Buyer beware on eyeing the new road

August 3, 2016

Picking a winner in the early stages of new tech development could be fraught for investors.

Driverless cars are promising to be a mainstream reality sooner than you might think; trials are underway or have been successfully completed across Europe and the United States and laws allowing road trials in South Australia have been passed.

Already, more than two dozen big corporates are hard at work building their own self-driving vehicles, according to research company CB Insights.

And Fortune magazine reports General Motors, Toyota, Nissan, Volkswagen, Fiat-Chrysler, BMW, and many others are wading into territory once considered a science-fiction fantasy.

Acquisitions and partnerships within the emerging industry are moving at a frenetic pace.

From March to May this year, Fortune reports, GM spent $1 billion on self-driving start-up Cruise Automation; Toyota struck a partnership with Uber; Volkswagen invested $300 million in ride-hailing company Gett; Apple put $1 billion into China’s Didi Chuxing and Google partnered with Fiat Chrysler to outfit 100 minivans with self-driving tech.

Other industries – from car parts suppliers to hospitality and financial services (particularly the insurance industry) – will undergo serious upheavals in the face of self-driving tech and the disruption it promises.

Clearly there are many investment opportunities; but picking a winner, particularly in the early stages of technology development, can be a fraught exercise.

Investors in VHS technology won the video cassette wars of the 70s and 80s at the expense of those who backed Betamax; and while the relatively few who put their money on Google to become the search engine of choice came up trumps, those who invested in early search leaders Yahoo and AltaVista didn’t do quite so well.

Investors should do their homework before buying shares in any company they think could benefit from the driverless car revolution.

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