May 9, 2022 BARRON’S 13
C OV E R S T O RY
HERE COMES THE
FUTURE OF
TRANSPORTATION
Our panel explores what’s ahead for EVs, autonomous driving,
shared mobility, and more.
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W
e once thought the future of
transportation meant George
Jetson’s flying car. Instead,
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
we got Elon Musk’s Tesla—the company and
the electric car—whose twin successes jolted
the global automotive industry and are speed-
ing the (eventual) demise of the internal com-
bustion engine.
One might think, from the stock market or
Twitter, that Tesla and electrification are the
only things that matter today in the world of
transportation. But there’s a lot more to the
story, including autonomous driving, ride-
sharing, robotics, and mobility technology, to
name just a few salient trends. Plus, there are
300 million vehicles already on the road in
the U.S. alone that still need care and repair.
What does all of this mean for investors?
That’s the subject of Barron’s first-ever trans-
portation roundtable, which explores the out-
look for auto makers old and new, and the
technologies shaping the industry’s future.
Our panelist include Gary Black, managing
partner of the Future Fund, whose Future
Fund Active exchange-traded fund (ticker:
FFND) invests in companies capitalizing on
“secular megatrends”; Pierre Ferragu, head of
the global technology infrastructure research
BY L AU R E N R . RUB L I N
team at New Street Research; Abhijit Ganguly,
managing director of Goodyear Ventures, the
venture-capital arm of Goodyear Tire &
Rubber (GT); and A. Carolina Jolly, senior
research analyst at Gamco Investors (GBL).
The roundtable took place in mid-April.
An edited version of the discussion follows.
Barron’s: Let’s start with an overview of
this sprawling subject. What are the most
important trends in transportation that
investors need to follow and understand?
Gary Black: The No. 1 trend is that EV adop-
tion is exploding. Battery-operated EVs were
about 6.6% of total industry sales globally last
year. We estimate they were 9% in this year’s
first quarter, and will be about 30% in 2025,
rising to 60% by 2030. That is reshaping the
competitive landscape, similar to the way Ap-
ple [AAPL] reshaped the mobile-phone land-
scape when it introduced the iPhone in 2007.
The No. 2 trend is autonomy, and it
involves two factors: self-driving cars and
robo-taxis. An industry will develop around
summoning a self-driving car that will take
you where you want to go, as you can do to-
day in Phoenix and San Francisco. The global
ride-hailing industry today is about $300
I LLU ST R AT I O N BY ST E V E N W I LS O N
billion in revenue, including taxis.
Third, Tesla (TSLA) has developed a
direct-to-consumer sales model within the
EV industry. It avoids dealerships, and uses
social media instead of advertising. That’s a
big trend that we have to pay attention to.
Fourth, as we take out gas stations and
install EV charging stations, a lot of infra-
structure will need to be built. Range anxiety
is still the No. 1 reason why people don’t buy
EVs. We need much better infrastructure to
enable drivers to go from New York to Cali-
fornia without worrying about running out
of juice. These are the four big trends we’re
watching.
Pierre Ferragu: To me, the most important
trend is electrification. The first order of
transformation is that an oil-consuming, pol-
luting powertrain is being replaced by an elec-
tric powertrain, itself a monster evolution of
a $2 trillion industry. Then, there is the spin
that Tesla is bringing to it. Tesla is revolution-
izing this market the way Apple revolution-
ized the $50 billion mobile-phone market. It is
redefining the category and attracting a large
number of buyers to a significantly more
expensive, higher-value product.
Second, the gig economy and more auton-
 14
omous mobility are transforming per-
sonal transportation. This means de-
livery eventually can become real-
time, and cheap. We will be able to
leverage technology to make customer
transportation and delivery much
more efficient.
A. Carolina Jolly: I want to talk
about the vehicles we currently have,
and how much we rely on them. I am
focused on logistics: housing and ser-
vicing these vehicles, and warehous-
ing parts, and how these segments of
the auto industry will adapt to trends
such as EVs, autonomous vehicles,
and shared mobility. The supply
chain is also important. As the indus-
try trends toward EVs, how is it going
to source components and raw mate-
rials? And, how is it going to educate
technicians in the future? Many auto
companies are being driven by great
ideas, but for these ideas to fully pen-
etrate the market, people need to
learn to support them.
Abhijit Ganguly: We see three big
plays from a corporate venture-capi-
tal-deployment standpoint. Robotics is
intersecting with mobility, and at that
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intersection, we find autonomous
driving. Advanced driver-assistance
systems are improving.
We also see the connected car.
More vehicle components are getting
smarter, which creates opportunities
for the automotive industry to on-
board value-added products that
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improve safety and efficiency.
Then, we see contactless digital
technologies that were pulled forward
by the Covid pandemic. The conve-
nience these technologies can deliver
to end users will become a big deal. In
our world, that plays out in a few dif-
ferent ways. Mobile car care is one
example: People are choosing to have
their cars serviced in their own drive-
ways, at the airport, or elsewhere. Also,
companies are starting to use sidewalk
robots to deliver groceries, improving
the last-mile delivery space.
Last, but not least, sustainability
is becoming a big factor in mobility.
Sustainability at Goodyear means we
balance environmental, social, and
financial demands without compro-
mising the ability of future genera-
tions to meet their needs. We are
stressing sustainability in our Good-
year Ventures investments by enabling
electrification, accessibility, driving
safety, and less congestion through
tire-intelligence collaborations.
EVs represent about 5% of the U.S.
market. Penetration is around
10% in Europe, and 15% in China.
How will EV market share evolve?
Black: We call it EV adoption. Our
numbers are a bit different: We esti-
mate that EV market share is 4% in
the U.S. and 16% in Europe, with
China in the lead, at 17%. It just feels
like it’s a better product. You charge
your car at night like you charge your
phone. EVs’ cost per mile is a lot
cheaper than internal combustion
engines, and is getting cheaper as gas
prices soar. And, as the technology
gets more sophisticated, EVs will drive
themselves.
We are bullish on Tesla because it
is the market leader. Tesla has about
a 20% share of the global EV market.
As the TAM [total addressable market]
expands for Tesla—as the company
launches its Cybertruck pickup, an
under-$30,000 EV, cheaper versions
of its best-selling Model Y—we think it
can hold its EV market share. The
TAM for EVs is growing by about 50%
a year. Competition is coming for Tesla,
but even if the company just holds its
EV market share, it will keep growing
by about 50% a year.
What are the key constraints to
faster EV adoption?
Black: Tesla has to build a new man-
ufacturing plant or two every couple
of years. It just opened a plant in Ber-
lin that has the capacity to manufac-
ture 500,000 vehicles. The Austin,
Texas, plant has the same capacity.
Both plants are in the process of
expanding their initial capacity.
[Tesla Shanghai announced this past
week that it will open a second factory
with a 450,000-unit capacity.]
What is your price target for Tesla?
Starship robots are used for meal delivery on the campus of Bowl-
ing Green State University in Bowling Green, Ohio.
BARRON’S
2022 Black: Our target is $1,600 a share.
ROUNDTABLE We estimate total global SAAR [sea-
PANELISTS sonally adjusted annual rate of auto
sales] of 80 million vehicles a year by
2026. We estimate EV adoption at
Gary Black
Managing Partner,
36% by 2026, and assume that Tesla
the Future Fund will retain 20% of the EV market.
That means Tesla will deliver about
6.2 million [vehicles] by 2026, versus
Pierre Ferragu 936,000 last year. We assume the av-
Global Team Head erage selling price stays about where it
Technology is, and the company’s auto gross mar-
Infrastructure, gin will grow to about 31.5% from 29%
New Street
Research
in 2022. We estimate that Tesla will
earn about $55 a share in 2026.
We assume the stock will trade for
Abhijit Ganguly about 45 times earnings, versus 75
Managing Director, times earnings today. That gives us a
Goodyear price of about $2,475. Discounting that
Ventures back at a 12% cost of equity gets us to
a $1,600 price target today.
A. Carolina Jolly
Do you see any risk in the CEO
Senior Research
Analyst, Gamco spending more of his time on a
Investors company called Twitter [TWTR]?
Black: Elon Musk can handle many
projects. He’s also founder and CEO
of SpaceX, and founder of The Boring
Co. I am not a fan of the distraction
caused by his pursuit of Twitter, but
he’s not using Tesla’s capital to do so.
If he acquires Twitter, he could easily
install another CEO to run it. [Musk
subsequently agreed to buy Twitter
for $44 billion.]
Pierre, you’re also a Tesla fan.
Explain your bullish view.
Ferragu: Electrification is a dynamic
system in which the more adoption
you get, the more possibilities there
are for people to buy new cars. At this
point, demand for Teslas has vastly
exceeded existing capacity. I am fo-
cused on supply growth. Today, Tesla
has to increase prices almost every
month to rein in demand and try to
get away from a nine-to-12-month lead
time. The company is rapidly increas-
ing the cost efficiency of its manufac-
turing operation, and the cost of as-
sembling a car is falling fast. The only
constraint over the next five to 10
years will be manufacturing capacity.
If Tesla maintains the current pace
of growth in its production capacity, it
should be in a position to sell about 20
million units in 2030, versus barely
one million last year. Between now
and 2030, Tesla has what it takes to
get there. Then there’s the question
of how fast other auto companies
can ramp up their EV production.
Recently, we heard from the CEO of
Rivian Automotive [RIVN] that it is
May 9, 2022
going to be tough. The battery market
is competitive, and it is difficult to get
the supply chain lined up. It is going
to be a fascinating decade.
In the meantime, Tesla is leading
the charge on the three most impor-
tant fronts, which are on the demand
side. Their cars are the most appeal-
ing; they have the best charging net-
work, and the best visibility. On the
technology front, Tesla innovates at
an unheard-of rate. Tesla retooled its
pilot battery-manufacturing line seven
times in two years, which means al-
most once a quarter. The average man-
ufacturer would do that every two to
three years. Tesla is innovating eight
to 12 times faster than anyone else in
the world in terms of manufacturing.
The last aspect is that Tesla is
accumulating scale. Even if some
other companies manage to move
faster in the early stages of EV devel-
opment over the next few years, Tesla
will still have a significant advantage
related to its expenses and scale.
What is your Tesla price target?
Ferragu: My price target is $1,580.
Between now and the end of the de-
cade, Tesla will be a hypergrowth
business. It can grow its cash flow by
30% a year. I arrive at my price target
by applying a multiple of 75 times
forward earnings, and I expect earn-
ings that are 30% to 50% above the
consensus in the next couple of years.
What happens once Tesla can
make two million cars a year, but
sell only 1.7 million? Also, unlike
Apple, the company manufactures
its own products. Is that an advan-
tage, or a risk?
Ferragu: On the first question, I don’t
have a strong conviction that will hap-
pen over the next eight years. Tesla
has an immediate addressable market
today of less than 10 million units,
limited by the number of people who
can afford a car that costs nearly
$40,000, or more. But it has already
demonstrated that its effective ad-
dressable market is 2 ½ times that,
because for every two drivers coming
from this premium market, Tesla at-
tracts three from the non-premium
market who are trading up to Tesla.
Photograph by Nick Hagen
There is so much pent-up demand
coming from that trade-up. Tesla will
need two to three years to meet that
demand with cars at today’s price
points, and will continue to generate
30% gross margins. In three years,
Tesla will have a car priced at $25,000,
 May 9, 2022 BARRON’S 15

“
We are bullish on
Tesla because it is
the market leader.
Tesla has about a
20% share of the
global EV market.”
Gary Black

which will extend its addressable mar-

ket to more than 50 million units per
year. I don’t know when the company
becomes demand-constrained.
As for the comparison with Apple,
the companies are more similar than
you might think. Apple doesn’t manu-
facture its own products—it has a
symbiotic relationship with Taiwan
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Semiconductor Manufacturing
[TSM] and Foxconn Technology
[2354.Taiwan]—but it controls the
product end to end, from the hard-
ware to the software, service fees, and
platform. That is also the Tesla model.
Apple came into a world in which
contract manufacturing was already
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mature. It didn’t exist in the same way

in the car-manufacturing industry.
Apple had the possibility to leverage
a flexible, efficient, third-party manu-
facturing system, and Tesla didn’t.

Before this becomes the Tesla

roundtable, where do the rest of
you see investment opportunities?
Jolly: We foresee 35% EV penetration
[of new car sales] in the U.S. by 2030.
There are 17 million new cars sold in
the U.S. in a normalized year, but there
are almost 300 million vehicles on the
road already. We focus on the compa-
Gary Black
nies that service and repair those cars.
To Buy: The average age of vehicles on the road
today is 12 years. We like companies
Tesla / TSLA such as Genuine Parts [GPC] and
$952.62 O’Reilly Automotive [ORLY]. They
generate over $1.5 billion in free cash
Uber flow per year from the distribution of
Technologies / aftermarket parts. We also like Monro
UBER [MNRO], which has 50% exposure to
$28.10 tires. Lastly, Universal Technical
Institute [UTI] trains technicians;
Prices as of 5/4/22.
Source: FactSet Photograph by LAWRENCE AGYEI
 16
“
Tesla is innovating eight to 12 times
faster than anyone else in the world
in terms of manufacturing.”
Pierre Ferragu
automotive is a big part of their busi-
ness. The industry is going to need
technicians, especially as Tesla’s Model
S and Model Y come off warranty.
How will greater EV adoption im-
pact traditional service providers,
such as Genuine Parts and O’Reilly?
Jolly: We estimate that EVs will ac-
count for about 2% of the U.S. after-
market, or vehicles more than six years
old, by 2030. Those vehicles will re-
quire about 30% less work than tradi-
tional vehicles. EV adoption will be a
small drag on aftermarket outfits like
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Genuine Parts and O’Reilly in the next
few years, crimping demand by about
60 basis points [six-tenths of a percent-
age point] through 2030. The big four
aftermarket distributors can double
their market share in a bull case, going
from 40% to 80%, as they have signifi-
cant ability to invest in the future.
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.
Ganguly: From our standpoint as a
tire company, electrification is a tre-
mendous opportunity. EVs demand
very different performance character-
istics. We also recognize the need to
manage the duality in the near term—
namely, the different types of vehicles
coexisting in the marketplace. And,
we see an opportunity in infrastruc-
ture, both in the software used in EV
chargers and in putting chargers in
the right places. We are investing in
companies that make charging easier
for end-users, whether consumers or
fleets. We’re studying the vehicle-to-
grid intersection, and the potential for
vehicles to return energy to the grid.
These and other areas allow for new
software-development opportunities.
There are also hardware opportunities
in the charging-station infrastructure.
Which start-ups in these areas
should investors keep an eye on?
Ganguly: Revel is a Brooklyn, N.Y.–
based EV-only ride-share company in
our portfolio. It has installed its own
charging infrastructure in Brooklyn,
BARRON’S
and is building it out in other places
to support its fleet operations, which
include 100% electric cars and electric
mopeds. And, it has opened up the
charging infrastructure to third parties.
We have also invested in AmpUp,
which makes charging more conve-
nient for users, fleets, and facilities
managers. AmpUp’s software allows
for choice and control. For drivers,
AmpUp offers a dedicated mobile app
to locate chargers and schedule charg-
ing. For charging-station owners, it
helps control who receives access to
charging, provides analytics, and opti-
mizes energy usage. For fleets and
utilities, AmpUp can provide energy
controls to deliver higher uptime.
These are two examples of compa-
nies facilitating the software/hard-
ware combination required for EV
charging to work broadly.
What is the revenue opportunity,
or total addressable market, for
EV connectivity?
Ganguly: There’s a lot to be done once
you put hardware in the ground. There
are simple things, like remotely man-
aging hardware and performing diag-
nostics. We envision a world of SaaS
[software as a service] opportunities
based on this installed hardware base.
On the connectivity side, we are still
in the process of understanding the
TAM. The connected car allows for
new value propositions. Car compo-
nents can be connected to the internet
to provide better safety and efficiency
and predictive maintenance. For exam-
ple, an intelligent, connected tire can
communicate tire health and, in the
future, alert road conditions to drivers.
In addition, we are expecting block-
chain-enabled smart contracts to help
connected cars with unique VIN num-
bers make payments automatically for
tolls, fuel, and such, and also interact
with city infrastructure and other
cars. Web 3.0 start-ups may also help
allow connected cars to display vehi-
May 9, 2022 May 9, 2022 BARRON’S
cle data in a user-friendly way, and
allow users to share data to help get
services such as insurance tailored to
their driving needs and styles.
We are extremely excited about
connectivity—the ability to digitize
the contact point of the car to the road,
which happens through the tire. If you
can do that, you can achieve much
greater safety and efficiency.
We’re almost an hour into this
discussion, and no one has men-
tioned Ford Motor [F] or General
Motors [GM]. They are spending
tens of billions of dollars to de-
velop EVs—and catch up to Tesla.
What are their prospects?
Black: Ford and GM are going to
struggle. Ford’s new Mustang Mach-E
[an all-electric Mustang] has gotten
the most traction, but even then, the
company can’t produce enough. ICE
[internal combustion engine] vehicles
still account for 91% of industry sales.
Ford and GM have deliberately tried
not to cannibalize their base business.
That’s a mistake.
You have to go after the heart of
your business and not be afraid to
cannibalize yourself, recognizing that
EVs at some point are going to be
100% of the market. We are starting
to see that with the introduction of the
Ford F-150 Lightning and Porsche
Taycan. Traditional car makers will be
more successful in the EV world if
they bring out EV versions of their
best-selling brands, rather than trying
to launch new brands with an EV
moniker.
Jolly: I might take the other side of that
argument, even though I agree with
some of Gary’s points. GM generates
about $150 billion of revenue annually.
It has said it will double that revenue
by 2030, including $50 billion in
Pierre Ferragu Cruise [autonomous] and $90 billion
in EV. ICE vehicles will account for
To Buy: 65% of sales through 2030, but tradi-
tional auto makers also have dealership
Tesla / TSLA networks that provide parts and ser-
$952.62 vice. Currently, pure-EV manufactur-
ers don’t have this. GM generates sig-
Uber nificant cash flow, but trades for only a
Technologies / mid-single-digit earnings multiple.
UBER From an enterprise-value perspective,
$28.10 once you back out stakes in Cruise, the
FinCo [finance company] book, and the
Grab Holdings / net cash on the balance sheet, GE
GRAB trades for one to two times Ebitda
[earnings before interest, taxes, depre-
$3.18 ciation, and amortization]. To me, GM’s
Prices as of 5/4/22.
Source: FactSet Photograph by BENEDICT EVANS
17
stock could be a great value play.
Black: To continue the Apple analogy,
who were the dominant players in
mobile phones before the iPhone
launched? Nokia [NOK], BlackBerry
[BB], Motorola, and Samsung Elec-
tronics [005930.Korea]. Three of the
four really don’t exist anymore as mo-
bile-phone companies. They couldn’t
compete with Apple. I put the iPhone
in the same category as Tesla. From a
technology standpoint, Apple didn’t
stand still. It kept improving the prod-
uct, and that’s what you’re seeing with
Tesla. I don’t see GM and Ford out-
innovating Tesla. Unless Ford and GM
separate their EV businesses from
their ICE businesses and build sepa-
rate EV companies almost from
scratch, they are going to have a hard
time gaining traction in EVs in the
same way that Motorola, Nokia, and
Blackberry failed to gain traction,
even though they had a huge head
start versus the iPhone.
Ferragu: Tesla’s Model 3 and Model Y
are very competitive in price against
an equivalent ICE Mercedes or BMW.
But Tesla has a 30% gross profit mar-
gin. It costs a traditional auto maker
typically $10,000 to electrify a car.
This is an enormous challenge for
them. How can they compete with
Tesla if it makes electric cars more
cheaply than their ICE cars, and they
have to spend $10,000 more to make
an electric car?
But Carolina is saying something
important: You don’t want to underes-
timate the economic momentum of the
legacy auto makers. Also, the U.S. auto
industry has enormous political sup-
port. I expect the industry to survive,
but the next 10 to 20 years are going to
be extremely challenging. These com-
panies will need financial lifelines from
their governments. In some ways, they
are too big to fail, or too big to lose sig-
nificant market share to new entrants.
How do non-U.S. auto makers
stack up?
Black: Volkswagen [VOW3.Germany]
has been pretty aggressive about going
after the EV business. Toyota Motor
[TM] is still the world’s No. 1 auto
maker. It has two best-selling brands:
the Camry and RAV4. Toyota has been
slow at adapting to the EV world. That
could hurt them, so I would put them
in the loser’s box. The negative argu-
ment for Tesla is: Can they produce 10
million units per year by 2030 with
only two models? No auto maker has
been able to do more than about a mil-
 18 BARRON’S May 9, 2022

GM generates
“
significant cash flow,
but trades for only a
mid-single-digit
earnings multiple. To
me, GM’s stock could
be a great value play.”
A. Carolina Jolly
lion per year.

Autonomous driving is an alluring

concept, but it hasn’t yielded
much yet in the way of real-world
applications. What is the outlook?
Ganguly: We have made a few invest-
ments in the autonomous world. We
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are investors in Starship Technolo-

gies, a mobility company whose au-
tonomous robots handle last-mile
delivery of groceries and meals; last
mile is the most expensive part of
delivery. The robots operate on side-
walks, which eliminates many of the
A. Carolina Jolly regulatory hurdles that come
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with operating on roads. On-demand

To Buy: ordering and contactless delivery saw
explosive growth during the Covid
Genuine
pandemic.
Parts / GPC
We have also invested in Gatik, an
$135.18 autonomous trucking company
working on middle-mile logistics—
O’Reilly that is, business-to-business logistics
Automotive / ORLY for the retail industry. We are work-
$628.08 ing on connected-tire technology. We
see ourselves playing an important
Monro / MNRO role in making autonomy safe and
efficient. Focusing on point-to-point
$46.17 delivery seems a more solvable prob-
lem than full-scale autonomy. Both of
Universal
Technical
these companies allow us to work on
Institute / UTI a subset of the autonomy problem,
but there are people looking at this
$10.96 space through a much wider lens.

Copart / CPRT Are there attractive public compa-

$118.83 nies in the autonomy arena?
Jolly: Our focus, again, isn’t on who
Snap-on / SNA is going to win in EVs or autonomous
vehicles, but which companies are
$227.95 going to benefit from these trends.
Prices as of 5/4/22.
Source: FactSet Photograph by BENEDICT EVANS
 May 9, 2022
Greater penetration of autonomous
technology over the next five years
means more-advanced sensors and
sensor-based parts on vehicles. The
addition of this technology means two
things: People probably will be able to
do less work themselves on their cars,
so companies with exposure to repair
will do well. Second, those sensors
likely will require more frequent recali-
bration, so cars will go in for repairs
more often than in the past.
In addition to Monro, Genuine
Parts, and O’Reilly, we like Snap-on
[SNA], which sell tools to repair
shops. We expect them to make
more-valuable tools as autonomous
technology penetrates the market. We
also like Copart [CPRT], which auc-
tions salvaged vehicles.
As the market transitions to au-
tonomous vehicles, new technologies,
especially sensor-based tech, are
driving up the cost and value of re-
pair. Increasingly, it is more expen-
sive for insurance companies to pay
for the repair of these vehicles than it
is to scrap and auction them out. This
creates an opportunity for Copart.
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Pierre, what are your thoughts
on the future of autonomy?
Ferragu: We are making good prog-
ress on autonomous cars driving
safely, but the real challenge is mis-
sion delivery: making sure the car
does the job in finding the person to
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pick up and figuring out where to
drop her off, for instance. Autono-
mous technology needs the right en-
vironments to flourish, meaning an
existing infrastructure, with an exist-
ing fleet of human drivers already
delivering a service, into which we’ll
be able to progressively introduce
driverless vehicles.
When it comes to assisted driv-
ing—a car driving by itself but with
the driver still behind the wheel,
ready to take over and able to super-
vise—we are particularly bullish on
Tesla. They have the best technology.
For driverless services, we are bullish
on ride-sharing leaders such as Uber
Technologies [UBER], Grab Hold-
ings [GRAB], and DiDi Global
[DIDI], which are best positioned to
introduce driverless vehicles in their
fleets. We are more prudent on play-
ers like Waymo [a subsidiary of Al-
phabet (GOOGL)] and Cruise, which
are trying to develop driverless fleets
by themselves.
Black: Pierre, how much of your
$1,580 Tesla price target reflects
BARRON’S 19
autonomy?
Ferragu: None of it. For now, I am
forecasting 30% gross profit margins
for Tesla, in line with their current “History shows that it doesn’t pay to try
performance. In the long run, auton-
omous might contribute to that level to time the stock market, but there are
of profitability, or add to it. It will
depend on how unique their technol-
ogy is.
times when risk levels have increased
Black: We put no valuation on
Tesla’s autonomy offerings, either. to a point where it is wise to have a
Every innovation you’ve seen in the
automobile in the past 60 years, safety net – like dividends.”
whether automatic transmission,
anti-lock brakes, or turbo-charging,
has been copied by all companies. It - Jim Cullen, Chairman & CEO
is hard to say that any one company
will gain significant market share.
Right now, the take rate on FSD
[full self-driving] at Tesla is under
10% globally, and about 15% in the
High Dividend Equity
U.S. People will say that’s because it
doesn’t work yet; it’s only a Level 2
system [partial automation]. But even Enhanced Equity Income
once Tesla gets to Level 4 or Level 5,
other companies will reach the same
point. Value Equity
Practically speaking, how will
Small Cap Value
autonomous driving roll out over
the next few years?
Black: Elon has been promising it
will be this year for at least five or six
years, and we’re still not there. First,
International High Dividend
we are several years away from the
point where regulators will approve
autonomous vehicles that don’t re-
Emerging Markets High Dividend
quire you to sit in the driver’s seat
and keep both hands on the wheel.
Second, everybody in the industry is Water Impact
working on this.
Tesla believes in what it calls a
generalized solution, meaning FSD
beta features have all been perfected.
Tesla can push a button and FSD will
work everywhere. Other companies
are using more of a geofenced frame-
work, whereby they master one mar-
ket and then roll it out to additional
markets. It is hard to see how this For further information, please contact Schafer Cullen Capital Management
scales quickly, so I struggle with it 212.644.1800 • info@schafer-cullen.com • schafer-cullen.com
from an investment standpoint. More
important, regulators aren’t going to
favor one company over another;
they are going to try to give every- Schafer Cullen Capital Management is an independent investment advisor
body an equal playing field. Hence, registered under the Investment Advisers Act of 1940. This information should
it is hard to value. not be used as the primary basis for any investment decision nor, should it be
Ganguly: We are watching point-to- construed as advice to meet a particular investment need. It should not be
point applications, and expect those assumed that any security transaction, holding or sector discussed has been
problems to be solved earlier than or will be profitable, or that future recommendations or decisions we make will
some of the broader, more challenging be profitable or equal the investment performance discussed herein. A list of all
problems the AV industry is pursuing. recommendations made by the Adviser in this strategy is available upon request
We expect to see a lot happen on the
for the 12 months prior to the date of this report.
sidewalk, including autonomous de-
livery of goods. We are also working
 20 BARRON’S May 9, 2022

“
We are extremely excited
about connectivity—the ability
to digitize the contact point
of the car to the road, which
happens through the tire.”
Abhijit Ganguly

with and watching robo-taxi-type

applications. We see autonomy hap-
pening first in segments where safety
can be assured more quickly.

Pierre mentioned Uber. Do the rest

of you have favorites in the ride-
sharing industry?
Ferragu: In ride-sharing and delivery,
we see a strong network effect. It is a
To reprint or license content, please contact Barron's reprints department at 800-843-0008 or www.djreprints.com

competitive market with no barriers to

entry on greenfields. But as competi-
tion intensifies, scale becomes critical
and only the largest two players sur-
vive. We call that natural duopolies,
and natural duopolies usually result
in very strong economics for the mar-
ket leader, whereas the No. 2 will have
For personal non-commercial use only. Do not edit or alter. Reproductions not permitted.

a harder time. We like Uber and Grab,

and we would like DiDi as much in a
different political setup.
The pinnacle of that world is when
you have the No. 1 food-delivery com-
pany and No. 1 ride-sharing player
combined in one company, and that is
the case with Grab. It is No. 1 in five Abhijit Ganguly
countries in Southeast Asia in both
delivery and ride sharing. Uber is No. Companies
To Watch:
1 in about 40% of the world in ride
sharing, and has exited other markets. Revel
In addition, in most of their markets EV ride-share,
they are a very strong No. 2—and mopeds,
sometimes even No. 1—in food deliv- charging stations
ery, as well.
Black: We like Uber, too, for the rea- AmpUp
EV-charging-
sons discussed. Also, it is a reopening
management
play. Uber is selling for less than two software
times enterprise value to revenue, and
will be profitable in 2023. They have Starship
formed a duopoly with a lot of pricing Technologies
discipline. We own Uber in the Future Autonomous
Fund. robots

Gatik
Thanks, Gary, and everyone. B
Autonomous
trucks serving
Photograph by ROSS MANTLE B2B customers