Autonomous Driving Expected to Bring Out the World's Inner Drunk, With Billions Up for Grabs

In a research report today, Morgan Stanley analysts including Adam Jonas said autonomous vehicles can expand the total addressable market (TAM) of alcoholic beverages while at the same time cut the incidence of traffic fatalities and accidents.

Drinking alcohol and driving cars represent hundred of billions of consumer hours and trillions of dollars of economic activity. These activities, in theory, should be mutually exclusive due to the threat to public health and safety (1/3rd of traffic fatalities are alcohol related) but in practice are frequently not (more than 1.1 million DUE arrests per year).

Drunk driving laws have been shown to significantly curb alcohol consumption. Autonomous driving means opportunities to drink before getting in the car and more opportunities to drink while in the car.

Government should like autonomous driving too, as it means less traffic fatalities and accidents. San Diego (2013), with the highest DUI per capita in the US of 907 arrests, saw a 14% reduction in DUI arrests when Uber began operations in San Diego, the firm noted.

According to the firm's research, each incremental drink consumed by the current drinking population that drives grows the TAM by $98 billion.

Amid this line of thinking, they see significant growth opportunity for alcoholic beverage firms. This is good for Constellation Brands (NYSE: STZ), Brown Forman (NYSE; BF-A), Diageo (NYSE: DEO), and Kweichow Moutai and to a lesser extent, Yanghe Brewery.

Restaurant stocks also stand to benefit as alcohol sales account for 10 to 20% of revenues and are a high margin business for most casual diners. Best positioned to benefit are BJ’s Restaurants (NYSE: BJRI) (a brew pub), Buffalo Wild Wings (NASDAQ: BWLD) (a sports bar) and Brinker Intl. (NYSE: EAT) (Chili’s, famousfor margaritas).

OEM suppliers with expertise in sensors and software/hardware are Mobileye (NASDAQ: MBLY), Tesla (NASDAQ: TSLA), Delphi (NASDAQ: DLPH), Continental (OTC: CTTAY) and Autoliv (NYSE: ALV).

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