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The Next Big Revolution in the Auto Industry (No, It's Not Electric Vehicles)

Dec 13, 2017

Richa Agarwal, Research analyst

Unless you have been living in a cave, you can't have missed the sudden hype around electric vehicles.

Environmentalists are excited about these ecofriendly cars...

Auto firms are also on board, driven by regulatory pressure and institutional dynamics...

And brokers and the media have a new theme to peddle to those looking for excitement in the stock markets...

Already, people are using the concept to recommend firms with the remotest connection with electric vehicles.

Rahul Shah recently gave us the names of some companies that are direct or indirect plays that you should watch out for.

But markets don't have the patience to watch the trend at play.

While the electric vehicle industry is yet to boom, stocks like Graphite India and HEG are already up a whopping 700% in the last one year alone.

In a lot of stocks, the opportunity has already played out. There is little margin of safety left in the real beneficiaries. Others are just swimming with the tide.

Did you miss this electric car ride?

The Next Big Trend in the Auto Industry?

Well, if you did, don't lose heart. Because I know something about the next big revolution in the auto industry. And the markets don't seem to have caught a whiff of that yet.

I'm talking about self-driving cars. You may not take this revolution seriously now. After all, we don't yet see any self-driving cars on roads.

But this could indeed be the next big thing.

You see, it's not technology holding back self-driving cars from hitting our streets. It's government regulations.

Without changes to city traffic rules, self-driving cars will be limited to inter-city highways.

But governments around the world are responding to this challenge.

There may still be some time before you spot a self-driving vehicle on the Indian roads. Meanwhile, global auto majors are quite serious about auto electronics.

By 2015, all the major auto firms already had the technology to drive cars in automatic mode.

It's too early to say what this will imply for auto companies. But the trend is certainly positive for the companies that are enabling automation in the sector.

I'm quite excited about it as my team and I have spotted a small cap company that will benefit big time from this trend. A company that is helping more than a hundred auto firms in the auto electronics domain. With clients like Volvo and Chrysler, it enjoys a strong global standing. Read more about this indirect play on auto technology in the latest Hidden Treasure recommendation...

And next time you cross the road, take a peek into the driver's seat to see if there is indeed a driver... or if the self-driving movement has arrived.

Good investing,

Richa Agarwal (Research Analyst)
Editor, Hidden Treasure

Brain Food for the Day

Choose a Future-Ready Company for Investment

Warren Buffett once said:

  • "Our approach is very much profiting from lack of change rather than from change. With Wrigley chewing gum, it's the lack of change that appeals to me. I don't think it is going to be hurt by the Internet. That's the kind of business I like."

It sounds like a foolproof approach...but may not be so relevant now. With technology taking over... moats are getting thinner. Even the biggest and best are not so safe anymore. The buy-and-forget style of investing is not easy to follow in these times.

Businesses need innovation and evolution to survive and thrive. And the ability to evolve is emerging as a strong competitive advantage that you cannot afford to neglect.

So, make sure the companies you are betting on are proactive and nimble enough to adapt to the sweeping changes in the business ecosystem... Because the real opportunity to generate wealth lies with these firms.

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