A recently published report by AlixPartners, a well-recognized financial consulting firm, suggested that auto industry and technological players looking to get into transportation, are spending $255 billion on 200-plus electric models and $61 billion toward autonomous vehicles.
While this appears to be a lot of money, the worldwide vehicle industry is so large that $300 billion, spread over several years, is not likely to cause any material financial strain for most companies. The bigger issue is the lack of demonstrable, consumer demand for either electric or autonomous vehicles. Generally, electric vehicles are only selling in jurisdictions with very generous subsidies or stringent mandates. Autonomous vehicles are not available yet.
Investors should include company investment strategies, particularly in areas requiring significant innovation, as part of an overall assessment of portfolio strategy.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA