As the struggle and innovations continue to develop in the driverless car industry, the idea that a tech company will buy an automaker is becoming more and more real. A few things come to mind in forming this idea. The first one that comes to mind is company valuation and cash balances. Many tech companies that are involved in the automotive space are sitting on a lot of cash. The second area that indicates the probability of this idea is that there are already partnerships and smaller deals between the tech companies and the automotive companies. Another area that brings this idea to fruition is finding the answer to the question of “What does the future look like in the space and who is best capable to lead this move into the future.
If you look at the tech sector and the automotive sector in terms of valuation, you will see that it is entirely possible for a deal to happen. The following chart gives a quick snapshot of valuations of different tech companies involved in the auto space as well as a few automakers. You can see the cash balances and valuations of the tech companies actually put them in a favorable spot to make a bid. Tesla’s market cap and Ford’s is now basically equal.
Company
|
Valuation
|
Cash on Hand
|
Amount Invested in Auto
|
Alphabet
|
$600 Billion
|
$86 Billion
|
New Company named Waymo
|
Intel
|
$167 Billion
|
$5.5 Billion
|
Just made a bid for Mobileye
|
Apple
|
$753 Billion
|
$21 Billion
|
Undisclosed Amount in Software
|
Tesla
|
$45 Billion
|
$3.5 Billion
|
Full Electric Car Company
|
Ford
|
$47 Billion
|
$16 Billion
|
Auto Company
|
Fiat Chrysler
|
$21 Billion
|
$18 Billion
|
Auto Company
|
GM
|
$51 Billion
|
$14.5 Billion
|
Auto Company
|
Large partnerships are starting to abound between the two industries. Recently, Intel made a bid for Mobileye. Ford has been in partnerships with Alphabet. GM purchased Cruise Automation for more than $1 Billion dollars last year and has a partnership with Lyft. Mercedes Benz recently reached an agreement with Uber with regards to a driverless car. With all this smoke around, the likelihood of a purchase continues to get stronger and stronger.
While in the past, someone might not associate tech with cars, today you just can’t get away from the connection. Driverless eco friendly vehicles are the future. Big companies are putting large fortunes in play to make this happens. There will be some hiccups and disasters for sure. But don’t be surprised if you wake up one morning, pick up your phone (instead of the tv), and find that a car company has been purchased by a tech company.
**Disclosure - KDK Fund, a client of KeaneVCC, owns shares of Ford. KDK Options, another client of KeaneVCC, owns an April spread options trade on Microsoft. **
