Ford's CEO, Mark Fields, discussing Ford's Chariot ride-sharing service. Image source: Ford.  

As the U.S. new-vehicle cycle peaks, everybody seems to be a Debbie Downer when it comes to automotive stocks, and few seem to be looking for out-of-the-box upside to these stocks. That's not stopping Detroit executive from pursuing future ideas, of course, and while industry folk have touted the enormous potential for smart mobility projects that could eventually resemble services such as Uber -- once valued at more than $60 billion -- we haven't touched on exactly why those projects will help automakers evolve. That appears to be one focus for Ford Motor Company (NYSE:F) executives during the North American International Auto Show in Detroit. Let's look at a couple of smart mobility examples and how exactly those could change automakers' business.

Examples of smart mobility projects

One of the biggest bear arguments for owning the stocks of major automakers is that they operate in a highly capital-intensive business with thin margins. That's true -- or at least it has been over the past century, but that could change for a couple of reasons. As the dollar value of technology inside vehicles continues to increase, and a push toward autonomous vehicles continues, margins could slowly improve. But the biggest near-term factor that could help offset the industry's thin margins is automakers moving toward smart mobility projects.

A great example is Ford's Chariot, a Silicon Valley on-demand shuttle service the automaker acquired last year that will expand to eight cities globally this year, the company announced at the North American International Auto Show. Or take General Motors' (NYSE:GM) Maven brand, which encompasses three areas: a city-based service that enables consumers to rent GM vehicles per hour, another program based in urban apartment complexes that allows residents to do the same, and a peer-to-peer sharing service named Express Drive.

What's the upside?

"This is a non-recessionary business we're dealing with," said Jim Hackett, chairman of Ford Smart Mobility, speaking with Automotive News. "The [car ownership] side will always be the larger percentage of the business, but [car sharing] is going to be a significant contributor to profit such that it eases the effects of recessions. It isn't operating at that scale yet, but we have plans to get it there fairly fast."

One reason investors shy away from buying shares of Ford, General Motors, or other competitors is simply the cyclical nature of auto sales. However, as automakers develop these new programs and tap into recurring revenue from ride-hailing or ride-sharing demand opportunities, it will help offset a downturn in new-vehicle sales and change how we value these companies' business models.

A mobility business is a fundamentally different business that requires fewer capital-intensive practices and thus offers better margins. In fact, Ford CEO Mark Fields has commented that management believes 20% profit margins are attainable from new mobility services, roughly double what the company's 113-year-old automotive business achieves. 

Deep value or falling knife?

Automotive stocks are at a pivotal point, with the industry likely to change more over the next two decades than it has over the past century. Here are a few things we know.

We know that automakers are arguably healthier and more efficient than they have been in decades; in fact, both Ford and GM have noted their business could break even if new-vehicle sales in the U.S. drop as low as 11 million vehicles a year, compared to 2016's record 17.5 million level. Both companies have slashed costs and the number of vehicle platforms and vehicle variations they use worldwide. If Ford or GM, or both, manages to strike gold with a smart mobility business that accelerates revenue and profitability, it will force investors to completely reconsider their thesis. It may not be a matter of if but when this happens, and of when Detroit automakers prove their current forward price-to-earnings valuations (less than eight, per Morningstar estimates) to be absurd.