The transportation industry is on the verge of some big changes over the coming years. Several experts have said they expect driverless cars to go mainstream as soon as 2021, or just three years from now, and plug-in electric and hybrid cars are also remaking and disrupting the industry.
Motor vehicle sales totaled more than $1 trillion last year, and the opportunity may be even bigger when taking into account the growth potential from ride-hailing services like Uber.
With the quickly evolving transportation market ready to unleash billions in profits on the winners of the coming revolution, see why Tesla Inc. (NASDAQ:TSLA), General Motors (NYSE:GM), and Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) are three key disruptors to watch.
You can't have a conversation about disruption in the auto market without talking about Tesla. The company has already achieved much against daunting odds, becoming the first new viable American car company in generations. Tesla has proven that it can make high-performance electric cars, winning Motor Trend's Car of the Year award, and that there is an ample market for its vehicles as demand consistently outstrips supply.
Tesla is currently in the midst of "production hell" as the company scrambles to meet its production goals for the Model 3, but it continues to disrupt the transportation industry in a number of ways, including its battery technology, its supercharger network, and an electric semi-truck.
All Tesla cars being produced now come equipped with "autopilot," or self-driving hardware, meaning that as the company's autonomous vehicle technology advances, Tesla owners will be able to upgrade their own cars with a simple download, giving the company an advantage over legacy auto-makers.
With a lack of profits and production bottlenecks, Tesla's long-term success is far from guaranteed, but its disruptive impact will continue to be felt across the industry.
2. General Motors
No legacy automaker has done more to prepare for the tidal wave of change in the auto industry than General Motors. The company acquired autonomous-vehicle technology specialist Cruise Automation for more than $1 billion in 2016, following it up with the acquisition of Strobe a few months ago, another AV technology company. It's also made headway in electric vehicles with the Volt, and more recently the Bolt, which it is now making a self-driving version of that will soon be tested on New York streets.
More recently, GM unveiled a design for a self-driving car that does not have a steering wheel, gas pedal, or brake pedal, showing the company is preparing for a future in which autonomous driving isn't an option but the standard.
GM also has a stake in the ride-hailing game. It invested $500 million in Lyft two years ago, giving it a 9% stake in the firm, and formed a strategic alliance with the #2 ride-hailing company. The Chevy-maker followed that up with a partnership with Uber, as the company is clearly eyeing selling its self-driving Bolts to one of the two app-based transportation companies. With a stake in a range of ventures across the auto sector, GM looks poised to benefit from the ongoing industry disruption.
Alphabet's autonomous vehicle division, Waymo, has long been considered the leader in self-driving technology. Unlike GM or Tesla, however, the Google-parent isn't focused on making self-driving cars, but instead selling or licensing the technology. Its autonomous vehicles have already racked up more than 4 million miles on the road, and it became the first company to test AVs on public roads without a human behind the wheel in a trial last year in Arizona.
Like GM, Waymo has formed a number of partnerships with the likes of Intel, AutoNation, and Lyft, with which it partnered to develop an AV business, starting with pilot projects and product development. A prior partnership with Uber unraveled over a number of legal conflicts.
As a division of an $800 billion tech giant, Waymo's potential success in autonomous vehicles won't have the same impact on its parent's stock as a company like Tesla or GM would, but auto investors can't ignore it, especially as an AV ride-hailing service with Lyft looks like a growing possibility.
Nobody knows for sure where the transportation sector is going. Plenty of analysts have suspected that the rise of AVs will mean a decline in auto sales, as Americans have less of cars of their own. However, the effects of breakthrough technologies like AVs are difficult to predict, and if autonomous vehicles succeed in the ways they've been advertised, like lowering the number of auto accidents and deaths, easing traffic, and eliminating time wasted looking for parking, the number of vehicle miles is likely to increase.
The one safe bet here seems to be that the opportunity in electric and autonomous vehicles will be enormous. Keep an eye on these three disruptors as the new technologies continue to evolve.