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Mobile Tech: Will It Replace Cars?

By Jay Wei - Mar 4, 2014 at 11:45PM

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The solutions to current driving problems and the construction of future smart cars may lie in mobile computing technologies.

Many of today's automakers are increasingly aligning themselves with budding mobile computing tech companies in the hope of implementing mobile communications from behind the wheel. In-car communication is only the beginning of car manufacturers' likely adoption of yet-to-come mobile technologies designed for the next generation of automobiles.

Cars, as we know them, have been forced to slow down amid ever-worsening traffic congestion. Mobile tech companies may have the potential to reinvent today's cars and reduce global driving gridlock. Autonomous driving, accident-preventing car-to-car communication, mobile software for parking assistance, and other technologies may have the potential to fundamentally change the future landscape of driving.

Future mobile tech promise
Today, there aren't many secrets to making cars, as the technological barriers to entry in car manufacturing can be overcome by willing enterprises with enough capital investments. For example, Tesla ( TSLA 1.64% ) was started by founders who had no formal experience in the automobile industry or car manufacturing, yet the company has gone on to build a top-ranked consumer car in a short few years.

The latest speculation about an Apple ( AAPL 2.28% ) acquisition of Tesla shouldn't be a shocker for investors in either company, nor anyone who has closely watched the potential convergence of mobile tech and automobiles. Possessing an unparalleled drive for mobile computing innovation and a large cash position, Apple could propel Tesla to a new frontier, guided by its iOS in-car mobile communication platform, as well as other future vehicular technologies.

Similarly, if Alan Mulally of Ford ( F -0.75% ) had joined Microsoft ( MSFT 0.01% ), he might have (one day) tried to combine Ford with Microsoft. While such a scenario may now seem unreal even to the most vigilant investors, there's nothing imaginary about ongoing, close partnerships between car makers and mobile technology companies. Windows-based automotive operating system software has already become the main in-car communication technology used by many car manufacturers.

Mobile tech companies that provide in-car communication also include Google ( GOOGL 0.62% ) and BlackBerry. The latter supplies the QNX Software Systems, another major in-car technology that directly competes with Microsoft. Google's driver-less car has logged miles and hours in road testing and could someday disrupt the way people use cars, potentially changing the way cars are sold.

Current driving problem
In the near term, car makers may still be able to manage growth through continued pushes into emerging markets, mostly China and India. However, that may not be the ultimate winning strategy for car makers if their newly found emerging market businesses lose promise someday. With only 44 cars for every 1,000 people in China, urban traffic there is already the worst among the world's megacities.

Considering the car-ownership level of more than 400 cars for every 1,000 people in the U.S., there seem to be bright prospects for auto sales in China, the world's most-populous market. However, what automakers can actually offer could be far less than the actual number of cars they can sell, considering the maximum amount of traffic that China's roads and infrastructure can handle.

Convergence of mobile tech and car-making
For U.S. car companies, their overly dedicated strategy of introducing American cars to emerging markets may prove short-sighted. To catch up to advancing technologies and move along with auto-market changes, U.S. car companies should focus on reinventing the car concept of the last century.

The average five-year sales growth at both GM and Ford is currently below 1%. At that level, there's little chance for future earnings growth. To navigate future sales challenges, automakers must shift attention away from the conventional mobility of the past, and instead toward affordable modern mobile communication abilities. Otherwise, some mobile tech companies may one day move into the car business, since many of them have demonstrated aspirations to solve today's ever-present driving congestion problems.

The rationale for mobile tech companies' potential takeover of automakers is all logical. Automakers have driven themselves to the highest design and manufacturing capabilities possible, as they can offer ultimate speed and power, plus any desired level of fuel efficiency. However, because they lack another kind of power, the power of mobile computing, automakers may never progress into future automobiles, where mobile communication between cars and people supersedes mechanical speed and power.

Foolish final thoughts
Either by striking partnerships with mobile tech companies, or through falling victim to them as acquisition targets, automakers will eventually evolve to make future smart cars that are both mechanically sound and intelligent. It's unimaginable that the great invention of the last century, the automobile, stops rolling forward amid advances in mobile communication between man and device, as well as from machine to machine.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$175.08 (2.28%) $3.90
Microsoft Corporation Stock Quote
Microsoft Corporation
$334.97 (0.01%) $0.05
Alphabet Inc. Stock Quote
Alphabet Inc.
$2,963.73 (0.62%) $18.34
Ford Motor Company Stock Quote
Ford Motor Company
$19.81 (-0.75%) $0.15
Tesla, Inc. Stock Quote
Tesla, Inc.
$1,068.96 (1.64%) $17.21
General Motors Company Stock Quote
General Motors Company
$60.78 (-1.22%) $0.75
BlackBerry Stock Quote
$9.31 (0.21%) $0.02

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

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