What These Moves Tell Investors About the Driverless-Vehicle Threat
It's all but certain that eventually our cars will drive us around much of the time. How exactly this will impact companies within and surrounding the automotive industry is nearly anybody's guess, but what we do know is that companies will have to rapidly adapt or face extinction. Two companies facing driverless-car challenges, AutoNation (NYSE: AN), the nation's largest auto retailer, and Delphi Automotive (NYSE: DLPH), a massive auto parts supplier to original equipment manufacturers, are already preparing for such a future -- but what do their moves mean for investors?
Driverless cars pose a number of challenges for these companies, though for the most part, these won't fully materialize for decades, since it will take a while for these vehicles to make up a significant part of the market. But hurdles certainly loom for much of the automotive industry and could impact business sooner if companies don't begin adapting today.
Take AutoNation, for instance, which generated 79% of its year-to-date 2017 revenue from sales of new and used vehicles, and only 16% from its parts and service segment. Not only would driverless cars likely lessen our dependence on owning vehicles to some degree, it would also lower the number of crashes and repairs. Why does that matter, you ask? Because while parts and service only generated 16% of the company's year-to-date revenue, it generated 45% of its gross profit, more than any other AutoNation business segment.
Source: Fool.com
