5 Stock Plays To Leverage The 'Huge' Opportunity Presented By ADAS Over Next Decade

Electric vehicles are the future, as the world moves from gas-guzzling ICE vehicles to their green energy counterparts. Ancillary beneficiaries of the growing EV adoption are companies that moved to an advanced driver assistance system (ADAS) technology, which has now come to be the core of self-driving and EVs.

Huge Opportunity Ahead: ADAS features, which were installed in just 10% of the one billion cars in use worldwide at the end of 2020, are now part of one-third of the cars sold in major markets such as mainland China, Europe, Japan and the U.S., new research from market research firm Canalys showed.

For this proportion to change to one-half, it will take several years, the firm said.

"The ADAS opportunity over the next decade and beyond is huge," said Sandy Fitzpatrick, VP at Canalys.

Canalys currently predicts that only around 30% of cars in use will have ADAS features in 2025 and around 50% in 2030.

"Carmakers that can include them as standard in all their new vehicles, without a big price premium, will have a competitive advantage," the firm said.

What's ADS? ADAS are electronic systems installed in vehicles that use advanced technologies to assist the driver. It uses sensors such as radar and cameras to understand the environment around it, either providing information to the driver or taking automatic action.

ADAS features include adaptive cruise control, lane-keep assist, automatic emergency braking and blind-spot alert. These features along with the sensors can actively keep a vehicle a set distance from another vehicle in front, keep a vehicle centered in its lane, bring a vehicle to a complete stop in an emergency, identify other vehicles or pedestrians approaching and more.

Here are five stocks that could benefit hugely from the increasing usage of ADAS:

1. NXP Semiconductors NV NXPI: NXP accounts for about 11% of the automotive chip market and is the biggest player in the arena, Barron's reported, citing BofA Securities analyst Vivek Arya. The company derives roughly half of its revenues from the automobile end market, the analyst said.

The company supplies radar, vision, parts for infotainment and in-vehicle experience and automotive connectivity to EVs.

2. ON Semiconductor Corporation ON: ON ranks seventh in terms of sales of automotive-related chips and boasts a 4% share of the market, Arya said. The company is highly levered to gain in both electric vehicles and auto image sensors for ADAS applications, he added.

ON provides high-performance image sensors, lidar detectors and an extensive partnership ecosystem. It also has a product portfolio, including power management, lighting solutions, motor drivers, system design expertise, reference designs, powerful and flexible development kits, and highly experienced applications support.

Related Link: Tesla To Be The Most 'Deeply Integrated Automotive Company' In The World With AI Day Plans Fully-Implemented, Says Ark

3. Aptiv PLC APTV: Aptiv shares have more than tripled since the COVID-19-induced bottom in March 2020. Aptiv was one of the first to launch a radar-based Adaptive Cruise Control system in 1999. In January, the company introduced its next-gen level 1-3 capable ADAS platform. The auto parts supplier has a joint venture with Hyundai Motor Company. GDR HYMTF for robotaxis.

4. Innoviz Technologies Ltd. INVZ: The Israeli startup is a developer of solid-state lidar sensors and perception software. The company went public in the U.S. in late 2020. It has a 2018 agreement to supply high-end automotive-grade solid-state lidar to Bayerische Motoren Werke ADR BMWYY, through Magna International Inc. MGA as the Tier-1 supplier.

5. Ambarella, Inc. AMBAAmbarella designs chips for computer vision, the technology used by EV giant Tesla Inc TSLA. Following the company's second-quarter results, KeyBanc analyst John Vinh said Ambarella is gaining traction in the fleet management market with Yandex, KeepTruckin and Solera announcing products using the company's CV.

Related Link: EV Week In Review: Tesla's Gets Upbeat Delivery Forecasts, XPeng's Sub-$25K Car, Lucid's Big Week, Workhorse Gives Up On Legal Challenge

Image by Rudy and Peter Skitterians from Pixabay 


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