Want to spot the next big thing in tech? You should pay attention to what’s going on at the Consumer Electronics Show (CES).
The CES has been held in Las Vegas every year since 1967. It’s a chance for tech companies to showcase their latest gadgets.
In 1970, the first video recorder went on display there. The CD popped up in 1981. And the Xbox debuted in 2001.
Those were all massive products that changed the face of entertainment. But the biggest hit at this year’s CES – held last week – could be far more revolutionary than any of those.
Hitting the streets of Vegas without a designated driver
The biggest talking point at last week’s CES was a Mercedes. But not just any Merc. The F015 drives itself. A prototype is already cruising the streets of Vegas.
Mercedes of course is not the only company developing self-driving cars. Audi released details of its own driverless projects (560 miles with minimal human intervention). Google also talked about its own system.
But there are good reasons to bet on Daimler (which owns Mercedes) eventually dominating the sector.
I’ll explain why in a moment.
First, the bad news – despite the publicity, it’s going to be a while before you can drive around town with your feet up on the dashboard rather than the pedals. Google is still officially talking about starting to sell cars by 2017. But 2020 is the earliest possible date for a full launch.
That’s due to various system problems, such as being unable to operate in certain weather conditions, and to deal with obstacles such as manhole covers. And since Google’s car relies on very detailed maps to navigate, there is the question of how those maps will be compiled and updated.
The good news is that self-driving vehicles are far from pie in the sky – they’re already in use in certain commercial settings. Mining giant Rio Tinto has been using driverless trucks for over three years, for example, and it now runs more than 50 such vehicles.
Meanwhile, driverless bus shuttles are already operating on a small scale in some tourist areas, with one UK bus company looking to roll them out for rural bus routes.
Even ordinary cars are becoming more sophisticated. Driving aids, such as cruise control, are becoming standard. And many modern cars have some sort of advanced braking system that automatically slows them down if they get too close to the vehicle in front.
Automated parking systems are another recent innovation. Volkswagen and Audi are just two of the companies that now sell ‘self-parking’ cars.
These autopilot functions are so sophisticated that it’s hard to distinguish them from fully autonomous cars under most normal conditions. Indeed, electric-car maker Tesla claim that its latest model – out this year – will be effectively self-driving for 90% of the time.
It’s not technology that’s holding back the robot invasion
Yet in most countries, self-driving cars are strictly confined to private roads. So what’s the problem? The biggest barrier is not the technology – it’s the legal issues.
This isn’t necessarily a bad thing. Few of us want poorly designed or malfunctioning cars swerving all over our roads. So it makes sense for governments to err on the side of caution.
And so far, it’s working. Recent trials show that self-driving cars have far better safety rates than those with human drivers. Google cars have clocked more than 300,000 miles without serious incident.
As a result, governments are relaxing. Four US states (California, Nevada, Florida and Michigan) now allow self-driving cars on public roads. Other states are also thinking about doing so.
Barriers are also coming down in Europe. Several cities in Germany, France and Sweden allow self-driving cars, while Bristol is trialling their use.
Some experts even think that the endgame is not just for automated cars to become legal, but compulsory, with error-prone, potentially dangerous human drivers banned from the road. That may seem unthinkable. But given that at least 90% of crashes are down to human error, removing the human element entirely becomes the sensible – perhaps even the ethical – thing to do.
A fully automated system would have many benefits. Eventually, it should mean roads are used far more efficiently (because each car would know where every other car was going, allowing for better route planning). This would cut congestion while at the same time reducing the need for further road building. Driving systems that maintained a constant speed could also help cut fuel consumption and reduce carbon dioxide emissions.
The best way to invest in self-driving cars
Even if these more utopian visions don’t come true in the near future, it’s clear that self-driving vehicles will be more common on our roads before too long. So what’s the best way to invest?
That takes us back to the car that caused the splash at this year’s CES. Daimler (Germany: DAI) owns Mercedes, which is one of the leading brands in the race to dominate this new wave of cars.
Already its luxury models have some of the most advanced driver assistance systems available, including an advanced cruise control system that can automatically scan road signs in order to adjust the car’s travelling speed.
Mercedes aims to sell a fully automated car by 2020. This puts it in front of most manufacturers. And even if Google gets to market first, Mercedes’ expertise, reputation and distribution network suggests it still will grab a large share of the market.
Daimler trades on a forward price/earnings ratio of ten, which looks good value. And better yet, they should benefit if the European Central Bank does decide to embark on quantitative easing later this year.