Forget driverless cars, as of this moment there are at least a dozen more interesting development in the transportation sector right now that deserves the attention. First, we’ve got this phenomenon of electric scooter sharing. Yes, I’m also in agreement that self-aware adults should never, ever use scooters as an acceptable mode of transportation but the world clearly doesn’t share the same mindset, so there we go.
In another dubious idea, we’ve got flying cars, which are definitely not cars and makes as much as sense, practically speaking, as translating a text from English to Japanese to Chinese to France and back to English again. In a much more digestible idea, we have the Hyperloop concept, basically a maglev train pumped up full of steroids. Being hurtled around in a tube at a velocity of hundreds of miles per hour sounds scary but compared to other dumb ideas the world has conceived recently, Hyperloop sounds brilliant by comparison.
The current state of the transportation sector
Partake in any trading courses you prefer and one item of advice will always crop up, take advantage of current trends. Transportation is that current trend. Google has their own Waymo project for driverless cars. Amazon is working with Toyota, Uber (who has their own self-driving project) and Pizza Hut for a self-driving shuttle bus, the kind that Chinese company Baidu is preparing to launch in Japan next year.
Dyson, the company that makes my hair dryer has even gone as far as preparing a line of electric vehicles, a left turn so illogical that it’s now a right turn. Tesla upended the industry so much that we’ve been seeing a barrage of EVs being released in a short amount of time, some from reputable automakers, while others, not so much. With Space X pushing down the cost of space flight with their reusable rockets, an actual private tour to the moon might actually be attainable this year.
The wisdom in investing within the transportation sector
In short? Because it’s ripe for disruption, as much as I loathe the word. Almost every nation in the world is suffering from problems with either traffic or transportation infrastructure. New York’s subway problems have lead to some genuine horror stories scarier than Stephen King’s clown. Sydney too is not without issues as train delays during rush hour have causes massive crowding on stations.
On the other end of the spectrum, nations are scrambling to fulfill their end of the Paris Agreement, not least of which is China, whose pollution levels in cities like Shanghai has went past acceptable levels. One of the point of contention of course are pollution from cars, which is why we’re starting to see electric car startups from China like Nio and Byton trying to be the Tesla of the East.
Whether it’s companies trying new out transportation schemes like the Hyperloop concept or companies trying to improve established transportation methods like with driverless and electric cars, there are tons of development happening in the transportation sector right now. Some of them have even the government involved as this is pretty much an issue that affects them as well.
Just like how technology is now making the financial sector quite a hot property at the moment, technology-driven transportation is predicted to be one of the main topic of conversation as we go forward. Driverless cars still have quite a while to go before hitting the completely autonomous level-5 standard while charging infrastructure for electric cars is still limited, with only Tesla’s supercharger network coming close to being adequate, and that’s only on the United States.
The risks inherent to the transportation sector
The transportation industry is what the business world dubs as capital intensive industry. It is referred as such because the investment and resource needed to generate an acceptable return of investment is massive and that if production isn’t going as well as it should, the company is essentially burning cash. Tesla’s been doing this for some time now and it was only recently that they’ve hit the production target they’ve made for their latest car, the Model 3.
Chevrolet hasn’t run into the same problems with their Bolt EV because they’ve been making cars close to a hundred years at this point. The question mark lies with cars from other startups such as Nio and Dyson, who’s never made something as big as an actual car before. Capital intensive industry does not treat newcomers kindly, most new car manufacturers in recent times are either focused on limited production models or simply new subsidiary of an established brand.
China’s booming automotive industry are rife with copycats while companies like India’s Tata and Malaysia’s Proton and Perouda are limited to developing countries, whose automotive regulations are nowhere as rigorous as the one in developed countries. Investing in a startup in a new company in these industries carries a big risk while investing on the old guard companies doesn’t have much growth opportunity. General Motors’ bankruptcy and VW Group’s dieselgate scandal also shows that they’re not exactly safe either.
Additional thoughts
One other tidbit that I haven’t mentioned is how shipping and deliveries figures out in this sector. Amazon and other logistics company have experimented with delivery drones but it still remains to be seen how it is going to be regulated. Technically, the same rule also applies to driverless cars as the ethical implication about what would happen when an accident occurs is still an issue that hasn’t been made clear.
While the transportation industry is indeed a capital intensive sector, some transportation companies, especially those dealing with public transportation are can be considered defensive stocks. People are always going to need commuting to and from work and the dividends they generate aren’t likely to stop. If you’re looking for an investment option that won’t bring you much headache, that is always a good option.