RBC Capital Markets’ Equity Analyst Joseph Spak shares the top 5 takeaways from our inaugural Auto Tech Conference.
The inaugural RBC Auto Tech Conference was held on May 31st and pulled together various participants across multiple industries to get a sense of how four key secular themes are evolving: connected, autonomous, shared and electrification. The big picture takeaway is that these themes are all very real and quickly moving from the development phase to the production realm, but with that comes a new set of challenges.
Autonomous hype was strong (and perhaps re-invigorated by recent announcements including Softbank’s $2.25 billion investment in the driverless-technology division of General Motors and Alphabet Inc.’s Waymo buying up to 62K Fiat Chrystler Automobiles NV (FCA) Pacificas to increase its fleet of self-driving cars). Participants at the conference indicated the pace of electrification is accelerating. Meanwhile, connectivity of vehicles and infrastructure makes that data explode and opens up whole new services, features and monetization opportunities.
Here are some overarching themes we learned from RBC’s AutoTech Conference:
1. Scale is critical and achieving it is harder than it looks. For new technologies, scale is critical to get the cost down. However, doing so in a robust, automotive grade environment is more difficult than appreciated. This could help incumbents against the threat of potential new entrants. Scale is also important for building out the new “robo-taxi” networks. Meanwhile, another underappreciated area is the required security and robustness of the architecture for the dream of connected, autonomous, shared and electric vehicles to become a reality.
2. Dawn of robo-taxi era; Will there ever be “owned” Level 4/5 cars (those with high level or full automation)? The general consensus was “robo- taxis” will be here in ~2 years and only scale from there. There was some debate over whether owned Level 4/5 will ever happen and if that is even a good thing if it does. Meaning the shared autonomous model could become so prevalent and economical that it will never make sense to own a Level 4/5 car.
3. Business models still evolving. Enthusiasm for robo-taxis and Transportation as a Service (TaaS) was emphatic. Many believe revenue/trip will be the new go-to-metric for mobility, which if true, means being multi-modal could be important. Consumer interface and differentiating service even more so. Still, there was no clarity from anyone on how the exact business model will evolve: transaction based, subscription, advertising or other.
4. Light Detection and Ranging (LiDAR) a must. Every participant that plays in and around the autonomous driving space save Tesla believes LiDAR is a critical sensor for L4/L5 autonomous vehicles. LiDar works like radar, but instead uses a pulse of infrared laser light to measure how far away a given object is from the vehicle. The form and type of LiDAR technology was up for debate, but there could be different LiDAR technologies for different purposes/use cases. Sounds like we should also be on the lookout for increased use of LiDAR for Advanced Driver-Assistance Systems (ADAS) around the end of decade.
5. Electrification inflecting. Sentiment is that low hanging fruit of improving Internal Combustion Engines (ICE) via technology or lower levels of electrification is picked off and OEM plans are quickly moving to more complex electrification architectures like Plug-in Hybrid Electric Vehicles (PHEVs) and Battery Electric Vehicles (BEVs).
For a copy of the full report and access to more Auto Tech research, including Autonomous, Robo-taxi and LiDAR Forecasts and Electric Vehicle Forecast through 2050, please contact your RBC Capital Markets Representative or log-in below if you are an existing client.