Reading time: 4 minutes
Electric vehicles have been transforming the automotive industry for over a century. But one of the major changes influencing the cars of tomorrow is the creation of driverless vehicles, or those that are fully autonomous.
We’ve covered how fast the world is charging down the electric avenue with the production and utilisation of electric vehicles, and how investors can access this megatrend through the BetaShares Electric Vehicles and Future Mobility ETF (ASX: DRIV). However, in this piece we will focus on another key component of DRIV’s portfolio; that of autonomous vehicles and the applications of driverless cars in the modern world.
Understanding Autonomous Vehicles
The world of autonomous vehicles is currently defined by six levels of driving automation (as defined by the Society of Automotive Engineers). Ranging from level zero, where the car is fully manual to level six where the vehicle is fully automated1.
The first two levels of this scale have been achieved, with level one allowing drivers to set a cruising speed and remove their feet from the pedals. Level two involves driver assistance systems which make it possible for the driver to remove the hands from the wheel in certain situations (i.e. parking). The lofty end goal in this process? Full autonomy.
Source: Synopsys: The Six Levels of Autonomous Driving2
In looking at the size and value of the autonomous vehicle market, according to a report by Allied Market Research, the global autonomous vehicle market “was valued at $76.13 billion in 2020, and is projected to reach $2,161.79 billion by 2030, registering a compound annual growth rate of 40.1% from 2021 to 2030.”3 The report credits the rise in demand for automated guided vehicles to such notable reasons as developments in the reduction of production costs, machine learning and improved technology. This includes, but is not limited to, improved sensors and cameras.
A key example of such improvements can be seen with the development of sensor fusion technology, which brings together inputs from multiple radars and cameras to form a single model of the environment around a vehicle4. Notable companies at the forefront of the development of this technology include Aptiv5 (5.26% weight in DRIV as at 18/04/2022) and Analog Devices6 (3.53% weight in DRIV as at 18/04/2022).
The growth of the autonomous vehicle market signifies changes beyond the automobile industry. This impact extends to areas such as commercial transport, industrial automation, smart cities, agriculture, and transportation systems as a whole.
Market research company Frost & Sullivan expect that that “smart cities will create business opportunities worth $2.46 trillion by 2025”. They expect investments to land in projects like smart grids, intelligent traffic management, autonomous vehicles, autonomous drones, smart lighting, e-governance services, and data-enabled public safety and security7.
An example of this is seen in South Korea’s plans to invest roughly US $1 billion in autonomous vehicle technology with a focus not only vehicles but transportation, infrastructure, and associated services8. Application of this can be seen in Samsung (3.63% weight in DRIV as at 18/04/2022), which has already successfully tested a drone and artificial intelligence solution to optimise 5G network performance.9
Source: ReadWrite: Automotive 2.0: The new road ahead to autonomous vehicles10
A more common example of the use of autonomous vehicles beyond personal transport is within shipping and logistics, with a number of companies racing to perfect automated trucking technology. Last year, Tesla (8.8% weight in DRIV as at 2/05/2022) discussed plans for ‘Semi’, its own autonomous truck reliant on battery power and with a range of up to 500 miles.11
Additionally, truck manufacturer Paccar (5.2% weight in DRIV as at 18/04/2022) announced in September 2021 that it was teaming up with FedEx and autonomous driving technology company Aurora to launch a commercial pilot of autonomous trucks in linehaul and trucking operations.12
The BetaShares Electric Vehicles and Future Mobility ETF (ASX: DRIV) seeks to provide exposure to a portfolio of global companies at the forefront of innovation in automotive technology. In doing so it captures not only those companies heavily involved in the manufacturing of electric vehicles but also those developing the technologies which will eventually drive us down the road to full autonomy.
There are risks associated with an investment in DRIV, including market risk, sector risk, international investment risk and concentration risk. DRIV should only be considered as a component of a diversified portfolio. For more information on risks and other features of DRIV, please see the Product Disclosure Statement.