Please ensure Javascript is enabled for purposes of website accessibility

One Surprising Autonomous Ride-Sharing Stock to Watch

By Travis Hoium - Apr 2, 2021 at 9:04AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Optimus Ride could make a little-known part of Polaris's business very valuable.

New business models are emerging in the autonomous ride-sharing market and some surprise companies are entering the arena. Polaris Industries (PII 5.84%) announced that it is partnering with Optimus Ride to bring a custom fully autonomous vehicle to market. 

Polaris may not be the first name you think of with autonomous vehicles, but this is part of a growing trend toward manufacturers providing contract services to autonomous driving start-ups. This could be lower risk way for Polaris to grow its business into autonomous vehicles. 

Autonomous vehicles driving in a city.

Image source: Getty Images.

Polaris and Optimus Ride

Last year, Polaris invested in Optimus Ride, which has been testing Polaris GEM vehicles -- small, no-frills, electric vehicles -- for two years, putting them through over 75,000 rides. This partnership aims to take Optimus Ride from the prototype phase to a fully developed, custom-made vehicle. Here's how the two companies put it in their press release:

Under this joint development agreement, an exclusive line of Polaris GEM electric low-speed vehicles (LSVs) will be manufactured to fully integrate Optimus Ride's autonomous software and hardware suite direct from the factory for deployment nationwide on streets in residential communities, corporate and academic campuses, and other localized environments.

Ironically, this isn't the first smaller-scale autonomous vehicle deal we've seen in recent weeks. Cruise, owned by General Motors (GM 2.19%) announced the acquisition of Voyage, an autonomous ride-sharing company that focused on small-scale deployments like retirement communities. Optimus Ride is tackling similar markets. 

Growing the GEM brand

As far as Polaris goes, GEM is a very small portion of the business that's gone almost unnoticed for years. While off-road vehicles, snowmobiles, and motorcycles garner most of the attention, GEM sits in the "global adjacent markets" segment that generated just $424.6 million of the company's $7.03 billion in sales during 2020. And it's only a small portion of that segment.

What a deal like this could do is make GEM a more well-known brand for local EV deployments. And if Optimus Ride grows its deployments at college campuses, urban areas, and retirement communities, this could be a valuable partner to have. 

The modularization of vehicle manufacturing

I look at a deal like this as a similar strategy to what General Motors is doing with Cruise. Polaris is effectively making its GEM vehicles a modular input into Optimus Ride's autonomous ride-sharing platform, becoming a specialized supplier to what might ultimately be the more valuable part of the value chain. This leverages Polaris's manufacturing and design services and takes away the ups and downs of marketing, sales, and working with dealerships. That end of the business will be handled by Optimus Ride. 

Becoming a supplier to a technology company like Optimus Ride, or in GM's case Cruise, may be the best way to stay profitable long term. We can see that these autonomous ride-sharing services are coming and as they do, the vehicle itself will be commoditized. Having partners to sell your manufacturing services to will be a solid, albeit potentially less profitable, business. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Polaris Industries Inc. Stock Quote
Polaris Industries Inc.
$103.14 (5.84%) $5.69
General Motors Company Stock Quote
General Motors Company
$35.98 (2.19%) $0.77

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.