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Silicon Valley Continues to Bet on Cars

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【Summary】Betting on cars is a safe bet for Silicon Valley.

Original Timothy Healey    Jun 04, 2017 10:15 AM PT
Silicon Valley Continues to Bet on Cars

Tech companies are seeing rising shares as they continue to get involved in the automotive space.

Goldman Sach analysts had this to say about how software and new tech might change the industry: "The assumption that we need to own the vehicle in which we travel is dissolving." That's according to Fox Business News and Dow Jones.

As we all likely know by now, ride-sharing companies like Uber and Lyft are part of the changing industry.

Rapid Growth

"Rapid growth has already occurred (circa 120 percent year-over-year in 2016 from $16 billion in 2015). Our ride-hailing market estimate of $285 billion (with bear and bull scenarios of $177 billion and $492 billion, respectively) is derived by thinking about how big the ride-hailing opportunity could be relative to today's local taxi markets," the Goldman Sachs analysts wrote.

That, of course, assumes that future growth will continue, but it's just one example of how moving into the automotive industry has helped Silicon Valley companies. Whether it's a company like Uber or Lyft that primarily does business in the automotive space – after all, what other space does a ride-sharing company truly play in? – or an existing software maker like Microsoft or Apple that's providing tech to traditional "legacy" automakers like Ford or General Motors, any tech company that's made a significant investment in the automotive industry has been rewarded by investors.

Rise of Ride-Sharing

Given that the rise of ride-sharing, a concept that is likely here to stay even if/when growth levels off, and given the research into autonomous cars (cars will almost certainly be at least semi-autonomous going forward, even if fully self-driving cars never take over the roads), it's clear that investors are making a safe bet on tech companies when they dive into the automotive industry.

The future of the automobile is changing. Perhaps that change will move fast, perhaps not. Perhaps ride-sharing and autonomous cars will dominate the future, or perhaps neither will grow much beyond the current status quo. But even in the worst-case scenario, if the Goldman Sachs analysts are right, that means there will still be a huge market for ride-sharing alone, at just under $200 billion.

So it's no wonder that shares of tech companies that are getting involved in the automotive space are rising. At this point, any tech company that isn't working the automotive industry is missing the boat.

Fox Business News

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