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Big data’s $12 billion opportunity in the EV space

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Wells Fargo Automotive & Mobility Analyst Colin Langan joins Yahoo Finance to discuss the future of the electric vehicle market as increased investment in EV innovation is driving up competition in the automotive industry.

Video Transcript

MYLES UDLAND: All right, welcome back to Yahoo Finance Live on this Tuesday morning. We talked a lot about the auto space this year. We've seen a lot of electric vehicle adjacent companies come public via a SPAC. But when you look at the performance of the stocks in the space, it has been about the old school names. Ford and GM have really been outperformers, trouncing the S&P so far this year, as both companies come out and continue to increase their spending into their electrified future and really just come out with a series of announcements that the market just seems to love.

So let's talk a bit about what's happening in the space at large. Colin Langan joins us once again. He's an automotive and mobility analyst over at Wells Fargo. So Colin, let's start with Ford and GM. Both companies coming out over the last couple of weeks, talking about new electrified products, new investments they're going to make into the space, and investors bidding up the stock on more spending. What do you make of the dynamic that the market is reacting to out of these two, again, old line automotive powers?

COLIN LANGAN: Yeah, I mean, I think the big question is, ever since Tesla came along, is whether the traditional automakers could make the pivot, whether they're taking, you know, new competition and emerging entrants seriously. And these commitments and these announcements are simply a sign that they are. And so I think there's a lot of good news that particularly Ford, I think, this year, has sort of started to convince investors that they are really committed to future mobility and made some very positive announcements. And GM has just really continued to make the announcements that they've been making for several years now.

BRIAN SOZZI: Colin, which-- you have overweight ratings on Ford and GM. Which stock is the best bet right now on an electric car future?

COLIN LANGAN: I mean, I think both are very well positioned. I mean, I think GM has been talking about this longer. And so the LTM battery strategy seems to be longer in the pipeline. You know, that said, you know, I really think the MAch-E is one of the most compelling EVs from a mass market automaker. And Ford outlined also a very compelling, though, more recent EV strategy.

So I think it's kind of interesting. I think this actually has positioned the US automakers better than I think global automakers in general because they know the threat of disruption because they've been disrupted in their home market, losing market share for decades. And now they're taking these threats seriously and responding.

BRIAN SOZZI: Switching gears a little bit, Colin, Tesla stock, it continues to be under pressure. Do you think their involvement in Bitcoin is putting pressure on the stock?

COLIN LANGAN: I mean, it's creating-- I mean, it's $1 billion of their $17 billion in cash. So it is actually quite a bit of a distraction, given the size and market cap of the company. So I mean, it really shouldn't be taking too much impact. But there's a lot of news in the company, I imagine, that is creating some volatility, though, for sure.

JULIE HYMAN: Hey, Colin, we talk all about the new technology from the automakers, whether it be lidar. We talked to a lot of lidar makers for autonomous driving. We talk about electric vehicles. You were out with a note that says maybe what we're not paying enough attention to is the big data proposition at the automakers, that they're interacting with you more through their screens in the vehicles. How-- what are they getting from you? And how should they be? And will they be using it in the next few years?

COLIN LANGAN: Yeah, I mean, there's a massive amount of data coming out of the car. And actually, my concern for the traditional automakers that they've spent-- you know, they were spending too much time maybe chasing electric power trains and not enough of developing the technology. I really think Tesla is a technology company. That's why people are buying the cars. And it happens to have an electric powertrain inside it.

You know, I really think Ford's investor day really showed that they understand the importance of leveraging data in the car. So it's about the diagnostic data. So you'll be able to hopefully identify maintenance issues early and be proactive about addressing those issues and actually using the infotainment in the vehicle and your connectivity through your phones to maybe seamlessly get an appointment with the dealer to make that whole servicing process very, very painless.

It's also about understanding your customers because you know an awful lot about a person. You'll know where they live, where they work, where they shop. You'll know what kind of music they like. So you'll really be able to profile them. And the driver monitoring of the car actually might even give us a sense of how you're feeling that day because it'll be able to read your facial expressions.

So there's a tremendous amount of data that the car will have from that perspective that will allow them to understand their customers and realize this is an industry with very, very low customer loyalty. About 40% loyalty to its average brand is typical. That means half of your-- more than half your customers go somewhere else after five years. So improving that is massive in terms of reducing your marketing spend.

And then, lastly, having that connectivity opens you up to whole new servicing opportunities. You could pay for over the air updates. You could do subscription services like OnStar. You could do fleet management, which is a big part of what Ford was announcing at their last investor day, all much higher margin than the traditional auto business. So it's a very exciting time as these companies pivot toward this type of technology.

MYLES UDLAND: Yeah, you know, Colin, I just got a new car. And it has an app. And it's going to, I guess, tell me when I need an oil change and all that. It tells me how much my oil has already come down. I got to say, I mostly feel like they're just going to tell me I got to come in right now because they want the 80 bucks or whatever it's going to cost me. But maybe we can bridge that gap at a future point.

But this whole data conversation also makes me think of self-driving cars and what the future of autonomous driving looks like. How are you thinking about that? Because it seems like some of that hype has come out of the market and these other data opportunities that you're talking about are now a more realistic and more practical maybe path forward over the next five or 10 years.

COLIN LANGAN: Well, I think definitely level two autonomy. So that sort of semiautonomous functionality is rolling out. Ford will be rolling out BlueCruise. GM is rolling out its Super Cruise across more vehicles. So that sort of semi-autonomous driving will be important. In terms of full self-driving, you know, in terms of being able to take a nap on your way to work, that is probably going to be-- you know, I think most experts would put that as 10 years away, if not longer. I think people are realizing to get all those edge cases is taking a significantly longer amount of time.

We do think-- we did a report a couple of weeks ago on autonomous delivery. I think those more business-to-business specific use cases have a better sort of near term sort of lifeline. And maybe we'll see them a bit earlier and higher scale. The scale is always relative in the next 5 to 10 years. But I do think, you know, people are starting to realize that it's just going to take a long time before we really see scale applications of autonomous rideshare.

MYLES UDLAND: All right, Colin Langan, mobility analyst over at Wells Fargo. Colin, really appreciate the time as always. I know we'll be in touch. Thanks so much for joining this morning.

COLIN LANGAN: Thanks.