Self-driving car stocks to lead auto sector shares in 2022

Self-driving car-related shares failed to draw attention last year as investors focused on electric vehicles and the autonomous vehicle value chain was vague.

But rapid development in the technology, especially from US Big Tech companies, is expected to help self-driving car-related stocks take the lead in global auto sector shares this year, analysts said.

REEVALUATION OF AUTONOMOUS CAR-RELATED STOCKS

The share price of Hyundai Autoever, South Korea’s developer of advanced driving assistance systems (ADAS) software and others, closed up 1.1% at 143,500 won ($119.9) in Seoul trading on Jan. 5. The stock has soared 23.7% since Dec. 6, 2021, far outperforming the wider Kospi that has lost 0.6% during the period, as investors have been reevaluating self-driving car-related stocks since late last year.

Shares in LG Innotek and MCNEX CO., producers of camera modules, key hardware for autonomous vehicles, have advanced 17.8% and 2.1%, respectively, in one month to Jan. 5. ADAS manufacturers Hyundai Mobis Co. and Mando Corp. have surged 7.5% and 15.2%, respectively, while Telechips Inc., a microcontroller unit (MCU) maker, has jumped 15.5%. Thinkware Corp., a navigation producer, has risen 2.5% on growing investor interest in its map platform.

Investors weren't interested in those autonomous vehicle-related stocks last year, given the cut-throat competition between cameras and lidar sensors to become the industry standard. Investors were keeping watch on which technology achieves Level 4 self-driving cars first. The industry then expected to commercialize a Level 4 vehicle, which can drive itself under limited conditions, in 2025. It was tough for investors to determine the leading players in the sector. The global automotive chip shortage also soured sentiment, causing investors to focus on EV-related stocks.

APPLE, MERCEDES-BENZ

But investor sentiment has turned around on self-driving car stocks.

Apple Inc. is moving forward with self-driving car technology and is targeting 2024 to release a passenger vehicle that could include its own breakthrough battery technology, Reuters reported last month. Intel Corp. unveiled a plan to list its self-driving car unit Mobileye in mid-2022.

Mercedes-Benz plans to commercialize a Level 3 self-driving car in the first half of this year while working on empirical research for Level 4.

“Sequential commercialization of Level 3 and 4 will draw investors’ attention back to the self-driving theme,” said Choi Yoo-joon, an analyst at Shinhan Investment Corp. in Seoul. “The ultimate goal of electrification is autonomous vehicles.”

The technology standard competition between cameras and lidars has also shifted. Investors are paying more attention to how to process data collected than to which equipment collects more data. It doesn't matter to investors whether a self-driving car is equipped with cameras or lidars if the components process data well.

GROWING INTEREST IN PARTS MAKERS, SOFTWARE DEVELOPERS

South Korea is home to both hardware makers and software developers for autonomous vehicles. Hyundai Mobis and Mando manufacture ADAS, while LG Innotek and MCNEX make camera modules.

Investors began showing interest in parts makers such as MCU producers -- Telechips and ABOV Semiconductor Co. KEC Corp. is also expected to benefit from the growing demand for electricity semiconductors, analysts said.

Among software developers, OBIGO Inc. and Thinkware are likely to attract investors, analysts said. OBIGO, which supplies apps and software used in automobiles, is dominating South Korea’s connected car software market.

Write to Yun-Sang Ko at kys@hankyung.com
Jongwoo Cheon edited this article.