Consensus May Be Wrong About Impact to U.S. OEMs from Autonomous Vehicles and On-Demand Mobility, Says Deutsche Bank

The are significant misconceptions about the impact of Autonomously Driving Vehicles and on-Demand Mobility on vehicle ownership and auto demand, according to a team of analysts at Deutsche Bank. In the view of analyst Rod Lache, Auto Sales are more likely to increase than decrease, even as the population of vehicles declines.

"On-demand mobility services such as Uber and Lyft have tremendous potential for growth, but they will not replace private ownership everywhere," the analyst explained. "Our analysis suggests that these will be practical and financially attractive in the densest sub-sections of the top 20 MSAs (13.2MM households owning 15.5MM vehicles). Within these regions up to 61% of households may find it financially attractive to switch to On-Demand Mobility. Ultimately, we believe that network owned autonomous vehicles (e.g. operated by Uber, Lyft, Maven, Google, FordPass) may ultimately reduce the U.S. Parc by 7MM vehicles. Autonomous privately owned vehicles could further reduce the Parc by an additional 18.5MM."

"Our analysis suggests that Autonomous Driving and On-Demand Mobility will result in more miles driven. This should lead to increased annual vehicle scrappage (life expectancy is dependent on miles driven). Annual sales will likely increase and the Auto Industry will likely become somewhat less cyclical. Moreover, we see more upside vs. downside risk for U.S. mass market OEMs. They are not profitable in the segments that are most likely to be disrupted. And they have potential to generate significant recurring earnings streams from mobility services (every 1% of NA volume shifted to this market could contribute $1.4-$1.7bn to earnings)," continued the analyst.

Discussing impact on suppliers and semi companies, Lache said ,"McKinsey recently estimated that by 2030, approximately 50% of all vehicles sold globally will have semi-autonomous driving capability and 15% will be Fully Autonomous. We believe that most of the remaining 35% will have significant active safety content (i.e. autonomous braking). Based on these forecasts, we believe that the market for Automation alone (hardware and software) could climb to $120bn sometime between 2025 and 2030. We also expect this phenomenon to increase demand for Vehicle Electrification. We believe suppliers best positioned to take advantage of this opportunity include Mobileye, Delphi, Continental, Autoliv, and Denso. Semiconductor content per vehicle could expand up to $1k (~$400 from ADAS alone) vs. $350 today, making for a 15-year Automotive semiconductor CAGR of +6% (roughly half from ADAS). Top picks in global semiconductors to play this theme include Buy-rated Infineon, Maxim Integrated, and NXP."

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