Flying taxis and delivery drones are coming - and these 40 companies are predicted to be the biggest players

Tesla

Sector: Autos & Shared Mobility

"Tesla has expertise in batteries, AI software, complete vehicle engineering, charging infrastructure and material science that we believe may have transfer ability to the autonomous aircraft domain. Tesla CEO Elon Musk is regularly asked about flying cars. While he is sometimes cautious about the near-term commercialization of the product due to noise and wind force, he has been outspoken about his desire to design a vertical-take-off-and-landing supersonic electric jet. Tesla’s increasingly close relationship with SpaceX may also prove useful in this adjacent area of development."

Source: Morgan Stanley

Aptiv

Sector: Autos & Shared Mobility

"Aptiv is a leader in software, sense-and-compute, electronic architecture and hardware integration for autonomous and electric cars. Given the skills overlap between AVs and flying cars discussed throughout this report, we see Aptiv as potentially well positioned in flying cars in a magnitude that we believe exceeds the risk of potential cannibalization. The company has conducted 5,000+ automated rides in Las Vegas, with a 4.96 / 5.00 rating on the Lyft app, and expects to have 75 vehicles in Las Vegas by the end of 2018."

Source: Morgan Stanley

Seating and interior companies

Lear and Adient

Sector: Autos & Shared Mobility

"Seating/interior companies have expertise in the mass production of seats (including seat structures and mechanism/recliners) that are tested to a high level of longevity and crash safety in a rigorous automotive environment.

"In our view, while the absolute unit volume of passenger – carrying flying cars may be quite low for the next 10 to 15 years, the $ value per unit may be substantially higher than for light vehicles - perhaps a significant multiple of content value. Adient has been emphasizing the aerospace opportunity broadly for their seating and interior products. Earlier in 2018, Adient and Boeing launched a new company to design and build airplane seats with the aim to sell a portfolio of products directly to airlines and leasing companies. Lear’s seating portfolio is also well positioned on the theme, in our opinion. "

Source: Morgan Stanley

Textron

Sector: Airlines / Aerospace & Defense

"Textron has exposure to the aviation industry through both its Textron Aviation and Bell business segments. Textron Aviation is a manufacturer of turboprop and business jet aircraft, including Beechcraft and Cessna brands, while Bell is a manufacturer of helicopter and tiltrotor aircraft for both military and commercial use.

"In recent months, Bell has overtly expressed interest in Urban Air Mobility through its unveiling of the Bell Air Taxi cabin experience at CES 2018 and collaboration with Uber to accelerate the large-scale deployment of eVTOL."

Source: Morgan Stanley

Boeing

Sector: Airlines / Aerospace & Defense

"Boeing has made a number of moves over the past year to position the company as leader in the emerging UAM market. During the 2018 Farnborough Airshow, the company announced the formation of Boeing NeXt, a business unit tasked with "building the ecosystem that will define the future of urban, regional and global mobility." This "ecosystem" includes next-generation airspace management and global airspace integration, to ensure autonomous and piloted air vehicles can safely coexist.

"In addition, speaking at the Morgan Stanley Laguna Conference, Boeing CEO Dennis Muilenburg noted that the company was making investments currently working on prototype vehicles."

Source: Morgan Stanley

Northrop Grumman

Sector: Airlines / Aerospace & Defense

"Northrop Grumman is a leader in unmanned aircraft for military applications, including VTOL and conventional flight systems. The company’s Autonomous Systems business segment within its Aerospace Systems sector has been producing aircraft of this type for decades, including Global Hawk and Fire Scout amongst others.

"In addition, the company has invested in cognitive systems, a fundamental component of autonomous aircraft given the need to navigate congested airspace."

Source: Morgan Stanley

Lockheed Martin

Sector: Airlines / Aerospace & Defense "Lockheed Martin, through its Aeronautics and Sikorsky businesses, has commercial and military exposure to the VTOL market. It has built a number of unmanned aircraft for military use and in conjunction with DARPA is currently developing ARES (Aerial Reconfigurable Embedded System) a modular VTOL aircraft that can transport 3,000 pounds of payload load at a range of 250 nautical miles on a single tank of fuel. "In addition, the company has demonstrated its MATRIX Technology which enables military and commercial helicopters VTOL aircraft, to safely, reliably, and affordably operate as autonomously or optionally piloted aircraft." Souce: Morgan Stanley

JetBlue

Sector: Airlines / Aerospace & Defense"

"JetBlue is a domestic US airline that we view as a potential beneficiary of flying cars given its early moves to defensively position itself. The company has acknowledged the emergence of Urban Air Mobility, going so far as to invest in the space through its corporate venture fund, as a backer of Joby Aviation." — Morgan Stanley

"We believe the regional transportation ecosystem is ripe for disruption and startups like Joby Aviation will revolutionize how people move across urban areas," Bonny Simi, President, JetBlue Technology Ventures, said recently, according to Morgan Stanley.

American, Delta, and United could be players, too

"The "Legacy" US domestic carries in American, Delta, and United utilize regional feeds that are fundamental to overall network/business flow and represent 10-20% of revenues. The emergence of eVTOL could pose a risk as it targets short-haul routes and begins to penetrate traditional airline markets. That said, we see these networks as somewhat difficult to penetrate, with any impact occurring over a lengthy period of time."

Source: Morgan Stanley

United Parcel Service (UPS)

Sector: Freight Transportation

"UPS has experimented with drone delivery and even has a stake in WKHS, an early developer of van-based drones. However, we believe UPS’s highly unionized labor force and intricate ground network could be barriers to mass VTOL adoption.

"Earlier this year, the Teamsters labor union sought to prohibit the use of drones and driverless vehicles in UPS’s operations as part of labor deal negotiations. UPS also relies heavily on an integrated ground delivery network which may need to be re-tooled to integrate drone delivery. Further, in the event that retailers themselves vertically integrate into last-mile omnichannel delivery via drone/VTOL, we believe the legacy parcel carriers could be most exposed to disintermediation risk."

Source: Morgan Stanley

FedEx

Sector: Freight Transportation

"We believe FDX is exposed to many of the same secular/structural risks as UPS, but FDX’s lower reliance on eCommerce, more adaptable Ground network and DSP model (no unions) makes their network more flexible. FDX also appears more receptive to new technologies like autonomous trucks and VTOLs. Fedex’s non-unionized labor force makes it easier to integrate new technology and their use of third party networks makes it relatively easier to scale operations up or down to accommodate VTOLs.

"Also, FDX’s foundation as an Express airline and their large air network could act as a complement in the initial stages of VTOL adoption. We see FDX as a potentially faster adopter of VTOL technology vs. UPS."

Source: Morgan Stanley

United States Postal Service (USPS)

Sector: Freight Transportation

"We believe the USPS could be the biggest winner from mass adoption of VTOLs. The USPS has by far the largest and densest delivery network in the country today, largely resulting from the Universal Service Obligation for first class mail. The USPS has also struggled with the long-term secular shift away from first class mail though its eCommerce growth has helped stem that headwind. As the USPS looks to be reformed and reinvented with sustainability a going concern (largely through acts of Congress like H.R. 756/S.2629), we believe VTOLs can present an effective mail/parcel delivery solution to maintain the Universal Service Obligation (which is in danger of being downgraded as a cost savings measure) as well as a lower-cost alternative to mail carriers driving long-distances in rural areas.

"If the USPS is able to make the transition and adopt VTOLs to become a more nimble and profitable entity, while still preserving its network advantage, it could become even more of a formidable competitor to UPS/FDX."

Source: Morgan Stanley

Deutsche Post

Sector: Freight Transportation

"Deutsche Post AG has been an active investor and manufacturer of electric vehicles (Streetscooter) to utilize in its urban delivery network in Germany, but has recently scaled its operations to now manufacture these vehicles for third party customers. DPDHL and other players in ground parcel logistics such as LaPoste (not listed) in France have piloted successful drone deliveries (DHL’s Parcelcopter) in urban, regional, and rural markets.

"According to McKinsey, assuming these technologies can be commercialized and regulated appropriately, the 10-15% of parcel deliveries today that go to low density rural areas in Europe could be transferred to these lower cost options resulting in margin gain for the post and parcel players."

Source: Morgan Stanley

Progressive

Sector: Insurance

"The Urban Air Mobility ecosystem will represent a brand new market for insurers, although it may cannibalize some of the demand for on ground transportation. PGR is a market leader in auto insurance (both personal and commercial) and they are the most technology driven insurer with heavy usage of data analytics, telematics, predictive modelling, etc."

Source: Morgan Stanley

TPI Composites

Sector: Clean Tech

"TPI Composites currently makes composite wind turbine blades and has started making composite bus bodies in partnership with Proterra. It now has five development programs in this strategic space (its clean transportation initiative), including EVs in the automotive area, trucks with Navistar, and other products along these lines - a couple have been mentioned by name, including General Motors and Navistar, and there are a few others that remain confidential at this point.

"On its recent 3Q call, it announced that it is investing ~$12m in ‘19 to develop an automated pilot manufacturing line for the EV market, which it will use to establish processing IP and showcase manufacturing capabilities at automotive volume rates. It has said it is targeting $500m revenue contribution in 2023 from its clean transportation initiatives (EVs/buses), which would represent ~20% of topline. If it is able to establish a presence in the broad EV space now, it might have an early mover advantage with next generation flying cars."

Source: Morgan Stanley

Amazon

Sector: Internet

"Amazon Prime Air (not to be confused with their planes) is developing autonomous drone prototypes. Shipping is Amazon’s second largest cost ($28bn in ’18e and $38bn in ’19e), and UAM aircrafts could cut delivery expense in rural and congested urban areas. Google is also developing autonomous drone prototypes and architecture in its Project Wing."

Source: Morgan Stanley

Alphabet

Sector: Internet

"Urban Air Mobility (UAM) represents a TAM expansion opportunity as an evolution of Google’s self-driving car initiative, Waymo. A push into flying cars would partly mirror Uber’s Elevate, which hopes to fly people in urban environments to avoid lengthy commutes."

Source: Morgan Stanley

Microsoft

Sector: Software

"We believe that Microsoft will be a likely platform for building applications in the space given its Cloud to Edge capabilities."

Source: Morgan Stanley

Dassault

Sector: Software

"UAM represents a large opportunity for advanced design and material systems, utilizing 3D printing. Dassault is a market leader in 3D design and digital mock-up software.

Source: Morgan Stanley

NVIDIA

Sector: Semiconductors

"NVIDIA's Graphics chips are better for video data streams given the higher degree of parallelism they offer vs. traditional microprocessors. And NVIDIA has the advantage that most neural networks are trained on its devices, where it has nearly 100% share outside Google’s TPU use cases.

"Compared to custom chips, graphics chips are also more programmable and NVIDIA has advanced the state of the art software substantially with its investments in Tensor RT, making GPUs more friending towards Inference applications. Having said that power consumption is an area where graphics chips still lag FPGAs and dedicated silicon/ASIC solutions."

Source: Morgan Stanley

Intel

Sector: Semiconductors

"Intel’s exposure to this theme is through several of its product families – 1) Movidius in drones/surveillance (current leader), 2) Mobileye in Autonomous vision; 3) Nervana’s ASIC solutions for enabling machine learning training, and 4) Xeon CPUs for driving Machine learning inference applications."

Source: Morgan Stanley

Ambarella

Sector: Semiconductors

"Ambarella’s computer vision chips, launched late last year, are likely to be used to delivering "perception offload" for some of the cameras, while the NVDA solution addresses the heavier computational lifting."

Source: Morgan Stanley

Xilinx

Sector: Semiconductors

"Xilinx has significant opportunities to benefit from machine learning inference. Xilinx's key products – customizable logic blocks called field programmable gate arrays, or FPGAs, and 7nm ACAP SoCs are uniquely well suited to machine vision tasks, given their high degree of inherent parallelism, lower latency, and better power consumption compared to graphics.

"Ease of use has been a challenge in cloud traditionally, which is improving over time as Xilinx and ecosystem partners invest in platforms/compiler software, but closer to the edge we see Xilinx’s FPGA solutions having a strong role."

Source: Morgan Stanley

NXP Semiconductor and Analog Devices

Sector: Semiconductors

"Sensor providers (Radar/Lidar/Vision) are the key beneficiaries of increasing penetration of flying Cars. In the near term, DJI’s, who is pursuing ASIC designs for their devices, dominance in the consumer drone space can limit the opportunities for US semiconductor companies. We see benefits for increased adoption of NXP and ADI's radar solutions."

Source: Morgan Stanley

Tower companies: American Tower, Crown Castle, and SBA Communications

Sector: Telecom Services

"We expect connected UAM aircraft to layer additional capacity needs onto wireless networks and view Towers as the best way to play this theme from a telecom perspective as providers of passive network infrastructure.

"The three public US Tower companies are leading owners of macro tower cell sites with assets leased to various telecom network operators and connectivity providers. They own a combined ~86k domestic towers (~65% of the market). Both AMT and SBAC also have significant international portfolios (largest markets are India and Brazil), while CCI also owns a significant amount of dense metro fiber and small cell assets in the US."

Source: Morgan Stanley

Casinos

Caesar's Entertainment and MGM Resorts Intl.

Sector: Gaming & Lodging

"Flying cars should be a positive for Vegas casinos. They would improve gaming and nightlife customers’ ability to visit Las Vegas, which currently suffers from infrastructure headwinds, like no direct train service and hours of traffic from LA during busy weekends. Vegas does not have a large population base outside of the immediate locals market, so the ability to cut a 4+ hour drive down to minutes would be a game changer

Qualcomm, Cisco, and Blackberry

Sector: Telecom & Networking Equipment

"These are the Comms names with the largest auto/networking exposure, which would help give them a first mover advantage for UAM aircraft connectivity.

• Cisco's recent acquisition of Jasper allows Ford, GM, and others to connect to a wireless network.
• Qualcomm makes modem chips for cars as well as networking technology.
• Blackberry provides a more secure "kernel" for many auto operating systems, which becomes even more imperative if the OS is for a smaller car-like connected aircraft."

Source: Morgan Stanley

Lumentum and II-VI Incorporated

Lumentum and II-VI

Sector: Telecom & Networking Equipment

"We highlight these companies as important developers of LiDAR technology - responsible for light generation and filtering technology for 3D sensing."

Source: Morgan Stanley

IT Hardware

Seagate, Hewlett Packard Enterprise, NetApp, Nutanix

"We highlight these names as potential beneficiaries of increased TAM in light increased edge compute and storage in order to operate flying vehicles. This group would generally benefit as part of the broader "data era" thesis."

Source: Morgan Stanley

Apple

Sector: IT Hardware

"Imagine your iPhone screen breaks but you're busy and you don’t have two hours to get to an Apple store and wait for someone to fix your device. Instead, it can be picked up and dropped off at your home or office in the same amount of time and without taking time away from other commitments. The same can be applied to other computers and machinery whereby sensors and remote diagnostics communicate that a part needs to be replaced and it’s delivered immediately with no human intervention. APPL is likely the largest beneficiary from customer support business model disruption."

Source: Morgan Stanley

Garmin

Sector: IT Hardware

"Garmin recently partnered with Bell/Textron to develop Air Taxis (first to be tested in Dallas). Garmin would provide the avionics and vehicle management. They already have strong share in the US for very light general aircraft (light business jets and smaller), and they recently finished building this a large manufacturing facility in Kansas City. Air taxis are likely part of their 10 year plan."

Source: Morgan Stanley