A team of analysts from Morgan Stanley on Thursday published an updated list of the bank's "Shared Autonomous 30" — a group of companies that the team thinks will influence a big transition from a world in which vehicles are sold to a world in which more emphasis is placed in how much vehicles are driven.
"The 100-year-old auto industry business model is facing unprecedented technological disruption, starting with the very definition of the market itself — moving from 'millions of units sold' annually to 'trillions of miles traveled' annually by the global car parc," the analysts wrote.
"Shared, autonomous and electric mobility," they added "addresses many of the shortcomings of the current industry model, including low utilization (cars are used 4% of the day with an available seat mile utilization of barely 1%), consumption of finite resources (cars consume nearly 400 billion gallons of fuel per year, accounting for 45% of US oil demand), and public safety (roughly 3,500 traffic fatalities per day globally)."
But here's where things get truly alarming for the traditional automakers.
"Morgan Stanley's US Research team settled on 30 US stocks," the note read, "all rated either Overweight or Equal-weight, across 14 industries, that the analysts believe are favorably exposed to growth opportunities in the execution of a shared, autonomous, electric ecosystem, or are favorably positioned to the adjacent data and content opportunities that are enabled by a business model that liberates hundreds of billions of consumer hours for monetization."
The worst-case and the best-case scenarios
At worst, this is hilariously wrong: the traditional auto industry will report May US sales next week, and the pace is expected to be running close to 17 million for the full year. That would mean more than 51 million new cars and trucks have rolled off dealer lots in three years — almost none of them shared, autonomous, or electric.
At best — at least as far as Morgan Stanley's teams' ability to call winners and losers — the list is grim for conventional carmakers. Only Tesla features among the 30. The remainder of the lineup includes tech firms such as Microsoft, Google, and Facebook; the auto contract manufacturer Magna; the mega-dealer AutoNation; and even Buffalo Wild Wings. ("Over the course of a year, how many more drinks might be consumed if people were completely freed from the responsibility of driving?" the team asked, evidently in all seriousness.)
It's worth noting that what we're looking at here is nothing less than the predicted collapse of an industry that defines an entire US city — Detroit — and that employs hundreds of thousands of people in the Midwest and South. Car dealers make a substantial contribution to the localities where they do business, and auto lending and leasing is the second-biggest business of many banks, behind mortgages.
The gains from the auto industry, in the US, as actually quite evenly distributed; the car business is the polar opposite of monopolistic, with General Motors, Ford, Fiat Chrysler Automobiles, and Toyota — the four biggest companies by share — each controlling less than 20% of the market.
It actually does make sense that numerous auto-industry-adjacent players will play a role in a shared, autonomous economy. But it's perturbing that only Tesla seems to have any meaningful upside. The assumption seems to be that Tesla will somehow dominate with electric, shared, and autonomous mobility all at once.
However, Tesla isn't that much different from a traditional carmaker, because it's essentially in the business of building a rolling mobility platform that costs quite a lot. And at this juncture, Tesla has shown itself to be very, very good at charting a visionary future, but very, very bad at actually constructing and delivering the vehicles that will make the visionary future a reality (less than 80,000 in 2016, with not much improvement in 2017, while GM will sell almost three times that many in just May).
To its credit, the Morgan Stanley team wrote that a lot of hard-to-predict stuff could happen between now and the end of the 100-year-old car business. But just as a prediction, it should be completely terrifying to auto executives across the world.
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