The world’s automotive industry faces challenges of tougher regulation, shifting consumer demand and technological disruption. We detail the big industry trends – from electric vehicles to the road to autonomous vehicles – and their implications across industries.
We see two big changes happening in parallel in the auto industry:
Our bottom line is that investors need to be selective as this evolution plays out, since the race to the future of vehicles will create significant dispersion between the winners and losers.
For example, semiconductor and software makers are set to be some of the biggest beneficiaries of the rising digital content of vehicles, we believe. These higher-margin players are muscling in on traditional auto players, which are less cash rich due to slimmer margins. See the chart below.
Where the money is
Profit and cost breakdown of selected industries, 2016
Sources: BlackRock Investment Institute, MSCI and Bloomberg, April 2017.
Notes: Automobile and auto components companies are constituents of the MSCI ACWI Automobiles and Components Index (USD). Technology hardware, software and services, and semiconductor companies are constituents of the MSCI World Information Technology Index (USD). The aggregate is based on latest available full-year data. Profit is based on earnings before interest and taxes.
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