Ford Motor Company (NYSE: F) has recently announced that it will team up with the Chinese search corporation Baidu for the development of driverless cars within the next half a decade. Market analysts are bullish on the said project as they believe that fully autonomous car technology will be greatly beneficial to the future of the US car manufacturer.
According to Jefferies analyst Mr. Philippe Houchois, the decision of the American multinational automaker to penetrate the autonomous ride-hailing industry is an “interesting initiative to position Ford in what is likely to become a new volume segment.” As the automobile industry transitions towards driver-assist technologies, driverless cars could become common in the next years.
The analyst believes that the entry of Ford into the industry could mark the initiation of the emergence of other private label cars. Autonomous car sharing is not limited to huge car manufacturers, but the disruption was primarily put in place by high-profile brands such as Lyft and Uber. At present, Uber is valued higher compared to General Motors or Ford, and is conducting research on autonomous vehicles to eliminate drivers.
According to Rod Lache, an analyst at Deutsche Bank believes that the level-4 driverless cars’ production by 2021 will place the Blue Oval in the number one position among technology and car corporations that are presently engaged in research in the field.
The Deutsche Bank analyst speaks positively regarding the ability of Ford to develop internal technical capabilities due to its purchase of machine learning firm SAIPS, as well as strategic investments at Civil Maps and Velodyne. By having these technologies in-house, the auto manufacturer will ramp up its long-term viability in the smart car development.
In a note, the analyst stated that Ford could effectively boost yearly recurring earnings before interest and tax (EBIT) by over $15,000 if it establishes an on-demand driverless mobility service. With the mentioned amount factored in the model, Deutsche Bank estimates that the car company could obtain around $1.4 billion in recurring EBIT annually even if only 1 percent of its overall North American car sales account for driverless ride-sharing.
Other traditional car corporations have also been fast in terms of making investments. Huge auto manufacturers are teaming up with providers of on-demand taxi service in order to establish easy inroads into the fairly untapped market.
As of 11:14 AM GMT -4 on August 18, the Ford stock is trading a bit lower at $12.36, down by 0.32 percent or 0.04 points. Currently, its market capitalization stands at 49.29 billion, and has a dividend yield of 4.86 percent.