Today’s Headlines: A Boost for Self-Driving Cars, Part 2

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Today’s Headlines: A Boost for Self-Driving Cars, Part 2
January 20, 2016

Please read the first part of this analysis of self-driving cars at

In addition to offering compelling safety and convenience benefits, self-driving cars would permit far more efficient utilization of the nation’s existing road and highway infrastructure. Simply put, far more cars could smoothly navigate the same infrastructure at any one time. This would greatly reduce traffic congestion, commute times, new road building requirements, and the diminished productivity associated with clogged US roadways.

According to Benjamin Seibold — a Temple University mathematician leading a National Science Foundation study on the impact of autonomous vehicles on traffic patterns — autonomous cars could have an enormous impact on reducing traffic congestion. In the October 8, 2015, issue of Popular Mechanics, he noted that, if self-driving cars accounted for just 2 percent of the traffic on the road, those cars would "drive in a particular way that makes them better at keeping a constant velocity, can reduce stop-and-go traffic by as much as 50 percent." Imagine the possibilities when nearly all of the domestic vehicle fleet is operated autonomously.

Clever automakers will attempt to promote positively as many features of self-driving cars as possible as they are separately integrated into vehicles. Self-parking and anti-collision technology are already featured in ads, and features like Super Cruise will tout safety along with fuel-efficient automatic driving practices. (Gas will not average less than $2.00 per gallon forever.)

As these technologies become routine, trust will build toward full autonomy, but until they prove themselves as an integrated package in ideal conditions, expect emphasis on autonomous features in regular vehicles instead of the full self-driving target.

Potential Pitfalls

Along with regulatory concerns and basic trust, there are two other major issues self-driving cars must confront.

The first is liability. Logically, fully autonomous cars will shift liability burdens from drivers toward vehicle manufacturers, but semi-autonomous cars leave a major gray area. At what point does failure to intervene become the fault of the driver? Precious seconds are wasted assuming the car will maintain control, leaving a driver with no reasonable reaction time. It may eventually fall to courts to decide.

The second concern is security. Self-driving cars can be considered an extension of the Internet of Things. They have to be connected to things around them by definition — for example, with other self-driving cars to avoid potential collisions. As a result, auto software could be a tempting soft target for hackers.

Software engineers will have a daunting task integrating all the necessary systems and making them robust without opening the door to hackers. The Chrysler/Jeep hack from 2015 showed how easily a vehicle could be taken over if security is not emphasized.

The Takeaway

Any new technology that takes many years to commercialize will see companies that rise and fall in unpredictable ways. Investing in companies that are working on self-driving cars may be trendy and environmentally conscious, but it can also be risky if you do not properly value a stock.

With autonomous cars, risk is mitigated a bit compared to many new technologies because several main players are established companies with small divisions devoted to developing the new technology. Investing in Mercedes, Nissan, or Google/Alphabet involves far more overall company analysis regardless of their chances of success in autonomous cars, while Volkswagen has far bigger problems affecting their stock price.

Delphi and Bosch are more tangentially integrated into the auto industry. Tesla is in a field by itself with respect to multiple promising technologies but correspondingly large and risky investments. Tesla has no core business to fall back on as the other entrants do.

As with any field, educate yourself before you invest in autonomous car companies. Consider their technological progress, how much their efforts depend on government funding and venture capital versus internal funding, and their level of investment/loss in self-driving cars compared to overall company profit and cash flow. Assess how proposed regulatory and infrastructure improvements are likely to accommodate each company's approach.

With sufficient background work, you can place your long-term bet on self-driving cars as it fits your risk tolerance and wait a decade or so to find out if you were right. Perhaps a self-driving car will drive up to your door some day with stacks of cash that you earned from selling your highly appreciated stock.

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