Revolution in the Driver’s Seat: The Road to Autonomous Vehicles

Revolution in the Driver’s Seat: The Road to Autonomous Vehicles

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Revolution in the Driver’s Seat: The Road to Autonomous Vehicles

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  • Sweeping Changes Are on the Horizon

    The journey of AVs to market maturity will take 20 years or more to complete. But it is not too soon for the automotive industry, regulators, and all players in the transportation and technology spheres to consider the implications of this revolutionary development and prepare for the changes it will unleash.

    OEMs and suppliers will need to decide which features to prioritize and what impact those features will have on the base car. Segmenting the market will be a critical first step: Which features will consumers prioritize, and how will OEMs offer them? Which features will win in the marketplace, and which OEMs and suppliers will be best positioned? These companies will also have to choose among underlying technologies and determine which combinations of lidars and camera, positioning, and radar systems will best enable autonomy and win consumer favor.

    What Does “Full Autonomy” Mean?

    Additionally, OEMs and leading suppliers will need to invest heavily in the processing power and software architecture and integration that will be necessary to support autonomous driving. The software development will be extremely complex and raise challenging questions. What, for example, constitutes full autonomy?

    That’s not just an academic question. There may be situations—a whiteout snowstorm or a sudden, heavy fog—in which safe, fully autonomous operation becomes impossible. How will the vehicle sense such a situation, indicate that it can no longer proceed safely, come to a safe stop, and hand over control to a human operator? And who will be responsible for developing integration technology and its enabling software? Will OEMs take the lead, or will they rely on their suppliers or technology partners?

    Strategic trade-offs will influence decisions about whether to make or buy key components. On one hand, by keeping certain technology development—such as sensor fusion and software development—in-house, OEMs can limit their liability exposure and build competitive advantage. On the other hand, partnering with suppliers can be economically advantageous and obviate the need for investments in building internal capabilities. What’s more, changes in liability laws may transfer a greater share of risk to OEMs. Bringing about such changes would require greater coordination among multiple stakeholders, including suppliers, insurance companies, lawmakers, and governments.

    New Technologies, New Entrants

    The AV revolution also opens the door for new entrants across the value chain, especially considering the potential use of AVs in commercial and urban settings. New technologies will provide opportunities for emerging sensor and processor suppliers, and the need for high-definition maps and data connectivity will create further growth opportunities in the automotive space for technology companies. AVs will boost demand for connectivity and cloud-based data services as well. Telecommunications companies will need not only to plan investments in infrastructure but also to collaborate with automotive players and explore new service models for consumers. OEMs will need to watch for disruptive moves by tech players, such as Google’s and Apple’s forays into the automotive arena.

    What’s more, OEMs may be able—or may be forced—to develop new business models to better serve urban markets, in which personal-vehicle ownership is no longer considered desirable or necessary. And what player, existing or new, will develop new models for operating and coordinating safe, cost-competitive commercial-vehicle fleets incorporating AV technology?

    Challenges for Policy Makers

    AVs also raise urgent questions for public authorities. Regulators—together with OEMs, insurance companies, and safety administrations—will need to design and enact legislation that will define the infrastructure necessary for autonomous driving, allocate liability for accidents and technical failures, and specify minimum technological requirements. They will also need to devise systems for measuring changes in auto safety.

    And they may be faced with unexpected trade-offs, such as choosing between autonomy and zero emissions. If autonomous features turn out to improve safety significantly, can regulators require consumers to pay for both autonomy and zero emissions? And if the cost is higher than what the market can bear, will the prospect of reduced emissions lead regulators to encourage the adoption of electric vehicles, or will the safety and productivity benefits of AVs tip the balance in their favor?

    Meanwhile, public-transportation policy makers will need to consider the economics of AVs and consumer attitudes toward AVs in their investment plans. Their long-term planning must take into account the possibility that the favorable economics of AVs might lead consumers not only to give up their own vehicles but also to shun conventional mass transit in favor of robo-taxis. This phenomenon could be particularly pronounced in megacities in emerging markets, where public-transit capacity can’t keep up with rising demand. Policies that would nudge drivers to switch to AVs—such as requiring drivers to obtain expensive permits for conventional personal vehicles—could dramatically advance efforts in those cities to emphasize transportation by walking, bicycling, and robo-taxi. The policy ramifications would be massive and far-reaching. One possible consequence: municipal authorities would have compelling opportunities to transform parking structures into more socially and economically beneficial spaces.

    AVs will also disrupt business models in the mobility environment and have significant impact across many other related sectors. When robo-taxis are widely and cheaply available, will conventional taxis and car rentals become redundant or converge in a single-service concept? What shift will occur within the insurance business if auto accidents become a matter of product liability rather than personal liability? Will the potential for improved safety lead insurance providers to reward AV owners? How will the anticipated reduction in accidents affect downstream businesses, such as repair shops, towing services, and legal services? Expected traffic benefits and a reduction in the total number of cars on the road resulting from increased car sharing could also reshape parking and infrastructure investments and lower oil and gas demand.

    This list only scratches the surface of the changes in store. After all, it is not every day that one of the world’s most important industries is thinking globally about putting someone else in the driver’s seat. Or even no one.