Driverless Cars: A $97 Billion Opportunity For These Companies

In a new report, Citi Research analyst Itay Michaeli turns the clock forward 15 years to look at the impact that driverless cars will have on the global auto market by 2030. According to Citi’s analysis, the auto industry can expect annual driverless car sales of up to 15.7 million by 2030, and Michaeli sees a lot of money up for grabs in the space.

Unlocking frontier markets
Citi projects that markets such as China, India, Indonesia and Nigeria will be key to the future of the auto industry. “Over the next 10-30 years, driverless car networks could conceivably add over 8 million of new ‘SAAR’ units alone in India, Indonesia and Nigeria,” Michaeli writes.

Manufacturers benefit
Auto makers that stay on top of the driverless trend will be competing for $7 billion in profits, according to Citi’s calculations. “Adding ~ 8 million of new vehicle units at $12k/unit creates a $97 billion assembler market,” Michaeli explains, adding that an EBIT margin of 7 percent would lead to the potential $7 billion profit pool.

How to play it
Of the $7 billion earnings potential, Citi is expecting top U.S. manufacturers General Motors Co GM and Ford Motor Co F to each draw about $2 billion in EBIT from driverless cars by 2030. This number represents about 20 percent of GM’s current EBIT, and about 22 percent of Ford’s.

Michaeli estimates that auto suppliers such as Lear Corp LEA and Johnson Controls Inc JCI will also be benefiting from an additional $1.6 billion in supplier revenue by 2030.

However, perhaps the biggest winner from the driverless car revolution will be suppliers of driverless car software and sensors. Citi projects that Mobileye MV MBLY could witness a $400 million revenue boost from driverless car demand.