Is It Smart To Invest In Smart Cars?

The growing push toward smart cars has led many investors to place their bets on car companies and software manufacturers who are leading that field, but some analysts caution that a technology as new as this doesn't have all the bugs worked out just yet.

Partnerships Emerge

When it comes to smart cars, the line between tech companies and automakers has become blurred. Over the past year, several new partnerships have emerged as firms vie to create the most technologically advanced automobile.

In March, China's SAIC Motor Corp Ltd announced that it would work together with Alibaba Group Holding Ltd BABA on a 1 billion yuan project to develop connected cars.

Related Link: The Chinese Smart Car Market Is Heating Up

That type of partnership is not uncommon; AT&T Inc. T recently announced its own partnership with brands like Ford Motor Company F and General Motors Company GM to create exclusive content for connected cars.

How To Play Smart Cars

For investors looking to place their bets on smart cars, there is no shortage of options. Most big name automakers have begun to develop their own version of connected cars. General Motors has used its existing OnStar service to offer a 4G Internet connection, while Fiat Chrysler Automobiles NV FCAU created an entirely new system called uconnect that allows its cars to link up to the digital world.

At the moment, the industry leader for smart cars is Tesla Motors Inc TSLA, as the company has always focused on creating cars that boast the latest technology. The company has already made its API available to third party developers to create new apps and has both an iPhone and Android smartphone app already on the market.

Related Link: Analyst Sees Automated Driving Cutting Car Production

Data Traffic Jams

Though smart cars appear to be a growing trend in the auto market, some caution that they could face some hiccups as the technology develops.

A a href="http://www.reuters.com/article/2015/05/21/us-autos-connected-data-idUSKBN0O616M20150521">report by Machina Research forecast that machine-to-machine connections will rise to 2.3 billion in 2024 from 250 million today.

All that data floating around could create a problem on the roads, though. With entertainment, navigation and monitoring data competing for frequency with smartphones, tablets and wearables, traffic jams could become a problem for devices as well as cars.

When several cars are stopped together, data providers will have to find a way to manage the growing demand for bandwidth in a concentrated area.

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