Jul 22, 2019 Equities

Investing in the trends of tomorrow: mobility on the cusp of change

Making private transport sustainable is a great challenge. Thousands of companies worldwide are working on alternative drive systems, reduced congestion and greater road safety. This also creates interesting investment opportunities.

  • The global trend towards electric engines and autonomous driving seems unstoppable.
  • Climate change and political regulation mean the internal combustion engine could become obsolete technology.
  • Autonomous driving, fleet networking, electrification and shared vehicles will shape tomorrow’s mobility.
4 minutes to read

In some countries, new cars with combustion engines will be banned as early as 2030.

From 0 to 100 km/h in just 2.6 seconds, autopilot and a range of up to 600 kilometers [1] a few years ago, who would have thought that a battery-powered vehicle could be so impressively powerful? US car manufacturer Tesla paved the way. Established competitors and newcomers worldwide are now attempting to follow suit, as pressure on the car industry rises. In particular, transportation that protects the environment is a challenge that continues to grow. Alternative drive systems, such as electric and hydrogen engines, aim to reduce exhaust emissions and conserve natural resources, such as oil and gas. But consumers also want new solutions that enhance comfort and safety on the roads. Self-driving vehicles and networked mobility systems are no longer science fiction; they are being tried out around the globe.

Billions needed in investment

In this spirit, the EU Parliament decided at the end of March that manufacturers must reduce fleet-wide carbon dioxide emissions from new cars by 37.5% percent between 2021 and 2030 [2]. This will be almost unachievable without a massive expansion of electromobility. Some countries are going even further and will have banned new combustion engines from the streets in just ten years’ time. In Norway, they will no longer be permitted as early as 2025, and other countries, such as the Netherlands, Ireland, India and China, plan a ban from 2030.

"Car manufacturers have got the message,” says Olivier Souliac, director of index strategy at DWS. “They are investing billions in new technology to cope with the fundamental changes taking place in their industry and not be crushed by new developments."

What do you think?

Will new types of mobility, such as autonomous driving, fleet connectivity, electrification and shared mobility, catch on in the near future?

There is still a great deal of uncertainty about how exactly the big breakthrough will happen, but it’s already possible to identify to areas that could particularly benefit from future mobility. Four trends are crucial: autonomous driving, data communication between vehicles, the electrification of drive systems and shared mobility – that is, shared vehicle use and management of vehicle fleets. These trends can also be an exciting and potentially profitable area for investors, as future mass-market products and applications are already being developed.


Focusing on tomorrow’s winners

"The greatest challenge for investors is identifying tomorrow’s winners today,” says DWS’s Souliac. “For it is by no means certain that traditional car manufacturers will also do great business in future with mobility."

Sought-after companies are those that will drive technological development in various areas of future mobility or act as key suppliers. For example, this includes processors of commodities such as lithium, nickel and polymer materials to produce electric batteries and manufacturers of electric components, as well as the software developers that make the components work together smoothly. Central in the networking and autonomous driving field are the areas of sensor technology, 3D graphics, electronics and expansion of a high-performance and fast next-generation (5G) mobile network.

Finding the companies that are driving these technological developments requires a lot of knowledge and experience in relevant markets.

A broad palette of companies that profit from future mobility in different ways reduces risk.

Diversify risks as broadly as possible

As yet, it is by no means certain which technologies will catch on in the mass market or which companies will pull ahead as a result. Investors who want to participate in this growth trend should therefore invest in a wide range of companies that will profit from future mobility in different ways. The more they diversify, the less risk they run of betting on the wrong stock. An even better idea is to invest in a fund or index that covers the entire future-mobility spectrum. 


Selecting shares with artificial intelligence

"The topic of future mobility can be especially interesting for risk-conscious investors with longer time horizons," says Souliac. 

However, as the market is changing rapidly with many newcomers, it is difficult to keep track. An investment fund can therefore be a good alternative. The risk of price deviations in individual shares is not eradicated in an investment fund but it is spread over a number of different securities.

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1. Source: Tesla

2. Source: http://www.europarl.europa.eu/news/de/press-room/20190321IPR32112/neue-co2-emissionsgrenzwerte-fur-pkw-und-transporter-gefordert

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