Qualcomm Is Bidding for a Car-Parts Company. Why Autos Are the New High Tech.

Qualcomm's marketplace capitalization is acold larger than Magna's.

Dreamstime

The Qualcomm connection tops the terms of $31.25 the auto-parts elephantine Magna International (MGA) agreed to wage successful precocious July

The contention is simply a motion that autonomous-vehicle, oregon AV, exertion is heating up. Drivers tin get cars contiguous with alleged level 2 autonomous systems. These are systems combining adaptive cruise power and lane-keeping assistance that tin bash astir of the enactment of driving successful immoderate settings. Drivers inactive request to wage attraction with level 2 systems.

In coming years, car makers expect to person technologies that volition mean drivers don’t person to bash that. Estimates connected erstwhile that mightiness beryllium vary, but 2025 is simply a bully target. Between present and then, however, systems volition proceed to get amended and income for information systems—from Veoneer and its peers—should grow.

The existing car and tech industries are apt to question to involvement retired crushed successful that caller arena betwixt present and then. It is astir apt a bully thought to stake connected a triumph for tech.

Qualcomm’s marketplace capitalization is $167 billion, and the banal trades for 16 times estimated 2022 earnings. Magna has a $25 cardinal marketplace headdress and trades for 9 times. It isn’t truly a just fight, adjacent if Magna would person an acold easier clip integrating Veoneer into their existing operations.

That doesn’t mean car investors should fret. Their assets are becoming much invaluable arsenic the satellite transitions toward electrical and autonomous vehicles.

Veoneer banal was astatine astir $20 earlier the Magna bid. Its marketplace headdress was astir $2.2 cardinal oregon 1.3 times estimated 2021 sales. Now the institution is worthy $4.1 billion, oregon 2.4 times estimated 2021 sales.

The bid is bully quality for different lidar markers, specified arsenic Luminar Technologies (LAZR) and different information suppliers specified arsenic Aptiv (APTV). It’s besides bully for car makers specified arsenic General Motors (GM), which has its ain autonomous-driving technology.

It mightiness not beryllium arsenic bullish for Tesla (TSLA,) which is seen arsenic a person successful EV and AV tech. Companies similar Qualcomm, oregon Intel (INTC) and adjacent Apple (AAPL), pushing into the AV and EV concern would mean much contention for Elon Musk’s company.

The implications are endless, but the connection is clear. The car concern is becoming much of a exertion manufacture time by day.

Write to Al Root astatine allen.root@dowjones.com