As the mobility revolution gains momentum, the average investor is not aware of the magnitude of the change bearing down on the automotive industry -- a pillar of American manufacturing. The resulting landscape will deliver outsized returns to a few companies as others fight for survival. Here are recent stories that deserve closer watching
1. The ultimate mobile device
Did an Apple (AAPL 0.16%) executive accidentally fire a warning shot at the automotive industry? Senior Vice President Jeff Williams, when asked what the tech giant planned to do with its nearly $200 billion in cash, identified the car as "the ultimate mobile device." Let's talk about Apple's cash pile. It sits at $193.5 billion, and the company has generated $65 billion in free cash flow over the past 12 months. To put this in perspective, Apple's existing cash hoard is larger than the combined market capitalization of General Motors, Ford (F 1.10%), Fiat Chrysler, and Tesla. In theory Apple could buy all of America's automakers and have $20 billion left over. That obviously isn't realistic, and the vast majority of that money is trapped abroad as Apple doesn't want to pay U.S. taxes on it. But it speaks to the company's deep pockets, and given its culture of meticulous high quality, if it attacked the car industry many expect it could have a major impact on Detroit. There is a reason Fiat Chrysler CEO Sergio Marchionne warned that if Apple and other tech giants were to enter the market "they could fundamentally hurt this industry to the point where we are unable to respond quickly enough to the challenge."
When asked a follow up question on his comment, Apple's Williams deflected to the CarPlay infotainment system as an auto-related project. As a complementary technology that OEMs are quickly adopting, I'm sure the existing auto industry hopes it stays that way. However, given what is at stake and that Apple's biggest rivals are either demoing autonomous cars (Google) or rapidly filing car-related patents (Samsung), it is seemingly only a matter of time before this rumor becomes reality.
2. New ride sharing competition
Speaking of shots fired, Ford put one right across the bow of current ride sharing partner Zipcar. The Blue Oval announced it is debuting its own in-house ride sharing platform, called go!drive, in London. Ford has long provided the Avis (CAR +1.65%) subsidiary with vehicles for its rental fleet, an arrangement that will continue for now, despite the pilot program. Go!drive is closer in model to Zipcar with set pickup and drop-off locations than to, say, Daimler's popular Car2Go, which allows users to use a Smart car for one-way travel and park anywhere in the city. Ford is the first American company to join Daimler and its German rivals in ride sharing, as BMW has DriveNow and Audi is testing a San Francisco-only "Audi on Demand" service. Ford will continue pursuing its other new mobility program, the two-city "Dynamic Shuttle" premium bus sharing experiment.
Ford CEO Mark Fields has been outspoken in his belief of Ford as a mobility company and not just a builder of cars. In the future, this should push the boundaries of where investors expect a traditional power to generate revenue streams. But given the amount of upheaval that is heading Detroit's way, having a forward-thinking executive suite could make all the difference for Ford.
3. Uncle Sam loves autonomy
The final bit of driverless car news comes 35 miles west of the Motor City and highlights that it isn't just private industry that is pushing this new tech forward. The U.S. Economic Development Administration, part of the Commerce Department, is providing a small-but-symbolically-meaningful $247,000 grant to help transform a 700,000-square-foot former powertrain plant known as Willow Run into the Connected and Autonomous Vehicle Development Center. The $90 million project will be a testing ground for vehicle-to-vehicle and vehicle-to-infrastructure communications technologies, along with autonomous driving. The federal government sees a connected car as a safe car, funding the technological shift along with establishing regulatory standards ahead of time. Putting additional resources, especially tech resources, in the Detroit industrial cluster can benefit the area's whole supply chain. Detroit's best chance to thrive in the coming autonomous vehicle landscape is to further prepare for the day when a car will be, at least partially, defined by the technology that drives it.
Stay tuned as The Motley Fool follows the evolution of the auto industry and uncovers other value-creating industry shifts from which investors can profit.
