25 Mars 2021
25 Mars 2021
For Marketing Purposes - FOR QUALIFIED INVESTORS ONLY– This document is reserved and must be given in Switzerland exclusively to Qualified Investors as defined by the Swiss Collective Investment Scheme Act of 23 June 2006 (as amended from time to time, CISA).
Lukas Neckermann is one of the world’s pre-eminent visionaries on the topics of new mobility and smart cities. He also advises leading index provider MSCI on their respective indices designed to capture the Future Mobility and Smart Cities themes.* These indices are managed with the support of this human expertise, but also input from artificial intelligence techniques. This combined approach helps ensure Lyxor’s Future Mobility and Smart Cities ETFs stay relevant over time.
We recently spoke to Lukas to better understand his contribution to MSCI’s thematic index team, as well as hear his insights on the future of transport and how closely it’s linked to the creation of smart cities. As a German native, he also shared some local perspectives from his home country.
Mr. Neckermann, you advise MSCI on the key themes of future mobility and smart cities. Your knowledge contributes to a process that uses artificial intelligence to create indices, which are accessible to investors via Lyxor’s ETFs. Can you give our readers an idea of how you contribute to the creation of each index?
Lukas Neckermann: the first question is what should be included in, or how to delineate, the themes of future mobility and smart cities. This requires a certain level of precision in the current environment where companies that are still very traditional try to present themselves as future-oriented. So we developed new value-creation chains and defined the limits of the ecosystems for both indices in order to identify relevant firms. MSCI has an impressive AI-supported system and precise targets for relevance, weightings and ESG criteria. I received a long list of the proposed index components based on these databases and filters, and I could then make individual comments on these.
I imagine many readers are wondering how thematic indices differ from a traditional index such as the NASDAQ-100, the MSCI World Information Technology Index or other tech indices, because ultimately everything is connected in one way or another with the major theme of our time: digitalisation.
LN: Yes sure, digitalisation is an important basic prerequisite for all of these indices. But electrification, automation, and societal trends such as urbanisation and the drive towards the sharing economy play an equally important role. And these are not necessarily reflected in strict technology indices. It’s the conjunction of these trends and the specific focus on mobility and the development of our cities that distinguishes these two indices.
What happens if trends change? How can you, and by extension investors, be sure that the companies included in the index and in the ETF still reflect the megatrends of the coming years, and will therefore still benefit from these forces of change?
LN: On the one hand, this certainly means tracking the evolution of the megatrend itself, and here the approach is one of permanent monitoring, for example, to see how COVID-19 will impact mobility. The other aspect, and this may be even more important, is to constantly update the players included in these indices. We are currently seeing phenomenal value appreciation and a flood of new issues, particularly in the mobility sphere. MSCI carries out updates and reviews of the indices at regular intervals, and I also provide comments on these. This means that they are kept up to date.
Mobility ranks amongst the most sought-after themes, together with digitalisation. Yet when we talk about the future of mobility, this is often interpreted as the future of cars. And from there, the mind easily goes to Tesla. What are the shortcomings of narrowing down the scope of the theme in this way?
LN: Comparing Tesla with a traditional car manufacturer, an OEM (Original Equipment Manufacturer) to use jargon, is indeed inadequate. Tesla builds cars, but it also builds battery cells and battery packs, offers energy production and energy storage solutions, operates charging stations and is ultimately becoming a fleet operator. Tesla has its finger in significantly more industrial cookie jars than either Ford or General Motors.
Yet even Tesla is just one link in the bigger mobility chain.
From the very beginning, we called for a radical rethink – mobility is not just an extension of the car, but a brand new value chain with quite different objectives and performance characteristics. In the automotive industry, the yardstick is still how many cars are produced. In mobility it’s all about the volume of people or goods that have been transported, over which distance and by which method. Only then can I include players such as mobility service providers in the equation. And traditional OEMs only play a secondary role in these areas currently.
How do statements from leading politicians that the combustion engine will be withdrawn from use by 2035, or even in part by 2030, influence the mobility theme?
LN: To a certain extent, a concept needs political support in addition to technical and economic advantages in order to achieve widespread acceptance in society. This interplay is necessary for electrification to prevail.
In my opinion, the advantages are already evident in many countries – the train has left the station and the facts clearly speak in favour of a complete switch to battery-run vehicles, and this includes buses and trucks. In these circumstance, sales bans serve rather as confirmation of an imminent reality.
I really don’t understand why some politicians, particularly in Germany, seek to emphasise fuel cells for cars so strongly, in contrast with the clear ambitions and statements of the automotive sector. This leads to unnecessary delays and damages the competitiveness of German industry on the world market. Hydrogen energy storage will play a key role in stationary applications, possibly also in aviation. But not really for cars.
Germany is the country of the car, the land of private transport. Do you think that self-driving vehicles with regulated speed will become widespread in the foreseeable future?
LN: Yes. Just as we no longer allow or accept horses on motorways today, motorway lanes for cars driven by people will be gradually replaced by lanes for self-driving vehicles, as soon as the superior safety and efficiency of self-driving cars becomes clear.
But that’s still a pipedream at the moment, which is why we should look at other areas of application. Autonomous driving is not restricted solely to private transport. It will become widespread in logistics, i.e. for goods transportation over short and long distances. Today millions of types of goods are already delivered by robots in countries such as the UK, the US and China. Autonomous driving is already being tested for rubbish collection, road sweeping and people shuttles. And in the medium term it will also be used on rails and in the air; what’s the point of having two pilots?
Are additional measures necessary to speed up the move away from private transport?
LN: In principle, nothing should be excluded regarding private transport, providing that e-scooters, bike or car sharing, car pools and transport services…etc are included, as these also help to free up our streets and can improve air quality. The broad range of new alternatives will mean that it’s no longer necessary to own a car.
But as well as the range of alternatives, infrastructure measures are also critical. What is the point of an e-bike without cycle lanes? What use is an autonomous ridepooling shuttle without the connectivity of 5G and vehicle-to-vehicle communication standards?
The human imagination is always inspired by things that were inconceivable for a long time. 200 years ago we could hardly have imagined that one day people would be able to travel long distances in no time at all via underground trains, or a hyperloop. But many projects have amounted to nothing. This most likely includes the flying car of the early 1970s. What is your opinion of its reincarnation, the flying taxi? Will people soon be able to wave goodbye to traffic jams?
LN: Perfect is the enemy of good, but “perfect” is not defined by a single characteristic such as speed or comfort, but by the system as a whole.
A flying taxi may be quicker than a street taxi or cheaper than a helicopter, and a hyperloop quicker than a train, but an advantage only exists if the system as a whole is considered – and changed. If it takes me 30 minutes to get to the flying taxi station or the hyperloop station, the time and cost advantages disappear. To realise the dream of flying taxes and hyperloops, the business models need to be significantly – and not just slightly – superior to existing systems. And here in Europe we already have transport systems that operate really well, with high-speed trains reaching up to 400 km/h and a very well-established public transport network.
The calculation must be made over the very long term, which is often longer than the political or economic time horizon in Europe. So we will tend to see these concepts used at greenfield sites where new cities and new infrastructures can be built, for example, in the Middle or Far East.
Mr. Neckermann, you live in London, and as a world-renowned expert you travel a lot, which in light of the pandemic is currently very difficult at best and impossible at worst. Do you see a key role for air travel in global mobility in the future? Will there be a renaissance of supersonic flights with new technologies that are more environmentally friendly? Is hydrogen propulsion the future for airplanes?
LN: The desire to travel and the need for human interaction mean that air travel will recover, but with certain restrictions and changes at the expense of ease and speed. Hub-and-spoke air traffic with jumbo jets and massive hub airports serving regional spokes is not ideal even today, and is being replaced by smaller aircraft on more direct lines. In the extreme, this can be seen in the growth in private flights, which we already saw during the COVID-19 pandemic.
On the ground, the differentiation between bus companies and personal cars is dissolving with concepts like UberPool and Via. Air travel is likely to go the same way, with new business models based on private and commercial flights.
In terms of hardware, this should inspire some new concepts, including smaller supersonic aircraft. However, such projects much be considered in economic terms and be able to stand on their own two feet financially, unlike the eternally loss-making Concorde.
Another area of research for you is smart cities. It’s expected that by 2050, 70% of the population will live in large cities and that there will be a significant increase in the number of megacities with over 10 million inhabitants. We are experiencing a period of great change. Digitalisation is rising significantly, and remote working and online retailing have taken a practically irreversibe leap forward. So the opportunities to work far from places of employment are also increasing. Will these recent developments reverse the forecast trend of more, and larger, cities?
LN: Over 70% of the population in Europe and North and South America already live in urban areas. However, in Europe we only have a couple of real megacities, such as London, Paris, Berlin and the Ruhr region. So the statistics that are often bandied about primarily relate to the rapid development of megacities in Asia and Africa. We are not seeing any switch away from urbanisation in these areas, and it would definitely not make sense.
For thousands of years, cities have been the most efficient concept for bringing together the economy and people. Higher population density also leads to greater levels of efficiency in mobility, health care and education, and therefore also to significant improvements in the quality of life.
Of course, applications like Teams and Zoom will radically overturn some things, such as whether children need to go into school every day, whether students need to physically attend university, or whether employees need to drag themselves into the office on a daily basis. But this doesn’t necessarily mean a mass exodus from cities. We love cities for much more than the jobs they offer.
To what extent are the themes of future mobility and smart cities related? Or put another way, to what extent is the success of one dependent on the changes and adjustments in the other?
LN: If we think about the city as a person, then mobility is its circulation. Poor circulation results in an economic heart attack. And if the circulation stops, the city dies. So just as we strengthen our heart muscles with sport, we must constantly expand urban mobility with new and smart concepts. Smart mobility solutions are key to the success and growth of any city.
One question that frequently comes up with our readers is the following: how do you become a visionary in a field where its real-life implementation more or less requires a revolution?
LN: The few revolutions seen over the last 200 years have all resulted from primarily technological trends in conjunction with societal trends. This includes the industrial, internet and smartphone revolutions.
So the trick is to step back and out of your own world in order to recognise converging trends. When I wrote The Mobility Revolution seven years ago, urbanisation, digitalisation and the sharing economy were already evident. Yet within industry, it was still far from clear that this would lead to a convergence of electrification, autonomous driving and shared mobility. I just connected the dots.
Personally, I always take the time to simply look at things from a new perspective. And I chat a lot over coffee!
Is it possible to be content with futurology? Ultimately, the future is and remains just that, the future.
LN: Pure research would be just as boring as pure action. Learning experiences and success come from a mixture of thinking and doing. Sometimes more of the one and sometimes more of the other. Thanks to my intensive cooperation with start-ups in particular, I see myself more as a future shaper. I consider this an extraordinary opportunity given the seismic change we are experiencing.
Many thanks for taking the time to talk to us Mr Neckermann. We wish you and your team ground-breaking forecasts!
About Lukas Neckermann
Lukas Neckermann is the Managing Director of Neckermann Strategic Advisors, a consultancy established in 2013 focused on new mobility and its strategic impacts. He has 20 years of leadership experience in the automotive and financial services sectors and has held management positions at BMW and Allianz Group. Lukas is the author of three books, including Corporate Mobility Breakthrough 2020 and Smart Cities, Smart Mobility.
Target TER for these Thematic ETFs is 0.45% but has temporarily been decreased to 0.15% until September 2021.
*MSCI may seek input from outside market experts such as Lukas Neckermann on the ongoing evolution of the theme underlying the index. However, such input is advisory only in nature. Use of any such input is at MSCI’s discretion, and may or may not lead to a change to the index or index methodology.
This article is for informative purposes only, and should not be taken as investment advice. Lyxor ETF does not in any way endorse or promote the companies mentioned in this article. The opinions expressed by Lukas Neckermann are his own, and do not necessarily reflect the views of Lyxor International Asset Management or Societe Generale. Capital at risk. Please read our Risk Warning below.
This document has been provided by Lyxor International Asset Management that is solely responsible for its content.
|Fund name||Sub fund name||Country of domicile|
|Lyxor Index Fund||Lyxor MSCI Smart Cities ESG Filtered (DR) UCITS ETF - Acc||Luxembourg|
|Lyxor Index Fund||Lyxor MSCI Future Mobility ESG Filtered (DR) UCITS ETF - Acc||Luxembourg|
|Lyxor Index Fund||Lyxor MSCI Disruptive Technology ESG Filtered (DR) UCITS ETF - Acc||Luxembourg|
|Lyxor Index Fund||Lyxor MSCI Digital Economy ESG Filtered (DR) UCITS ETF - Acc||Luxembourg|
|Lyxor Index Fund||Lyxor MSCI Millennials ESG Filtered (DR) UCITS ETF - Acc||Luxembourg|
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