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Daily Intelligence Briefing - April 18, 2017
Featured Topic: AUTONOMOUS VEHICLES:
The development of autonomous vehicles is accelerating, with big auto and silicon valley either competing or collaborating to get there first. Google (now Waymo), Apple, General Motors, Tesla, Mercedes-Benz, BMW, Lexus, Ford, and Volvo, among others, are racing to bring to market self-driving vehicles that will redefine our relationship with automobiles and the transportation industry in general. Most of these players expect to have fully self-driving cars in production by 2020-2021. In the U.S. alone, 25% of all miles driven will be covered in self-driving cars by 2030, according to the Boston Consulting Group.
As AV technology develops, many industries — including fast food, real estate, hotels, and airlines — will experience shifting business models as new opportunities and consumer expectations evolve. Other industries and some job categories will be entirely wiped out. Even our physical landscape will be transformed. It is creative destruction at its best. Here are 21 industries, other than autos, that driverless cars will turn upside down.
ALSO, here are some articles that highlight recent developments in the industry: (each article is summarized here)
CHART: There is no pureplay ETF on autonomous vehicles so the chart shows two ETFs to provide some perspective.
FURTHERMORE, here are some companies that are involved in the development of autonomous vehicles:
OTHER STORIES HIGHLIGHTED IN TODAY'S DIBS:
MRP Reports:
Current Themes:
About the DIBs: MRP focuses on identifying transformational change in the global economy and offering an investment thesis whenever an opportunity arises that has not yet been recognized by the market. The DIBs are MRP's compilation of articles and data from multiple sources on subjects reflecting disruptive change that have potential investment implications for an industry or group of securities. We share these with our clients who may already have or may be considering exposure in the industries affected. The subjects change daily and constitute an excellent update on featured topics. Every day, the DIBs also include links to MRP's MARKET VIEWPOINT, THEME TRACKER and MACRO MONITOR.
| MAJOR DATA POINTS | Top |
| MARKETS | Top |
Stocks - Tech Stocks in Malaysia Hit 10-Year High, Buoyed by Chip Boom
As growth in semiconductor usage underpins a 42 percent surge in Malaysian technology stocks, companies like Vitrox Corp and other Malaysian electronic service providers in expanding output to meet increased demand for chips. These companies are betting orders will rise as global manufacturers invest in next-generation technologies such as artificial intelligence and the so-called Internet of Things. Global semiconductor revenue is forecast to jump more than 12 percent this year, according to Gartner Inc. Signs of health for the industry are evident in the nation’s overseas shipments. Malaysia’s exports in February jumped the most in seven years boosted by a surge in demand for electrical and electronic products, which accounted for a third of total shipments.
The Bursa Malaysia Technology Index climbed to its highest level since 2007 on April 6. It’s the best performing gauge out of 10 industry groups and its advance compares to a 6 percent gain on the FTSE Bursa Malaysia KLCI Index. Vitrox has gained about 24 percent this year. Its peers including Malaysian Pacific Industries and Globetronics Technologies have done even better, surging at least 45 percent in the same period. B
Stocks - U.S. defense stocks easily outperform the broader market
With U.S. military strikes top and center in the news, readers have been introduced to some of the most advanced and powerful weaponry built by aerospace and defense companies. Tomahawk cruise missiles, manufactured by Raytheon were used against a Syrian airfield on April 6. The Massive Ordinance Air Blast (MOAB), or “mother of all bombs,” made by Boeing, was used against Islamic State terrorists in Afghanistan last week. Aerospace and defense stocks as a group are up 7% this year, with dividends reinvested, while the S&P 1500 is up 4%. Since Donald Trump was elected president Nov. 8, the aerospace and defense industry group has risen 15%, compared with 10% for the index. Trump has said he wishes to increase defense spending by 10%, or by $54 billion. It remains to be seen if the president will get his way, but the stock market tends to be forward-looking, and the recent action shows investors believe favorable times are ahead for defense contractors. Here are several sets of data showing which companies have excelled and which are favored most by Wall Street analysts... MW
| POLITICS & FISCAL POLICY | Top |
Brexit - Britain to lose two key EU agencies within weeks
A British newspaper says Brussels will proceed with plans to remove the EU banking and medicine agencies from London after the Brexit vote. The European Banking Authority (EBA) and the European Medicines Agency (EMA) were widely expected to leave Britain after last June's referendum on EU membership. But the removal of the two agencies appears to have been speeded up due to the British government's threats to walk away from any "weak" deal with Brussels over its new relationship with the EU. The decision is likely to see several other EU states compete to attract the reputable agencies. DW
Turkey - Turkey's referendum result could scare off investors
President Erdogan has built much of his political success on the back of a strong Turkish economy. But GDP and tourism are down and Sunday's referendum win could mean a less positive economic outlook. Turkish GDP rose by 2.9 percent last year, far short of the six percent in 2015. The reason given for this was a slump in the tourism industry due to the attempted coup in the summer of 2016 and several terror attacks. The tourism sector, which contributes around five percent Turkey’s GDP, saw revenues fall by almost 30 percent last year.
In 2017, economic growth is expected to be similar. The European Commission, IMF and World Bank expect an increase of between 2.5-3 percent. Inflation has risen to its highest level for more than eight years. Consumer prices rose by 11.29 percent in March, month-on-month. Foreign direct investment fell by 31 percent last year to around $12 billion. Above all, the sharp devaluation of the Turkish lira is likely to have a negative impact on the economy. At the end of November 2016, the Turkish central bank raised the key interest rate for the first time since 2014, bringing it to 9.25 percent. This monetary policy measure will also have a negative impact on the country's economy. A weak national currency makes imports more expensive, leads to losses in purchasing power among domestic consumers, and increases the liabilities of local companies that have borrowed loans in foreign currencies. DW
| FINANCE | Top |
Insurance - Cyber Insurance Becomes a Must for More Manufacturers
For years cyber insurance was overwhelmingly purchased by consumer-facing business—retailers, financial-service providers and hospitals. Mostly this was to protect against customer data theft. Manufacturers are now rushing to make sure they are covered. Manufacturers paid $36.9 million in premiums for cyber-specific policies in 2016, according to insurance consulting firm Advisen, and based on its sample of over 9,000 mostly U.S. companies. That is up 89% from the year before. Manufacturers accounted for 12.6% premiums tracked in 2016 compared with 9% the year before.
Factories are increasingly computerized, automated and digitally integrated with other parts of a company and keeping those networks secure is critical. In the event of a cyberattack that shuts down a factory, manufacturers may not be covered by existing policies. Many property and casualty, or P&C, policies require physical damage before they pay. The market for manufacturers is young, therefore premiums vary greatly and are based on revenue, specific lines of business, and the number of records involved. Premiums range from $10,000 to $15,000 for every $1 million of comprehensive coverage for manufacturers with $1 billion or more in revenue. That is about half of what retailers and banks pay. WSJ
| TRANSPORTATION | Top |
AVs - Caterpillar’s driverless dumpsters drive disruption in Australian mines
While much of the media is focused upon driverless cars, industrial vehicle makers have forged ahead, developing autonomous vehicles capable of delivering significant benefit to business. During Australia’s recent mining boom school teachers, cleaners and plumbers quit their jobs in the big cities to become highly paid truck drivers in the country’s iron and coal mines. Now the mining boom is over and Australia’s formerly well paid mining truck drivers have headed back to their old jobs as driverless dumpsters take over.
Fortescue Mining Group operates 54 driverless dumpsters which alone results in a $100 million capital saving on twenty trucks. The operational benefits are also substantial claims Scott: “Over four years they’ve moved 200 million tonnes and delivered a 20% productivity increase over their manned fleet. They’ve also reduced their pit to port costs by 43%.” Caterpillar -- one of the world’s biggest suppliers of mining equipment -- and its Australian dealer, Westrac, also found that by replacing drivers, they can make further cost savings by eliminating some comfort and safety features on the trucks with weight savings of up to four tonnes per vehicle.
While the ongoing direct labor savings are obvious, it’s not all bad news for workers in West Australia’s mining industry. Westrac now has a technology workforce of over 100 people with specialist skills in robotics, data analytics, radio networks and GPS technologies to support the autonomous vehicles. Diginomica
AVs - Don't Worry, Driverless Cars Are Learning From Grand Theft Auto
In the race to the autonomous revolution, developers have realized there aren’t enough hours in a day to clock the real-world miles needed to teach cars how to drive themselves. Which is why Grand Theft Auto V is in the mix. The blockbuster video game is one of the simulation platforms researchers and engineers increasingly rely on to test and train the machines being primed to take control of the family sedan.
As improbable as it may seem to the lay person, hyper-realistic video games are able to generate data that’s very close to what artificial-intelligence agents can glean on the road. AI software has been playing around with games from Super Mario Bros. to Angry Birds for a while now, tackling problems in controlled environments and learning through trial and error. Waymo uses its simulators to create a confounding motoring situation for every variation engineers can think of: having three cars changing lanes at the same time at an assortment of speeds and directions, for instance. What’s learned virtually is applied physically, and problems encountered on the road are studied in simulation. B
AVs - Big Fuel Savings From Autonomous Vehicles
Autonomous vehicles enjoy a symbiosis with electric vehicles. They both employ wired, rather than mechanical, driving and braking controls. So manufacturers can eliminate the weight contributed by those mechanisms, producing more economical cars.
By 2050, connected autonomous vehicles could reduce fuel consumption by as much as 44 percent for passenger vehicles and 18 percent for trucks, according to the EIA. However, those gains could be offset if autonomous vehicles make automobiles easier for everyone and liberate shut-in populations, such as the elderly, disabled, and people too young to drive, the study says. By boosting the nation's total vehicle miles traveled, that scenario could slightly worsen fuel consumption. The delta between scenarios is much wider for driverless cars in this study than for trucks, which already tend to be sized for their tasks and have less potential to merge underserved populations onto the roadway. Truck companies are expected to favor autonomous vehicles because they spare them driver costs, and when trucking companies platoon those robot trucks they will also enjoy fuel savings. Forbes
AVs - 3 things every investor should know about autonomous vehicles right now
The prospect of a self-driving future has the capability to generate extreme revenue growth worldwide. McKinsey estimates that by 2025, the economic impact from advances in AVs could reach as much as $1.9 trillion annually. Here are three high-level facts to know.
1) 33 of the world’s top tech and automotive companies are competing to bring AVs to market, yet mass production of self-driving cars could still be years away. A host of factors delaying the immediate reality of AVs include skeptical public perceptions and significant production costs. The industry will also require updated laws and regulations, a lengthy record of successful testing, and creation of complementary technologies, such as high-definition mapping, which allows AVs to understand and interact with the road.
2) Industrial AVs, such as trucks and buses, have already entered the market, and autonomous taxi services are likely to be next. AVs have already become a reality in highly-regulated and controlled business environments such as manufacturing and logistics. Amazon, for instance, already uses autonomous mobile robots to quickly transport shipping items in their warehouses. Thanks to this initial adoption, industrial AVs are rapidly advancing to less-controlled settings. Last year, the Netherlands brought AVs to the highway, testing a fleet of autonomous trucks from top brands like Volvo and Daimler.
3) As the AV market matures, there will likely be consequential shifts in related industries. Insurance may transition from selling to consumers to selling to AV manufacturers. Related jobs will also be affected, for instance. demand for truck-driving employees could go down while the demand for white-collar jobs like engineers and designers could rise. Bizjournals
AVs - Self-driving 'arms race' complicates supplier alliances
The race to develop and exploit autonomous vehicle technology is reshaping the hierarchy of the automotive industry, replacing traditional top-down manufacturing relationships with complex webs of alliances and acquisitions. That shift is behind deals such as the one between Robert Bosch and Daimler's Mercedes-Benz to collaborate on development of self-driving vehicles, with Bosch in a broad role as a systems integrator. Separately, Silicon Valley chipmaker Intel acquired automotive vision technology leader Mobileye, and has a deal to help BMW develop autonomous vehicles around Intel and Mobileye systems. Some of the car companies and large suppliers could wind up as competitors.
BMW has said it wants to sell its self-driving systems to other manufacturers, as does Delphi, which is developing a system of its own. Intel and Mobileye are partners in both ventures. The Dutch provider of high-definition maps, HERE, has taken a position at the center for several supplier webs. HERE is jointly owned by Daimler, BMW, and Audi. Intel owns a minority stake in HERE, and rival chipmaker Nvidia has a partnership deal. Nvidia itself wants to be a provider of powerful computer chips and "deep learning" software for self-driving cars to a broad array of customers, including rivals such as Mercedes and Tesla, competing mega-suppliers such as Bosch and ZF Friedrichshafen and Chinese tech companies Baidu and Tencent Holdings.
The vehicle manufacturers are divided on how much self-driving development and integration to farm out to the suppliers, or whether to keep most of that in-house. "At the moment, the carmaker is at an advantage since it knows how the components all fit together," said Mercedes executive Christoph von Hugo. AutomotiveNews
AVs - Vietnam's FPT looks to put self-driving cars on Asian roads
Vietnam's FPT aims to jostle into competition among industry titans like Apple and Google over autonomous vehicles by commercializing a low-cost system within the next two years. The country's leading information technology company is targeting about $200 million in annual sales from the business in 2020. Having developed a miniature car model equipped with a self-driving system featuring a 360-degree camera and various sensors, the company is now looking to install the system on real vehicles and start conducting road tests. FPT is working with Japanese, American and South Korean automakers, and its system will likely be used in new car models produced in Asia, a company executive said. The technology could quickly gain traction in Southeast Asia as the region's upper and middle classes expand. AS
AVs - Apple Secures Permit to Test Autonomous Vehicles in California
Apple has secured a permit for autonomous-vehicle testing in California, the clearest sign to date of progress in the company’s secretive efforts to develop self-driving car technology. The permit allowing to test drive vehicles on California’s public roads adds Apple to a list of rivals that includes Google parent Alphabet and Tesla. The move indicates Apple is going beyond testing on private tracks and in simulators as it works to improve artificial-intelligence systems that must learn to interact in the unpredictable world of human drivers.
An Apple spokesman declined to comment on the permit and referred to a statement it issued in December. The letter—which said Apple was making those investments for many purposes “including transportation”—suggested Apple was focusing on software that would control a self-driving car. That aligned with other signs that Apple’s car effort had shifted from building a car to designing an autonomous-driving system. Last summer, for instance, Apple eliminated some positions on Project Titan focused on car development and added software-focused staff. This new approach is a departure for Apple, which typically tries to control both the software and hardware of its products to deliver a uniform user experience, and maximize profits. WSJ
AVs - When car ownership fades, this parking garage will be ready for its next life
Architecture firm, Gensler, predicts car ownership will peak around 2020 and then start to decline, with more Americans relying on some form of ride-sharing than their own vehicles by 2025. That means cars gradually would disappear from home garages, curbs and parking structures, freeing up acre upon acre of real estate for new uses. About 500 million parking spaces serve this nation of nearly 326 million people, according to Gensler. Parking infrastructure covers an estimated 3,590 square miles, an area larger than Delaware and Rhode Island combined. Adoption of self-driving cars would free up garage space even if most Americans were to own one of the new high-tech vehicles. The total amount of garage space needed to maneuver and park a car would be more than cut in half, Leinberger said
Residential landlord AvalonBay which operates nearly 84,000 apartments in 10 states, is already beginning to plan for a future with fewer — and autonomous — cars. Mark Janda, senior vice president of development, envisions portions of underground parking being converted to a gym, a theater and perhaps other recreational uses when cars can park themselves two or three deep in tighter spaces. Other floors could be reconfigured to plug in more shops and restaurants and enable smooth and constant pick-ups and drop-offs. “We are designing it so in the future, if demand for parking decreases dramatically, we have the flexibility to go back to the city and ask for additional entitlements to change uses from parking to whatever,” Janda said. LATimes
AVs - US Air Force Successfully Trials Autonomous F-16s in Combat Situations
The world of autonomous vehicles extends well beyond cars and hoverbikes. The US Air Force has successfully demonstrated their very first autonomous F-16 fighter jet, which is capable of striking against a target without third-party control. To put the news into perspective, the US Air Force has collaborated with Lockheed Martin’s Skunkworks to make this project a success. The autonomous F-16 jet is now capable of conducting both air-to-air and ground strike capabilities without further human intervention, which is quite a significant development. Additionally, the autonomous F-16 is more than capable of flying to its destination on its own accord as well. The US Air Force has big plans where autonomous combat is concerned. It is believed the military hopes to allow for F-35s to command fleets of unmanned drones in the future, providing military personnel with a lot of important intel on the go. TheMerkle
AVs - Hyundai Says Superfast 5G Networks For True Autonomous Driving Are At Least A Decade Away
Hyundai says that the 5G cellular networks needed for fully-autonomous driving are about 10 years away from reaching production cars. Speaking at the Seoul Motor Show, Hwang Seung Ho of Hyundai's Auto Intelligence Division said 5G will first hit the mobile phone industry before making its way into the auto industry. A key reason why 5G networks are so important for autonomous vehicles is that they would offer near-instantaneous responses by sending and receiving information in less than a millisecond. Currently, most self-driving vehicles use 4G and vehicle-to-vehicle or vehicle-to-infrastructure connectivity, but such systems don't have as much versatility as 5G. Carscoops
AVs - GM’s Cruise Automation autonomous-driving subsidiary is about to grow
General Motors is getting more serious about self-driving cars. The largest U.S. automaker bought startup Cruise Automation last year to help it develop autonomous vehicles, and now it’s expanding the company’s operations. GM plans to add more than 1,100 jobs and invest $14 million in a new research facility in San Francisco for Cruise Automation, which GM says will more than double its research and development space.
GM and Cruise personnel are currently testing a fleet of automated Chevrolet Bolt EV electric cars on public streets in San Francisco, Scottsdale, Arizona, the Detroit metropolitan area. Unlike rival Ford, GM has not confirmed a timeline for the launch of a fully autonomous production car. But it may follow a similar strategy to Ford, which plans to use its self-driving car for ridesharing services only. GM already has a relationship with Lyft, and offers car sharing services through its own Maven brand in certain markets. DigitalTrends
AVs - FAW Jiefang's automatic driverless truck will be 'commercially available by 2018'
An automatic driverless truck, manufactured by Changchun-based automaker FAW Jiefang Automotive Co, passed its navigation test last week. Analysts said that its driving assistance system would greatly improve the security level of heavy vehicles. The vehicle is not only capable of recognizing obstacles, slowing down, making detours and speeding up, but is also able to react correctly to traffic lights, has adaptive cruise control, responds to remote commands and can successfully overtake other vehicles. However, Zeng said the technology is still far from commercialization despite the company's decision to put it on the market next year. "Considering China's complicated traffic and road situation, including a mixed flow of passenger and freight and poor compliance with traffic rules, it will be a long time before the technology hits the road," Zeng said. China Daily
AVs - Yamato Transport, DeNA start driverless delivery experiment
Delivery service giant Yamato Transport Co. and e-commerce specialist DeNA Co. will test out a home delivery service that uses driverless vehicles here from April 17. The motivation behind the experiment -- part of a project called "Roboneko Yamato" -- is to resolve the problem of driver shortages and redelivery of packages. By carrying out the experiment, which is scheduled to last for one year, the companies are hoping that they will be able to provide driverless delivery services to customers in the future. The trial will make use of three electric vehicles that are specially equipped with storage lockers, which the package recipients can open by entering confidential information such as pin numbers. As a general rule, these vehicles will be manned. However, this particular experiment will work on the assumption that the vehicles are driverless, and the drivers will have no involvement in the handing over of packages. Mainichi
| COMMODITIES | Top |
Gas - Blackstone Bets There's Gas Money to Be Made in the Oil Patch
The oil boom in the Permian Basin has become a gas boom. With its $2 billion takeover of EagleClaw Midstream Ventures, Blackstone Group on Monday became the latest company to bet on natural gas in a basin better known for its oil reserves. Its interest lies in “associated gas” -- a term used to describe fuel that comes out of an oil well along with the crude. Gas volumes will rise fivefold in five years on the EagleClaw system, said David Foley, CEO of Blackstone Energy Partners.
Gas output from the Permian, which accounts for more than a quarter of America’s oil production, has risen to a record every month this year, spurring deals in the region. The Permian has more than just booming production going for it. Blackstone says it’s targeting the play because supplies there are linked to global prices. In contrast, natural gas prices in eastern U.S. basins, such as the Marcellus shale, have been weighed down by a regional glut of supply. Permian gas may be easily exported to Mexico via pipeline and as liquefied natural gas from terminals on the Gulf of Mexico, Foley said. Texas gas also sells at less of a discount to the benchmark Henry Hub in Louisiana, compared with Marcellus supplies. B
Agriculture - World's Nutrient-Poor Farms Get a Vitamin Boost From Zinc Mines
Injecting an industrial metal back into the ground could prove a boon for farmers and miners alike. Used mostly to reduce corrosion in iron and steel, zinc also is needed in trace amounts to keep humans and plants healthy. Without zinc in their diets, people are prone to illness and crops are stunted. The trouble is that farmland in South Asia, sub-Saharan Africa and Latin America is increasingly zinc deficient, leading to more than 450,000 deaths annually of children under age five, a 2008 study in The Lancet showed. While use in agriculture remains small, sales of zinc-infused fertilizers from companies are growing, as farmers try to boost yields by reviving soils deprived of nutrients by overuse and a changing climate.
Expanding the market for zinc beyond steel and chemical producers would eventually bolster demand for the metal at a time of low stockpiles and surging prices. Last year, only about 270,000 metric tons of zinc was used on crops globally, IHS Markit estimates. That compares with 12.1 million tons by all users, according to Bloomberg Intelligence. However, with almost two thirds of the world’s farms deficient in zinc, demand in agriculture could triple to 900,000 tons if it was used everywhere it’s needed, Davis said. B
| ENDNOTE | Top |
Automotive 2.0: The new road ahead to autonomous vehicles and their applications RW
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