Technology and telecoms firms could be the big winners in a connected car market that may be worth $50 billion over the next decade, luring investors away from traditional automakers.
Chip-makers or tech giants such as Infineon and Google are among a variety of companies involved in rapid development and testing of intelligent cars: from those that drive themselves to those allowing a driver to use mobile phone applications through the dashboard.
A number of carmakers are embracing the trend, with Nissan, Volkswagen AG’s Audi and Toyota working with outside tech firms to test self-driving car technology.
However, it is the technology and telecom firms — from US bellwethers to small European companies — that are seen benefiting the most, fund managers and analysts said.
“It’s a whole new market emerging,” said Christian Jimenez, fund manager and president of Diamant Bleu Gestion. “The best way to play it for investors in the long term is to buy names such as Microsoft or chip-makers such as Infineon, not (automakers) Peugeot and Renault.”
If the new market grows to $50 billion as forecast by French bank Exane BNP Paribas that would be roughly half the size of German carmaker BMW’s revenues last year.
Google is leading the charge among technology giants, trying to break into the century-old industry as it works on its own prototypes of fully autonomous vehicles.
It may be a few years before driverless cars hit the road but Google is already shaking things up in the sector, saying last week that the first cars running its Android Auto — a voice-enabled software allowing drivers to navigate maps and send messages while behind the wheel — will hit showrooms later this year.
Apple is also in the race, with its new CarPlay, which integrates iPhone functionality to allow drivers to use applications directly via the dashboard to view maps, make calls, listen to music and send and receive text messages.
Only about 10% vehicles have built-in connectivity today, but the number is expected to rise to more than 90% by 2020, according to the British consulting firm Machina Research.
“This is not a distant dream, but a five-year race where there is money to be made, or lost,” Exane BNP analyst Stuart Pearson said in a note to clients, predicting that the market for connected car services would grow by an estimated 30% a year through to 2020.
Investors are also keen to pick smaller, specialised companies at the