come from the estimated 4 terabytes of data each car will generate per day. And based on the way they’re valuing the major AV players, Wall Street seems to think tech companies have a better shot than Detroit at capitalizing on that data.
The bet on data helps to explain why analysts at Morgan Stanley have very different views on the two leading AV companies.
What’s happening:The mood has changed about automated vehicles. Bold predictions by Tesla and others that cars would be able to drive themselves by now have evaporated in the face of technology challenges and market realities.
The business model for AVs assumes that by removing the driver, the cost per mile falls dramatically, from today’s $2.50 or $3 per mile, to less than $1, unlocking a much larger market opportunity.
That math looks even more difficult when you factor in the pressures facing GM’s legacy automotive business under CEO Mary Barra, who is trying to lead a rapid transformation. It’s a race, says Jonas, between management’s execution and a cyclical downturn ahead.
The bottom line:“The value is in the data, and what you can do with it,” says Jonas.
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