The Emerging Market of Personally Owned Autonomous Vehicles
By Grayson Brulte | May 31, 2023
Consumers have spoken with their wallets by purchasing Tesla’s Full Self-Driving software and other global automakers are taking notice. Personally owned autonomous vehicles are coming to a driveway near you soon and it might even just be a self-driving Porsche.
When Tesla first introduced Autopilot in 2015 (the precursor to Full Self-Driving), the company laid the foundation for a future with personally owned autonomous vehicles. Eight years after the introduction of Autopilot, the market for personally owned autonomous vehicles is slowly beginning to emerge with the accelerated development of Tesla’s FSD technology and the consumer’s willingness to purchase the $15,000 upgrade.
In 2022, 19% of all Tesla vehicles sold in North America had the FSD upgrade, translating into $324 million in highly profitable revenue for the company.
With a growing market that is highly profitable, Porsche with historical 9.8% net margins is now looking to enter the market. The company recently announced a partnership with Mobileye for their SuperVision technology platform, which will enable certain Porsche’s to drive themselves under certain conditions when the driver is paying attention to the road.
While the technology is great, it will not define the market in its current form as the autonomy technology still has a way to mature. When full autonomy is achieved, the technology will eventually become commoditized.
Brands and experiences are what will ultimately define the market and become the deciding factor for consumers choosing one brand over another.
In announcing the agreement with Mobileye, Mr. Oliver Blume, Chairman of the Executive Board of Porsche stated the following:
We are combining an outstanding product with a highly personal experience. The desires and lifestyles of our customers are important to us. We want to exceed expectations again and again – and that’s exactly what we’re doing with world-class partners like Mobileye.Mr. Oliver Blume
Mr. Blume is correct. Porsche is a lifestyle brand that delivers on both quality and experience. A self-driving Porsche will not be the first time that Porsche has made a strategic decision that mortified the Porsche purist.
In 2002, Porsche introduced the Cayenne to much uproar from Porsche purists. As controversial as the Cayenne was at the time, it saved the company financially and turned into a major financial success.
Since 2015, Porsche has delivered 79,000 Cayenne’s a year on average. Furthering the success of the brand, Porsche revenue per vehicle sold has increased by 20% to €111,626 per vehicle.
Stable sales and increasing revenue per car sold culminated in an oversubscribed IPO at €82.50 per share on September 29, 2022. Since the IPO, Porsche’s stock (GR:P911) has returned 42.55% (as of May 26, 2023).
What impact will a self-driving Porsche have on the stock’s performance when it is introduced? That is yet to be determined, but what we do know now is that Porsche is in a great poll position to win and capture market share for personally owned autonomous vehicles.
While Porsche is in that position today, there is another brand that lurks out there and does exactly the opposite of what they say publicly — Ferrari. First there was the statement stating no hybrids, then there was no Ferrari SUV statement and now it’s the no self-driving Ferrari’s statement. Will Ferrari go 3 for 3 in statements that eventually become true? We believe so and here is why.
First and foremost Ferrari is a luxury brand with a 35.3% profit margin and a multi-year waiting list. While the traditional Ferrari customer enjoys the art of driving, the company’s customer base will change with the rollout of the Purosangue (Ferrari’s version of an SUV) very similarly to the way Porsche’s customer base changed with the introduction of the Cayenne.
The prancing horses will now become synonymous with an SUV and that’s both good for the brand for shareholders as the Purosangue will accelerate sales. Since the October 21, 2015 IPO, Ferrari has returned 420.77%.
The Purosangue SUV is here today, the Self-Driving Ferrari will be here tomorrow. The first introduction of the Self-Driving Ferrari will be an SAE Level 3 vehicle that will allow drivers to take their hands off the wheel and their eyes off of the road under certain conditions. This is the Porsche approach.
It is a similar approach that we believe Ferrari will take until they introduce a fully autonomous Ferrari developed in partnership with an autonomous vehicle company, with Ferrari designing the vehicle and the passenger experience.
What Tesla, Porsche and Ferrari all have in common is that they are brands, not automakers. Consumers aspire to own their products and drive their vehicles. They want the experience and the lifestyle.
This is the future. In the future consumers will own autonomous vehicles that appeal to their senses and they will be personally owned, not shared. This market will be defined by brands and experiences. It’s a market that will become a growth driver for the global luxury market in the future.