I attended a meeting organized by The Right Place in Grand Rapids MI this morning. The Right Place is the leading economic development organization in West Michigan; Highland Ridge is a proud investor in the organization, which sets a high standard for other organizations of its kind.
Kirk Steudle, Director of the Michigan Department of Transportation (“MDOT”), spoke on the many developments in transportation, one of Michigan’s most important industries. For any attendees thinking that technology in transportation is the stuff of science fiction, they have certainly been offered a dose of reality. And, Michigan leads the nation in the development of this technology as the top state in the Automotive vertical.
Keep in mind that Michigan has 975 auto manufacturing establishments, including 90 motor vehicle and 790 parts manufacturing establishments within its borders (M-Live.com). Mr. Steudle indicated that, from a foreign trade perspective, Michigan is the 6th largest exporter and 3rd largest importer in the nation generally. And, the state government (including MDOT) has as one of its objectives to make the state a top automotive research and development center with two existing R&D facilities, one in Ann Arbor and the other outside of Detroit.
Mr. Steudle spoke on automated vehicles, which are already legally permitted on all state roads (Florida is the only other state with similar legislation). He forecasts that, in Michigan urban areas, we will begin to see some on-demand automated networks (think driverless Uber or Lyft service) by 2019. The major auto makers are leading this charge in partnership with their many technology suppliers.
Other developments in the state include a Connected Signals Policy which has the ability to communicate with vehicles and alert them to the changing conditions in high-traffic intersections. Once vehicles are equipped for connection, information will be available to drivers through on-board applications including alerts on changing stoplights or emergency vehicle presence. Signals will begin to incorporate the technology this year.
The economic impact is clear. Existing suppliers are already participating in the technological progress, and new companies continue to be founded at a strong pace. Including OEMs, the potential for job creation related to new technology in West Michigan and throughout the state is incredible.
From a societal perspective, autonomous driving has many benefits. For an aging population, it offers mobility and freedom to a segment of the population with limited mobility due to age-related conditions. The same benefits are clear for handicapped persons. And, considering the significantly lower cost of operating an autonomous vehicle – $0.47/mile versus $2.97/mile for a taxi (Royal Bank of Canada, Automotive Industry Review, 12/19/2017) – mobility will be more affordable for economically-challenged consumers, increasing the number of users as well as the frequency of usage generally.
From a finance perspective (yes, we are bankers), the advent of new suppliers and technologies offers opportunities for investors looking to support the automotive industry in developing ways. Anecdotally, we are witnessing an increase in investors looking to partner with and provide investment capital to these manufacturers. Further, growing M&A activity will lead to combinations of auto suppliers, increasing companies’ scale and technological know-how.
Contact Highland Ridge for ideas on how to participate in the automotive vertical, as either a user of capital, an investor, a buyer, or a seller.