The Los Angeles Auto Show begins this week and market focus will be back on the car industry, for a short time anyway. It is important to remember that there are three major auto shows: Detroit, the European show that rotates between Frankfurt and Paris and the Tokyo Motor Show. The importance of a show is defined by number of new product introductions, and the high-volume, most-important vehicles are launched at the big three auto shows, not regional ones such as LA.
That said, this week's LA Auto Show will feature introductions of more niche, yet intriguing vehicles like the Subaru Ascent, Jaguar XF Sportbrake and the 2019 Corvette ZR1, which sports a 755-horsepower V8 with a top speed of 212 mph and capacity to produce 715 foot-pounds of torque. The ZR1 Is also available in a convertible version, but I should stop the fanboy stuff there as my remit is more focused on convertible bonds than convertible cars. Google it, though, and you will not be disappointed.
I used the term "Google" in the prior sentence intentionally as the focus in the auto industry has been more on technology than metal. In fact I believe the industry symposium occurring now in LA -- AutoMobility LA -- is more important for investors than the auto show itself, which opens to the public Friday. Alphabet's (GOOGL) Waymo division (not technically part of "Google" but certainly part of the rich valuation given to "GOOGL") will be represented at AutoMobility, and the list of keynote speakers is impressive:
John Krafcik; CEO, Waymo
Tom Gebhardt; CEO, Panasonic North America
Jan Carlson; CEO Autoliv (ALV)
Peter Schwarzenbauer: BMW Group (BMWYY) Board member
Brian Krzanich; CEO, Intel (INTC) .
When I followed the auto sector as a sell-side analyst--from 1992-2002 -- those of us in the analyst community would not have paid much attention had Intel's then-CEO (Andy Grove) showed up at an auto show. Now, the Krzanich presentation is arguably the most important one of the week, and listening to him is certainly more important than enjoying the Alcantara leather in the ZR1.
Auto companies are now being judged on their perceived placement in the race for autonomous driving, electrified powertrains, and the connectivity of the car as much as they are for units, price and cost. In the past the OEMs garnered the lion's share of the headlines, but now that the industry is searching for "killer apps" a company like Autoliv (my favorite company to follow when I was based in London) is just as likely to be viewed as a tech play as GM (GM) or BMW.
That's the point: it is impossible to tell who has the leading technology since there are no commercially-produced and sold autonomous vehicles on the road today. I've seen a couple of the Google self-driving cars with the flying saucers on the roof on my trips to Silicon Valley, but, remember, those cars are beta versions, not sold units.
So, in a world where 0% of the vehicles sold in the world are autonomous, fewer than 1% are propelled by purely electric batteries and (according to the International Energy Administration) 98.9% of cars sold in the global market still have no electric power propulsion of any kind, it is just too early to separate the winners from the losers.
That's why Tesla's (TSLA) absence from the AutoMobility speaking slots is so telling. It is just a complete waste of my time trying to explain to committed Teslaphiles that their beloved company is facing a mountain of competition from established OEMs. Tesla's cash "hoard" of $3.5 billion at the end of September (which has surely shrunk in the past two months) is not enough to compete against a global auto industry that easily has 50x that amount on their combined balance sheets.
We just don't know who the winners will be in the mobility sweepstakes, and for one company to valued as if it has already won just makes no sense. So, I'll download the presentations from AutoMobility LA and concentrate -- as any analyst has to -- on the companies that are making management available to discuss new technologies rather than those that are not.
It's a brave new world for carmakers, and for car stock investors more information is certainly favorable than less.