However, in October 2022, Ford announced that it would shut down Argo AI and focus on driver-assist technology. Ford and Volkswagen may have determined that fully autonomous vehicles would not be profitable in the near term, while Argo had also struggled to attract new investors.
Ford BlueCruise is a hands-free driving system for pre-mapped highways that uses cameras and sensors to ensure safe navigation. Ford's Latitude AI subsidiary also develops automated driving technology, including a hands-free, eyes-off driver assist system.
Pros and cons of investing in self-driving car stocks
Pros:
- The self-driving car market is projected to expand significantly as technology matures and adoption increases.
- Early investors could see substantial returns if the market projections are realized and their chosen companies capture significant market share.
- Companies at the forefront of this industry are driving major technological advancements across artificial intelligence, sensor technology, and software development.
- This innovation can lead to new revenue streams and applications beyond consumer cars, such as logistics, robotics, and smart city infrastructure.
- Major players in the sector are not just car manufacturers; they include tech giants and sensor companies, so investors can target different parts of the AV value chain, from software to hardware.
Cons:
- Uncertain timelines for widespread approval and potential legal liabilities in the event of accidents pose significant risks and could slow down deployment.
- The market is highly competitive, with established automakers, tech giants, and specialized start-ups all vying for dominance as hopeful long-term winners.
- R&D costs are enormous, and many companies are still operating at a loss in this segment due to the significant capital investments required.
- Achieving Level 4 or Level 5 full autonomy is a massive technical challenge, and ensuring systems are safe and reliable in all weather and traffic conditions is an ongoing struggle.
- Any high-profile accidents could severely damage public trust and set back the entire industry.
What to consider before investing in self-driving car stocks
When investing in self-driving car stocks, you first need to consider the long, uncertain timeline to achieving full autonomy. While many cars have assist features, true Level 5 driverless vehicles that don't need a human are still years away due to the extreme technical difficulty of handling complex road situations. This uncertainty makes the sector highly volatile, as safety incidents or regulatory hurdles can quickly send stock prices plummeting.
You should also decide which angle of the industry you want to own, as different types of companies offer varying levels of risk. You can invest in established carmakers, tech giants focused on software, or specialized suppliers that make critical hardware, such as AI chips and sensors.
The massive profit potential in self-driving stocks comes from the chance to dominate a market that could be worth trillions of dollars in the coming decades as it disrupts taxis, trucking, and delivery services. Companies like Waymo are already generating substantial revenue from autonomous rides, and Tesla has reached a notable market cap partly on the strength of its self-driving promises.
If a company successfully scales a truly driverless fleet, it could achieve huge profit margins by eliminating the cost of human drivers, the biggest expense in transportation today. On the flip side, the risks are just as significant, as the industry faces massive technical challenges and high research costs that could make these self-driving enterprises unprofitable for years, even if they succeed in the long run.
How to invest in self-driving car stocks
- Open your brokerage app: Log in to your brokerage account where you handle your investments.
- Search for the self-driving car stock: Enter the ticker or company name into the search bar to bring up the stock's trading page.
- Decide how many shares to buy: Consider your investment goals and how much of your portfolio you want to allocate to this stock.
- Select order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you're willing to pay.
- Submit your order: Confirm the details and submit your buy order.
- Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.
