TM Stock: Toyota Motor Corporation Is Smarter Than Tesla Motors, Inc. in This One Way

toyota motors stockCompanies like Tesla Motors, Inc. (NASDAQ:TSLA) and Alphabet Inc. (NASDAQ:GOOG) are betting big on driverless cars. Toyota Motor Corporation (ADR)(NYSE:TM), however, is taking a more cautious approach, which could mean big gains for owners of TM stock.

Toyota stockholders can rest at night knowing the company has accumulated record profits of $10.0 billion over the past six months. The company, ever looking ahead to develop the next mass appeal technology, is accelerating the launch of its own driverless vehicle technology. Unlike some of its competitors, however, Toyota has chosen a more cautious route, one that focuses on innovation but not at the expense of safety. What does this mean for TM stock? (Source: “Ford CFO Says Toyota Gains $10 Billion Advantage on Weak Yen,” Bloomberg Business, Jan. 29, 2015.)

Is This a Game-Changer for TM Stock?

Alphabet Inc. stock, aka Google, has reached its lofty $733.69 per share price thanks to its innovative drive that extends across an ever wider range of technologies. Google is one of the leaders in advancing self-driving car technology.  Although it will take some time before a car can drive like a human, the race for driverless cars is fully underway.

While companies in the crowded automotive space such as General Motors (NYSE:GM), Nissan and, most aggressively, Tesla Motors (which already offers a number of self-driving features on its Model-S), tech and social media giants like Google, Apple Inc. (NASDAQ:AAPL) and Uber are all competing for the best talent in order to be the first to offer the most complete driverless technology.


In the latest “Google Self-Driving Car” report which the company publishes every month, the company reported that its fleet of driverless cars, which includes 23 Lexus  (a Toyota brand) cars, had no incidents after about 62,000 miles of tests last month. (Source: “Google Self-Driving Car Project Monthly Report October,” Google, last accessed November 9, 2015.)

At little or no risk to Toyota stock, the Japanese company has created and invested $1.0 billion into a new company, the Toyota Research Institute Inc., based in Palo Alto, Silicon Valley near Stanford University. This company is dedicated to studying artificial intelligence, including driverless cars. (Source: “Toyota Invests $1 Billion in Artificial Intelligence in U.S.,” The New York Times, Nov. 5, 2015.) Gill Pratt, one of the leading American experts in robotics and former manager at DARPA, the government agency (headed by the Department of Defense of the United States) that deals with the development of new technologies for military use will head Toyota Research Institute. The goal will be to increase the safety and accessibility of Toyota driverless vehicles.

Toyota wants to sell its first driverless car in Japan by 2020, using the Tokyo Olympic Games as the backdrop.  Toyota, like Google and Tesla, has been testing the technology widely. In Tokyo, Toyota tested a Lexus, allowing it to drive independently for 10 minutes along a crowded highway, maintaining a speed of 40 miles per hour, braking, steering and changing lanes without any human intervention.

Toyota’s approach is to forge a cooperation between the car and the driver as a team, bringing forward an idea experimented since 1990, when it was generally considered unrealistic. Then, the technology exploded and over the past few years, even some mid-price vehicles offer self-parking as an option or standard feature. Because Japan has a large population of elderly people, Toyota sees a potentially huge market for driverless technology at the service of the elderly and those with disabilities. However, Toyota is reluctant to launch the technology for now because it still has to sort out how it works in real life conditions featuring pedestrians and cyclists.

In a few months Toyota will offer a device called the Intelligent Transportation System, which communicates with the sensors installed in some intersections and sends the information to the vehicle before people cross them, so as to warn the driver. It is a pilot project, which if introduced on a large scale would drastically increase the level of security.

Finally, for the fourth consecutive year, Toyota stock has benefited from the brand’s consistent top-10 finish in the Interbrand Best Global Brand ranking, which considered not only Toyota stock valuations and company properties, but also the perception of the brand and its potential. Toyota rose to sixth place overall from eighth compared to 2014. Moreover, its brand is worth some $49.0 billion. (Source: “TOYOTA Remains Most Valuable Global Automotive Brand According to Interbrand,” Business Wire, Oct. 6, 2015.)

The Dangers of Autonomous Driving

While some companies have rushed autonomous driving systems to market; by 2012, Google semi-autonomous system was advanced enough that its Lexus-based test vehicles could run autonomously on freeways like the Tesla Model S and X and had to regain control of the car on the other parts of the journey. While the testers praised the autonomous system on the highway, including a fan of sports cars who saw previously autonomous driving as a synonym of boredom, the semi-autonomous system was definitely not safe.

The dangers of semi-autonomous driving–and therefore the need for such systems to be thoroughly developed before being introduced to the market–are more psychological than technical.  Google realized that many drivers would no longer pay attention to the road in autonomous driving mode, which impaired their ability to take over in case of an incident or emergency. Cameras installed on-board the test cars to study the human component of driverless features even showed one tester using  his computer in the back seat while driving on the highway to charge his phone. In fact, the problem is the testers felt too safe in the semi-autonomous cars

Many studies have shown the danger of a semi-autonomous driving system. A driver needs between five and 17 seconds to regain control of a vehicle. It is as if in autonomous driving, drivers are disconnected from reality and are no longer alert enough to react to situations. In this sense, owners of TM stock can feel secure that the company has preferred to take more time to develop autonomous driving systems. (Source: “Here Are Some Of The Problems Google Is Having With Its Self-Driving Cars,” Business Insider, Mar. 3, 2013.)

Stay in the loop. Follow Alessandro on Facebook and Twitter.