A Ride Sharing Fleet Of Autonomous Cars : Why This Could Be “Big” For Ford’s Investors?

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Recently, Ford Motors (NYSE:F) announced that it intends to deliver a high volume, fully autonomous vehicle for ride sharing by 2021. The company is collaborating with four start-ups in autonomous vehicle development and is doubling its Silicon Valley team for this effort.  According to Boston Consulting Group, by 2025 autonomous cars could very well create a $42 billion market for the technology and the global electric vehicles market is being projected to reach $270 billion by 2019 by Capital Market Laboratories.  While several companies—including Google, Apple, Tesla and General Motors—are at various stages of developing an autonomous vehicle, Ford is the first company to commit to a launch of a ride sharing fleet of driver-less cars as early as 2021. It is also involved with Uber’s launch of  a autonomous vehicle ride sharing service in Pittsburgh, which will initially use a Volvo SUV.  We believe this will give a competitive advantage to the company as it launches these vehicles ahead of other players and boost its revenues and profitability over the longer term.

Speeding Ahead Of Competition

According to Ford, the next decade will be defined by the automation of the automobile.  The company sees autonomous vehicles having a significant impact on the society, similar to that of Ford’s moving assembly line 100 years ago. As the auto industry undergoes a transformation, Ford is converting itself into an “auto and mobility” company and working on smart mobility solutions, of which autonomous cars are a part. While the company is confident of rolling out autonomous cars in line with the dates announced, other companies are also racing to launch their own driverless vehicles. While being first in the queue will give Ford an upper hand in this segment, it also comes with the risks of consumer acceptance and technological errors.

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However, Ford’s idea to launch its autonomous cars as ride sharing vehicles should help overcome these challenges. First, consumers don’t need to own ride sharing vehicles and hence the high cost of an autonomous car will not be a deterrent to use it. Secondly the growing population of millennials are not very keen to own or drive a car and hence Ford’s ride sharing autonomous cars could work very well with this section of the population. Furthermmore, older adults who do not prefer to drive can also benefit from this launch.

While Ford’s success in this segment and the overall impact of autonomous and electric cars on the industry has yet to be seen, we believe the company’s commitment to a date on which it will launch these vehicles is an indicator of the seriousness and fast paced efforts in this direction. Driverless cars are definitely in the future of automotive technology.  An early launch ahead of competition will allow Ford to fine tune is offerings for the long term, thus capturing a larger market share. We believe launch of a mass scale autonomous vehicle in the next five years can prove to be a big turning point for Ford and boost its profitability in the long term.

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