Electric vehicles
Some exciting opportunities in the next few years will involve manufacturers of electric and hybrid electric vehicles. These are new and different, and most analysts expect them to eventually displace internal-combustion cars.
EV companies might see high growth, which is also exciting for investors. But it's important to remember that the processes involved in developing and manufacturing EVs aren't all that different from those used by traditional internal-combustion vehicle manufacturers. That means EV manufacturers face high costs, just like traditional automakers.
It's also important to remember that all the major traditional automakers are introducing their own electric vehicles. The competition in this segment of the market is fierce.
That competition has intensified as relatively high interest rates have slowed demand growth at a time when many carmakers have released new EV and hybrid models. As such, the primary focus over the last year or so has been on cutting costs and reducing capacity where necessary.
The future of the auto industry
The future of the industry lies in EV and autonomous vehicles, with an increasing part of the value in the car coming from its software component. In addition, many believe ride sharing, notably via robotaxis, is where the industry is headed.
Many of the major automakers have invested heavily in EVs, autonomous vehicles, and robotaxis, but the undisputed leader in terms of commercializing these opportunities is Tesla.
Its robotaxi rollout and its aim of having unsupervised full self-driving (FSD) available (so Tesla drivers can transform their vehicles into robotaxis, and Tesla can launch its dedicated robotaxi, the Cybercab) are not risk-free events. Still, if Tesla can get it right, the upside potential for the stock is significant.
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