It's not just about the car.
The just-concluded Frankfurt Motor Show provided lots of wows and automotive eye candy for wishful drivers, and investors, with concept cars wooing aficionados in all sorts of ways.
The ultra-luxury group was dominated by convertibles and sport utility vehicles that promised drivers the prospect of feeling the wind in one's face or a day off-roading far from the madding crowd. Gearheads, meanwhile, dug engine and structural improvements that ranged from rear-axle steering in the Porsche Carrera to the body-shape-changing Mercedes S-class IAA, which actually reconfigures its body aerodynamically as the driver hits the accelerator to improve efficiency—and the Mercedes-Benz AG F015, which not only changes shape to improve aerodynamics but has an electric hybrid system and drives itself to boot.
But it's going to take more than a hot engine and a sleek body style to keep the automotive sector in the money, even at the high end—although by the time some of those additional factors are up and running, the sector may no longer be the one immortalized in everything from "Little Deuce Coupe" to "409." The auto industry is moving into other sectors, whether it likes it or not, and investors need to be aware of how the lines are blurring—or disappearing altogether.
Here's a look at five of the changes offering the most potential for change in the sector.
1. Driverless cars:
Also known as autonomous vehicles, these promise some pretty wild market disruptions as they emerge from test tracks to the open road. From insurance to electronics, lots of other sectors will be affected too as cars become increasingly capable of piloting their occupants from place to place.
According to a McKinsey report, it's not just insurance companies, and the electronics firms that produce the components for such vehicles, which could change; auto servicing companies, taxi and car rental industries and commercial parcel delivery services could also see major changes as they either adopt, resist or adapt to vehicles' changing natures. Supply chain and logistics operations could change too.
Former drivers will have time on their hands—great for commuters, but not for those who currently drive for a living. Parking needs and infrastructure will change as well. Self-parking vehicles don't require as much room and shared AVs may not need to park at all—or one AV may take the place of many, for a multitude of riders.
2. Electric cars:
There's way more to this than plugging in at night. Not only will fossil fuel consumption change as cars move to renewables (and even generate their own energy), but cars could actually help save the environment.
How's that? Vehicle-to-grid (V2G) technology. The principle is pretty basic: owners of electric vehicles plug into the grid to charge their vehicles, and can also upload energy to the grid at times of high demand—and actually be paid for it.
Think of it: all those future EVs plugging in, averting blackouts. Cooling centers and shelters keep functioning, keeping lives safe in winter and summer. EVs plug the gap between utilities and storm outages. No more losses for homeowners and restaurateurs whose refrigerators and freezers have stopped working. No more halted public transit; instead, fleets of EVs keep the power on.
China is already considering using energy-generating and -storing vehicles as alternative power sources to cut reliance on coal-fueled power plants. EVs can also power homes directly when they're not actively consuming energy.
Already being tested in cities like Madrid and by companies like Nissan, the V2G system can not only change the automotive sector but the energy sector as well. And with companies from Apple to Mercedes-Benz (the S 500 E) and Porsche (its Mission E, as well as its AG 918 Spyder, which hopes to challenge Tesla)—not to mention Chinese carmakers—planning electric vehicles, the power companies may be the ones in for a big change.
