Transportation is Evolving

Transportation is Evolving

Summary:Macro trends signal a slowing picture for the automotive sector, from inventory-to-sales to production.To fight the challenging macro, Detroit and others are doubling down on innovation in autonomous and alternative energy.Investors can expect early adopters to step in as early as 2020.The number of autonomous vehicle testing permits in California alone has increased 4X since September of 2015. Back then, only 9 firms had permits from the California Department of Motor Vehicles. Permit holders today include the major players; Apple, Google, Ford and many more. From indicators like this, our opinion is the automotive industry is pivoting.1The electronic vehicle (EV) marketplace has also experienced substantial growth. Plug-in vehicle market share in the United States grew 37% in H1 2017 vs H1 2016. The absolute market share is still minimal (1.1% in H1 2017), but just like the aforementioned trend in autonomous driving, the growth is undeniable.2The traditional automotive market is being disrupted by a technological revolution. The bulk of this attack is being driven by the world’s largest tech and auto companies. The ultimate goal is to make roads safer, more efficient, decrease barriers to entry (both from a user and technological point of view) and spur growth in the automotive industry. As such, your commute to work will likely drastically change in the coming years.The Macro Auto Picture From a high level, the automotive sector has beaten the market year-to-date (YTD).  A well-diversified automotive ETF (CARZ by First Trust) is up 19.5% while the S&P 500 is up 12.97% YTD. Last year, autos in aggregate had largely underperformed, down -4.6% when the market was positive 10%. Prior to...