Are Autonomous Cars Just Around the Corner?

Three years ago, we all believed that autonomous cars were just around the corner – and we felt that was a good thing. Retain human control for the fabled blast in the country, but let the machines take on the drudgery of commuting and long-distance motorway work – and getting us home from the pub!

Range Rover Sport that managed to drive the Coventry ring road

So what’s changed?

It was shocking to read, in Autocar, that Andy Palmer, boss of recently floated Aston Martin, quoted as saying “The idea of full autonomy being widespread in my lifetime is absurd. Full Level 5 systems are a moonshot.” As an aside, Mr Palmer was also scathing about Brexit, confirming that the delay was the worst of all worlds, preferring a decision, any decision, to be made to close down the uncertainty.

Andy Palmer of Aston Martin

We have some doubts about the direction of Aston Martin Lagonda Ltd as a company, but we respect Andy Palmer as a well-connected, senior car-industry figure. So when he says that full autonomy is a pipe-dream, we listen.

Another issue revealed to us is the autonomy “big accident” risk. When autonomous cars crash, they tend to be large ones! If humans have crashes, mostly they will realise that something has gone wrong and slam on the brakes at the last split-second. Whilst this does not prevent the crash, it does mean that some deceleration occurs before impact, and so the crash happens at much reduced speed. Typically, crashes in autonomous cars happen because of a failure to correctly interpret the surroundings of the vehicle. And thus the autonomous car hasn’t noticed anything wrong – so it ploughs into the obstruction at full speed! Ooops.

There have been two famous crashes, where Teslas have sped straight into the side of juggernauts parked across the highway. Speculation among the online community (oh dear, not the most reliable source then) is that the crashes happened because seeing a juggernaut sideways is such an unusual occurrence that the AI-developed software interprets the sight as an overpass bridge and so ignores it.

Finally, there is the fabled issue of how can one let a computer decide whether to swerve away from a man in the road, if that then endangers two children on the pavement.

However, we are not convinced that these issues will prevent autonomous cars. At its present stage of development, it appears that sensors, processing power and software are not quite there. But these are engineering problems that are easy to define and will be solved.

  1. Computers are very good at measuring distances and heights. Therefore, interpreting a truck as a truck and not a bridge can be pre-programmed. Likewise, new types of sensors will be developed so that cars will know much better than human drivers what is going on around the vehicle. Add to that car-to-car connectivity, so that each car knows the intention of all the vehicles within half a mile, and suddenly an autonomous car is much better placed to co-ordinate its movements with those of all the surrounding cars.

  2. We do not agree with the idea that humans are better at split-second, morally loaded decisions than computers. In a crash situation, the choices made by a driver will be essentially random, or pre-programmed by their normal reaction. Given a little forethought by the software programmers, 99.9% of situations can be managed for an optimal result rather than the vague human output.

  3. Convoys of communicating vehicles can travel closely together, allowing for more efficient use of roads, and greater fuel efficiency.

  4. We wonder if Mr Palmer’s reluctance over self-driving cars is that it removes a key justification for buying an Aston Martin – and that providing such systems is also beyond the capacity of a relatively tiny car company?
  5. However, combining human drivers with convoys of autonomous vehicles could be tricky.

It is this last point which is exercising us! We believe that fully autonomous roads will happen within the next 10 years. Our worry is that will the take over of roads by autonomous vehicles mean that car enthusiasts in their old-fashioned, petrol engined “classics” are banned from going out at all eventually?

Aston Martin Still Has a Mountain to Climb*

* Which is kind of ironic given that it was named after Aston Clinton Hillclimb!

An Aston Martin – climbing a mountain

Since we yanked on the handbrake for AML shares in March, and again in May, how have things been? Initially, almost as soon as we made our most recent forecast, the pesky management went and bought a few shares for themselves, and the price rallied £2. Not the best of starts.

AML ugly price chart – and it’s down another £1 today

Since then, more teasers of the make-or-break DBX SUV have been released.

DBX on test in Sweden

Autocar are carrying a report that the order-books are to be opened next month at Pebble Beach. Despite our view that we have seen peak SUV, the DBX fits into the mould. To be fair, it’s not as ugly as a Bentley Bentayga, nor the Rolls Cullinan. To us, it looks rather like a Porsche Cayenne with an Aston-shaped grill nailed on to the front. So it should sell well initially, though we continue to fear that sales will fall off a cliff-edge in 2 or 3 years time as EV’s take over.

And the latest news?

Talking of sales falling off a cliff-edge, yesterday it was announced that deliveries to dealers in the second quarter were down 22% in UK and 28% in EMEA. Over the twenty four hours since then, the shares have collapsed from £10 to £7, which we can disclose is a 30% fall (see, we’ve always had a natural flair for numbers).

Our view remains that at some time, the shares of this iconic brand will represent good value. But it is not yet. There remains huge delivery risk on the crucial DBX project. And just too many variables in the world luxury car market.

As before, we recommend BUY THE CARS, SELL THE SHARES. Is it time for my bonus yet? (Ed. NO!)

The New Land Rover Defender is Here! Hurrah!

Jaguar Land Rover is ramping up the excitement for the launch of the new Land Rover Defender! Like most petrolheads, we have a soft spot for the lumbering old beast – and not just the nearest muddy river in which we could go wading.

Camouflaged Defender at Goodwood

Here it is at Goodwood, with a teaser run up the hill. Picture and full story in Autocar.

Defender in Kenya on expedition!

And again, this JLR press release photo shows the chunky vehicle “in its natural surroundings”. Of course, that’s the image they would like – and to be fair, it does present a better picture than a crowded school gate or even a hipster smoothie bar in Shoreditch. But the reality is that this model is an up-market “macho” SUV, without the utility bit. So an SV… er but it isn’t really sporty either… so it is just a V!

Think of it as a replacement Discovery, now that the actual Disco has gone all curvy. Even the styling looks very much like the Disco Mk3 / Mk4.

But we like the square, tough looks. And have every expectation that the off-road performance will be excellent: look at those short overhangs for tackling ditches. The on-road ride will be good too, with independent suspension and clever suspension.

Most exciting of all, we hear rumours of the Land Rover traditional three abreast seating. That will gain acres of press coverage!

And now the bad news. The new Land Rover is not a £20,000 vehicle. Even at £30,000, only the most basic of basic specs will come close. In a usable condition, think £40,000.

But you know what, we want one!

Peak SUV Is Now. Electric Vehicles are the Future!

We are on the cusp of Peak SUV. The automotive world has cycles of fashion. Over the last 60 years, the fads of “must-have” cars have been in regular cycles;-

1960-1975 Two-seater sports cars

1975-1990 Hot hatches

1990-2005 MPVs and retro styles

2005-2020? SUVs

Working on a 15 year popularity-life, we are due for a new type of car to become the thing to buy.

And it is clear what the new fashion is; ELECTRIC VEHICLES.

The Wonderful Jaguar I-Pace

Already, the cutting edge new automotive products are Tesla, Jaguar I-Pace and BMW i8/i3. But they are not the only ones. Waiting in the wings are premium products from Mercedes and Audi. Volkswagen have a whole range of ID EV’s to launch in the next couple of years.

My geeky engineer friends tell me that the key challenge to EV design is the balance between driving range and battery weight/cost. The standard target is to achieve 300miles between recharges. Range is driven (pardon the pun) by rolling resistance and aerodynamic drag. Rolling resistance minimisation means large wheels and stiff tyre sidewalls. Aerodynamic drag is the product of slipperiness and cross-sectional area. We all like a sleek looking car, so aerodynamic designs will be welcome.

But here is the coffin-nail for SUVs. Not only are they heavy – which increases rolling resistance – but they have large cross-sections. It is like trying to push a barn-door through the air at 60mph. Which takes much more energy than pushing a cupboard-door. This is why the Tesla Model S is a large but low car – lots of interior space, but lower air-resistance.

Autocar’s image of the Dyson EV

Interestingly, Autocar magazine reports that the new Dyson EV will be high-riding, but with much ground clearance – so that the cabin remains shallow. This gives the dual benefit of lower air-resistance from a reduced cross-sectional area, but retains the popular high-riding high-visibility seating position.

You heard it here first. The days of the SUV are numbered. Sleek, high-riding EV’s are the future.

No U-Turn on Aston Martin (AML) – Yet!

At the time of the Geneva show, we recommended ASTON MARTIN – BUY THE CARS, AVOID THE SHARES. We didn’t buy the shares. Sadly, we weren’t able to buy the cars either. One day, it will be time to brake (break) our recommendation, reverse our view, steer in a new direction and accelerate purchases. Okay, now with the car-puns done, as before, let’s have some pictures before getting to the boring numbers.

Aston Martin Vantage – is it bonus time for me yet? (Ed; NO!)
AM-RB 003 – sold out already!

So to the financials.

AML Financials still look scary

The numbers still don’t look great, (Data from Sharecast.com) with strong growth in revenue required before a decent profit can be made. Turning the numbers around relies on the forthcoming SUV, the DBX, being introduced successfully and selling well. All the industry pointers confirm that this vehicle will sell at great speed and with good margins. However, it is being built in a new factory in Wales (not that the location is desperately relevant, I’m sure that the Welsh have produced outstanding engineering in the past, like, er…. didn’t the Sinclair C5 get built there?) Anyway, the fact is that a new factory producing a new type of car does hold some risks – just ask Elon Musk at Tesla.

AML Share Price since IPO

Here is the share price chart….. not looking like the trend has reversed yet is it? We’ve helpfully added the point where we advised not to buy last time! How modest of us!

Where Next For the Share Price?

Reasons for Up!

  1. Once sales of the DBX SUV fire up, revenues and profits should race away

  2. Autocar has reported that sales of the AM-RB 003 £1 mio hypercar are over-subscribed

 

Reasons for Down!

  1. The trend is firmly downwards – expect it be be oversold before it rebounds

  2. First quarter results confirmed our expectations that new-model investments will eat margins for the foreseeable future

  3. There remains huge delivery risk on the “saviour” SUV project

  4. Market cap remains twice revenue, whereas we would expect it to be closer to a 1:1 ratio

At some point in the future, these shares will be good value. That will be when revenues have grown, new products are selling well or at least have had good launches. Right now, we expect the selling to continue until perhaps 600p.

When we consider investing in AML shares, we find ourselves shaken, not stirred! Steer clear.

Is Jaguar In The Last Chance, er, Saloon?

The world has been cruel to Jaguar Cars. But our interest has been sparked by the shocking news that Jaguar is going all electric. (OK, that’s enough of the live-wire puns).

Today JLR announced a £3.4bln loss for the last quarter. We feel the pain!

How did it come to this?

During Ford’s ownership of the famous feline company, the product design went from PANACHE to PASTICHE. Who on earth thought that the X-Type or the S-Type were attractive? Not the potential customers, that’s for sure. So Jaguar’s engineers produced the masterful all-aluminium XJ8 X350 series. Only for the designers to clothe it in yet another re-hash of 1960’s glories.

Enter Ian Callum as Chief Designer. The man behind the Aston Martin DB7 – which owed much to Jaguar already – has created a modern, coherent range of Jaguar saloons. But still they are not selling. The production plant at Castle Bromwich has been on a 3 day week. Autocar magazine reports that sales in the last 3 months of 2018 collapsed – see https://www.autocar.co.uk/car-news/industry/opinion-can-new-defender-help-turn-around-jaguar-land-rover.

And now the resultant loss is declared. Much as many people will want to blame Brexit, the real reason is falling demand in China.

Jaguar correctly joined the SUV market. Not a natural arena for the maker of sleek low sports saloons and convertibles, but financially astute. The oddly-named F-Pace and E-Pace started off with great sales, but now seem to have slowed too.

And the final bright star, leading the way to the future? The I-Pace (as pictured at the top). All-electric, stunningly pretty, and earlier to the market than all the main competitors. What an achievement!

It is widely believed that the large XJ replacement, due later this year, will be electric only, as a Tesla model S competitor. What a bold decision!

And, in Autocar again, is the rumour that the slow-selling XF and XE will be replaced by a smaller all-electric saloon.

Suddenly, it seems Jaguar is betting the farm on going electric. Is it too soon? A niche within a niche? Or is it the boldest, most far-sighted highly-charged management choice in a long time? (Sorry, couldn’t help that one last pun sneaking in)

The world would be a poorer place for our children without Jaguar. They need the sales urgently!

So go out and buy an XF or XE RIGHT NOW! You owe it to your family.