Investors get tax break for driverless cars

EIS fund managers look to high-tech start-ups

Self-driving cars have captured the imagination of investors looking for tax breaks as new technology promises to revolutionise the motor industry.

Managers of enterprise investment scheme (EIS) funds, which give investors an incentive to finance early-stage companies by offering generous tax breaks, are funding tech start-ups specialising in driverless cars.

“This is a utopian future to some extent, but also when you think about some of the tech around this — it already exists,” said Tom Bradley, partner at EIS fund manager Oxford Capital.

The Oxford-based investment company said it is already speaking with companies involved in developing the algorithms needed for self-driving cars.

Until recently, EIS funds focused their attentions on the renewable energy industry, but the government’s removal of the sector from the tax-investment scheme — a decision which came into force in November — has prompted fund managers to look for new industries to back.

Self-driving cars have emerged as an area of intensive research and investment in the industry. Uber, the car-booking app, has said it will start testing the world’s first autonomous taxi fleet in August.

Uber chief executive officer Travis Kalanick has previously told the Financial Times that self-driving cars will be a cornerstone of future city transportation networks.

Google, Ford, Tesla, BMW and Volkswagen are also working on the technology.

Miles Kirby, director of investment manager Oxford Capital, said that despite the involvement of “the big boys” of the automotive industry, there were still opportunities for retail investors looking to gain exposure to the technology.

“The automotive folks are very good at engine management, but they’re not so good at machine learning,” he said. “We’re hearing that they’re struggling.”

“It remains to be seen exactly what will happen, but my belief is that the car companies don’t have the skills they need to bring this out and they will buy the expertise from university spinout companies,” said Mr Kirby.

Parkwalk Advisers, which specialises in university spinouts, has taken the approach of investing in companies that will contribute to the self-driving car industry.

“Google has done a lot with its self-driving cars, but personally I think it’s the data management that is quite interesting,” said Moray Wright, partner at Parkwalk.

“We’re seeing quite a lot of companies making leaps forward in data crunching in real time, which is essential for driving. That’s really cutting edge at the moment and it’s the holy grail.

“This tech is not far away,” he added. “We can build a car and the rest is just not far away.”

Parkwalk said it is already investing in companies making what it believes will be key components for cars of the future, including start-ups working on electric engines, solid state batteries, fuel cells and “extremely big data”.

Deepridge Capital, another EIS fund manager, said it was also looking at the niche. Andrew Aldridge, head of marketing for the company, said driverless cars were a core area for the tax break.

“EIS is there to support innovation so areas like that are core. EIS is there for that, it’s coming back to where it was intended, which is to support job creation,” he said.

Many car companies have already teamed up with tech giants as they race to be the first to deliver a self-driving car to customers.

BMW has partnered with Intel and Mobileye, Fiat will collaborate with Google to develop autonomous minivans while Volvo is working with Uber to develop self-driving taxis.

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