- • America must win this race
- • The end of car insurance as we know it
- • A seismic shift toward electric vehicles
Welcome to our weekly mailbag edition of The Bleeding Edge. All week, you submitted your questions about the biggest trends in technology. Today, I’ll do my best to answer them.
If you have a question you’d like answered next week, be sure you submit it right here.
World War 5G rages on…
First up, a reader has a question about the implications of the America/China trade dispute on the buildout of global 5G networks.
In what way, if any, do you see the trade war affecting the time lines for the construction of the infrastructure of the 5G networks across the world?
Will this situation motivate China to speed up its end? Will the Trump administration and U.S. companies stay the course… in your opinion? As always, I’m appreciative of your writings on these matters. Thanks!
– Julian C.
Thanks for your question and for being a reader, Julian.
The current trade war won’t delay the deployment of 5G wireless networks in the U.S. or any other Western market deploying 5G. The reality is that the most valuable and advanced technology enabling 5G networks comes from U.S. and European companies.
My point is simple: The 5G networks will get built out whether there is a trade war or not.
That said, the trade negotiations and ban on Chinese tech giant Huawei will have a negative impact on the rollout of 5G networks in mainland China. U.S. companies have historically provided key components, both hardware and software, to companies like Huawei and ZTE.
If they can no longer purchase those components, and once they run out of inventory, that creates a problem. And that may very well be an intentional tactic that the current administration is using in its trade negotiations in order to put a fair agreement in place.
I do believe the Trump administration will stand firm on this. The U.S. economy is so strong right now, and the country does not have any shortage of access to products and services domestically or with other trading partners. That’s a great position to negotiate from.
And China, just like the U.S., is deeply motivated to deploy 5G technology as soon as possible. These networks, because of their capabilities, will be a catalyst for investment and the development of new, bleeding-edge technology that can leverage 5G. This is a matter of strategic importance at a national level.
You may never buy car insurance again…
Next up, a reader wonders about the implications of self-driving cars on insurance policies and the automotive industry.
I believe self-driving car will create a list of issues, many of which will be negative. When an accident occurs (and they will likely occur at a lower frequency): Do we sue the automobile maker for personal injuries or property damage? Or will it be the software/artificial intelligence (AI) programmer that’s sued? Or will it be the organization that certified the AI that’s sued?
– Joe R.
Thanks for writing in, Joe. Very nice forward-looking question.
In a world of self-driving cars, would you need to own an insurance policy? I wrote on this topic in a special research briefing in my large-cap technology investment service, The Near Future Report (subscribers can catch up here).
Average car insurance rates have been steadily climbing over the past 10 years. The chart below gives you an idea of this trend.
In a world of both personal and shared autonomous vehicles, it is estimated that personal auto insurance premiums will drop by at least 60% within the next 25 years.
The reason is simple. Self-driving cars are estimated to reduce traffic accidents by 90%. That reduction will have an incredible impact on the costs to the insurance industry. This will directly impact and reduce car insurance premiums.
The question of who will actually pay the insurance premiums is where things get interesting. And I don’t believe there is one simple model. Let’s walk through some examples…
If a consumer actually purchases their self-driving car outright from a manufacturer, then they will likely pay greatly reduced insurance premiums. However, I can imagine that some self-driving car manufacturers will actually only lease the vehicles. In this case, I can see a selling point being that the manufacturer will provide the insurance, since the driver isn’t touching the wheel.
And for car manufacturers that don’t develop their self-driving technology, but rely on a tech company to do that for them, we’ll see a different model. Let’s use a hypothetical example: Honda decides to license Google’s Waymo division self-driving software to make its cars autonomous.
In a situation like this, Google would likely be insuring Honda for any accidents that might occur related to the self-driving software. After all, Google created it.
Another new business model that will emerge is companies that manage fleets of shared autonomous vehicles (SAVs). SAVs will be popular because they will be extremely affordable, and consumers will never have to worry about car maintenance or cleaning. Whenever they need a car, the SAV company will have one available… waiting to pick them up and transport them.
A business model like this would likely dictate that the SAV company provide the insurance.
The great news is that in all of these scenarios, accidents are going to decrease by at least 90%. And the cost of insurance will plummet as well.
The shift towards electric vehicles continues…
Let’s conclude the mailbag with one more question on autonomous vehicles.
I wouldn’t purchase a self-driving car. I like driving and I like speeding along vacant Oregon roads with many S-turns and wide-open throttle events.
Jeff, if you’re ever in southern Oregon, we can wheel out the nine-one-one, crank up the volume, put down the windows, and turn on the A/C. I realize that’s old fashioned, but it’s fun.
I’d like to request your opinion on investing in battery companies… seems like there must be a lot of “secret” research going on, especially with all the electric cars.
– Terry J.
Thanks for writing in, Terry. I’ve driven up and down the I-5 in Oregon many times, and it’s beautiful country… It sounds even better where you get to drive.
And I’m with you, I love to drive. I’ve had the great pleasure to drive on BMW’s private test track outside of Munich, Porsche’s flagship track in Leipzig, Germany, and even drive Radical cars around the F1 Track in Austin.
As to your question on battery technology, there is a lot of research happening in this space. After all, the world has been working with lithium-ion battery technology for more than 20 years… and the improvements have been small, incremental steps, year after year.
Unfortunately for investors, almost all of the interesting work on batteries is being done by private, venture-backed tech companies. Two public companies that are doing leading-edge work on lithium-ion batteries for electric vehicles (EVs) are Panasonic and Tesla.
Near Future Report readers will be familiar with Tesla’s strategic decisions about its unique lithium-ion battery design that has allowed it to manufacturer the best-performing and most cost-effective batteries available in the market. This is very much a strategic advantage for Tesla as an EV maker.
Another company that I had been anxiously keeping my eye on was Sakti3. Sakti3 was working on a new form of solid-state lithium-ion batteries that have higher power density. That means you need less battery to get the same amount of power.
As I told readers earlier this month, Sakti3 was acquired by Dyson, the British company known primarily for their vacuums, in 2015.
Dyson then recently filed a patent for an electric vehicle. This tells me Dyson is making a bold plan to expand into electric vehicles. Sakti3 battery technology will be a big part of that shift. I can’t wait to see what the finished product looks like and how well it performs with the new technology.
Given the scale of investment needed to produce EVs, I expect Dyson will have to go public to raise additional capital. That makes it a company to pay attention to as a potential future investment opportunity.
Do you have a question you’d like me to tackle next week? Send me your questions right here.
Regards,
Jeff Brown
Editor, The Bleeding Edge
P.S. Before you go, one last reminder…
Today is your last chance to claim your early-bird ticket to the second annual Legacy Investment Summit.
Remember, this is a subscribers-only event in Southern California from September 23-25. Like I told readers yesterday, I’m presenting on a technology that is on the bleeding edge of progress. And it’s just now starting to hit the mainstream…
Tickets are still selling at a discount… You can get them for hundreds of dollars less. But today’s the last day that offer stands. I hope to see you there. You can reserve your spot here.