Electric vehicles are already changing how transport looks, but the more dramatic changes are still ahead of us and will come in the shape of automated driving. Some parts of the automation are already here, cars self-parking or communicating about potential collisions. In fact, automated driving technology is 99% already there but the last 1%, or 0.1% or even 0.01% of absolute safety is exceptionally hard to achieve and means that we are still some years away from full automation.
How does it work? Automated cars (or trucks or buses) use artificial intelligence to work out how to navigate changing situations on the road. The AI needs hundreds of thousands of example situations to train itself to know what to do in any given situation. But while it is relatively straightforward (if you are a software geek) to train the AI to tell the car to stop at a red light and go at a green light, if the situation is more complicated the AI is still not as capable as a human to make the right decision.
For instance, if there are road works there is a man signalling to detour right and into that side of the street walks a child with a football the AI is still not at the level to compute which way to steer. What is needed for this is a higher level of AI, computers on a different level of strength and cloud computing capacity that is also on the next level. All of these are being developed concurrently and will be there over the coming years. The interesting and exciting thing (for technology buffs in particular) is that some of the developments are already being used in cars and that every year a little bit more of this new technology is becoming more the norm in newly built cars, trucks and buses.
Automotive vehicles: the technical bit
The industry uses five levels to describe the level of automation. Level 1 is cruise control which is already used in all cars. Most of the industry is at Level 2, that is cars that can steer to stay in lane and can control their speed to avoid collision. Some can also self-park. A few vehicle makers like Tesla are nudging into Level 3. This level is when lane changing, taking exits and overtaking is automated – but only on motorways and with human supervision. The last two levels are very similar and still some years away from being implemented: vehicles which can fully drive themselves without a human being involved.
There is an exceptionally broad range of companies that are involved and will benefit from all the developments going in the direction of automation, not only vehicle makers, but also automation software providers, AI and cloud computing firms but also vehicle part makers and battery suppliers.
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Where to start with the list of potentially interesting companies? Close to the top of the list has to be Swedish car maker Volvo [STO:VOLV-B] , which is at the forefront of car driving automation and a leader in car safety. Another car maker is Nissan – its Nissan Leaf in February drove over 230 miles, the longest self-navigating journey completed in the UK so far.
Another area of high growth are automated trucks and here US truck manufacturer Paccar Inc. [NASDAQ: PCAR], one of the world’s largest makers of medium- and heavy-duty trucks is of interest. The truck maker is working closely with Aurora Innovation NASDAQ:AUR, a technology company developing a Level 4 self-driving system for long-haul transport. Aurora is also establishing a terminal-to-terminal freight network ahead of the launch of its Aurora Horizon driver-as-a-service business for trucking.
Turning to Asia, there is Chinese battery maker and technology firm Contemporary Amperex Technology Company. Shares in the firm have rallied up a staggering 742% over the last five years and while they have stalled in the last 12 months while China was grappling with the latest wave of Covid, shares have been picking up again since the start of the year. The list goes on.
For investors with an eye on the longer term horizon this is a sector which will be alive and booming over the coming years.
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