by Giselle Roux
Great ideas and innovations are not necessarily great investments. Irrational exuberance can lead to overvaluations, new participants are attracted to new sectors, competing away most of the returns and intellectual property is easily replicated in new forms.
On the other hand, those with desirable imbedded systems and where one, or a few companies, create a monopoly-like structure can be long-term winners.
A host of industries face a potential massive disruption to their structure, as do the stocks within those sectors. Two that are attracting attention are the car industry, with little to no representation on the S&P/ASX 200 benchmark, and retailing, which has a more substantial weighting in the local index.
The auto and retailing industries also represent the opposite ends of the consumer risk spectrum. Cars tend to be a discretionary purchase, while much of retail is not.
The consensus is that autonomous vehicles are likely to be reality in years, not decades, with the debate only on the degree of autonomy. The use of cars as a service, rather than through ownership (think Uber) is even closer. Some argue it is already here. Add these two dimensions together, and the impact is enormous.
Cars are expensive assets that spend most of their time inactive – the average car is used 5 per cent of the time. If a household can avoid ownership, running costs, maintenance and insurance, it leaves the potential for a boost to disposable income. The Australian CPI weight for “private motoring” is 10.8 per cent, representing household spending on buying and sustaining car ownership.
Consider other implications of low car ownership. What…