27th November 2013
The car market is increasingly driven by computing power and its ability to offer intelligent safety allowing new entrants to take on traditional manufacturers.
John Bennett, fund manager of Henderson European Focus Trust plc believes technological innovation in the safety of autos provides represents what he calls an attractive investment thesis. He says: “Always pegged as an innovative industry; auto is leaping forward in bounds. The vast barriers to entry that once entrenched traditional manufacturers have been eroded and for the first time in decades, new and evidently more innovative firms are taking up the mantle.
“The sea-change has been driven by the dramatic advancement of technology. Auto was once the industry for superior mechanical engineering and a frontier for efficiency, such as in lean processes and mass production. Now it is one served by computer power. As such it has seen the tech giants manoeuvre into the space. Google tested a prototype of the world’s first fully autonomously driven vehicle in 2010; Tesla, started by South African entrepreneur Elon Musk and founder of PayPal, was one of the quickest start-ups to make a profitable electric car. Microsoft is also pegged to get involved.”
Intelligent safety is essentially about the vehicle technology that protects us. “There have been multiple stages in its progress. First was passive safety, components we all know about such as airbags and seatbelts. Next was active safety – the use of technology to prevent accidents – which began with anti-lock braking systems (ABS) and electronic stabilisation programs (ESP).”
He adds: “The end-goal is ultimately the fully automated vehicles that Google showcased. It is in the steps between where we are now with active safety and the end-goal that we see opportunity. Advanced Driver Assistance System (ADAS) or assisted driving is an area of particular growth. Semi-auto parking assistance and motorway steering are others.”
He says the growth in this theme is driven by various factors including technology integration, consumer demand, but there is also regulatory pressure. “Safety assistance is one of four areas in which the European New Car Assessment Programme (NCAP) regulations judge cars. NCAP rewards and recognises car manufacturers that develop new safety technologies. From a regulatory perspective, by 2014 it will not be possible for cars to receive a 5* rating without an active safety component.”
Henderson owns shares in vehicle components providers French-based Valeo, German Continental, and Swedish-American Autoliv, which are benefiting from the demand in driver aid technology.