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North America and Europe as the pioneers of the Autonomous Vehicle Industry

Oct 20, 2023

The global autonomous vehicle market to grow USD 121.78 billion in 2022 to USD 2,353.93 billion by 2032 with a CAGR of 35% from 2023 to 2032.

Autonomous vehicles or self-driving vehicles are the latest trend in the transportation sector. These vehicles can differ in size and applications including personalized cars, trucks, and public transit systems. Furthermore, autonomous vehicles are often categorized into six levels of autonomy. For instance, level 0 indicates that the driver is entirely responsible for all aspects of driving related tasks, level 1 includes technologies such as lane departure warning signs and cruise control, level 2 indicates capability control in vehicle steering system, breaking under particular conditions such as lane-keeping assist systems, level 3 offers automatic operation of vehicle under certain conditions with driver intervention as needed, whereas in level 4 the vehicle is completely automatic but in presence of a driver although driver intervention is not required at any point, and finally level 5 which offers complete autonomy to the vehicle without the presence of any safety driver.

Moreover, the United States and Europe have already embraced the technology and are ensuring the development of technology for common applications. Companies including Ford, Tesla, General Motors, and Alphabet have already invested significant fundings towards R&D of autonomous vehicle technologies. In the United States, companies such as Cruise and Waymo are expected to launch driverless taxis or ‘robotaxis’ in San Fransico which will be paid directly by the customers. Similarly, Volkswagen backed Argo-AI and Ford, have already started the operations of autonomous cars without the necessity of safety drivers in Austin Texas, and Miami by riding employees. The Argo-AI technology has also been tested on street in eight cities across the Europe and the United States with human safety drivers. In current scenario, around 30 companies have been permitted for testing automated vehicles on road in the United States.

Furthermore, by recognizing the benefits of automated vehicles, the European Union (EU) is looking ahead to create a favorable environment for the development of the technology. Germany has been the first country to legalize the use of automated vehicles with safety drivers on road. Whereas, in Netherlands the regulations allow testing of automated vehicles without the necessity of safety drivers. Thus, to implement the use of automated vehicles, majority of the European nations have signed the Vienna Convention on Road traffic which ensures common traffic rules across countries. This not only promote consistencies in highway designs but also creates an ideal environment for autonomous vehicle testing. Further, in March 2022, the United States National Highway Safety Administration issued the regulations regarding eliminating the necessity of conventional controls such as steering wheels and pedals in self-driving vehicles. However, operation of such vehicles must consider occupant protection as the most important factor. The growing focus and implementation of favorable regulations for the promotion of autonomous vehicles will offer lucrative growth opportunities for the autonomous vehicles industry in the near future.

Asia-Pacific as the largest consumer of autonomous vehicles by 2030

Autonomous vehicles are increasingly gaining popularity in Asian countries despite the current competition from Europe and the United States. Countries such as China, South Korea, Japan, and Singapore among others have been on the forefront in development and testing of autonomous vehicles on roads. For instance, since 2017, more than 40 autonomous vehicles have been tested and approved for utilization in Singapore. Similarly, the Japanese government recently announced the plans of allowing automated vehicles for use in several selected regions by the end of 2022. In addition, the Guangdong province in China unveiled the first regulation for internet connected and smart vehicles. The law is expected to come in force from August 2022 and will allow autonomous vehicles to operate on certain roads and sections as designated by the Shenzhen traffic management department. This will assist in accelerating the commercial utilization of autonomous vehicles in the country. The regulation also classifies autonomous vehicles into three major categories including, conditionally autonomous, highly autonomous, and fully autonomous driving vehicles. The rules of liability in case of accident are also dependent on these categories as the driver will be considered responsible for damages in the former two types of vehicles, whereas in case of fully autonomous, the owner or user of the vehicle will be considered responsible for compensation and accidents. The introduction and implementation of such regulations will act as the first step towards regularization of autonomous vehicles on roads and thus, promote their commercial utilization.

In China, autonomous vehicles are also envisaged to tackle the traffic, and air pollution problems. Adoption of electric and autonomous vehicles will assist in regulating the flow of traffic as well as achieve optimal use of resources for their movement. Although, this is only possible if majority of the vehicles on the road become autonomous, the rapid adoption and testing of the technology will stimulate the autonomous vehicle industry. Furthermore, in 2020, Meituan, China’s largest food delivery platform, commenced first driverless vehicle trial. This was mainly during COVID-19 when concerns regarding human contact and disease transmission was on peak. The company has completed nearly 40,000 orders in 20 estates of the Shunyi district in Beijing with the use of autonomous vehicles.

The focus towards commercial autonomous vehicles has also increased in China to boost the short- term progress in the industry. In 2019, the Ministry of Industry and Information Technology in the country drafted a policy permitting autonomous vehicle testing on highways to commercialize the use of autonomous shuttles, robotaxis, and autonomous heavy trucks by 2025. In current scenario, Baidu operates the largest autonomous vehicle fleet in China with around 200 vehicles in operation. The company also has partnerships with more than 100 third party players including various automobile manufacturers. Baidu also aims at deploying 3,000 robotaxis in nearly 30 cities in China by 2023. Other companies such as WeRide which is funded by the Renault-Nissan-Mitsubishi Alliance and Nvidia, and AutoX funded by Alibaba have nearly 70 autonomous vehicle fleet in their depository. Whereas companies such as SAIC-IVECO Hongyan and TuSimple have focused on autonomous trucks with testing of around 50 units.

Growing investments towards autonomous vehicle related research and development

Though the concept of autonomous vehicles has been around since a long time, the real time progress is still limited to partial autonomy of vehicles in the commercial landscape. This is mainly because of the issues related to accident liability, inadequate infrastructure, high price of the vehicles, cybersecurity, and others. However, the large-scaled funding directed towards autonomous vehicle technologies is expected to overcome most of these challenges in the near future. With local governments setting up new regulations regarding testing of new products and supporting the construction of infrastructure, private investments are mainly focused on product and software developments. In current scenario, ADAS systems and autonomous vehicles sensors are expected to experience the highest patent and investment opportunities. As autonomy is becoming more advanced, the necessity of precise cameras, lidars, radars, and other sensors need to develop both technologically and fiscally. Availability of microchips at lower costs will help in managing the expanding complexities in the autonomous vehicle industry scenario.

Moreover, the commercialization of autonomous vehicles will only be possible with the availability of suitable infrastructure to facilitate production as well as adoption. This is relevant to both personal and public fleet, thus, completely transforming every aspect of our lives. For instance, in November 2021, the Federal Infrastructure Bill was passed in the United States which included major incentives for the telecommunication and transportation sector. It also includes USD 65 Billion investment dedicated towards improvement of broadband services, and a significant amount directed towards autonomous vehicles under the strengthening mobility and revolutionizing technology (SMART) program.

Commercial autonomous vehicles have significant demand

Drivers are the high-cost segment in commercial fleet management business. Replacement of humans with computers will not only save costs on labour, but also reduce the occurrences of accidents especially in difficult terrains such as mining sites, construction sites, and others. Logistic companies are looking forward towards implementing autonomous technologies in real-time operations to meet the ever-growing demand of goods in B2B and B2C scenarios. For instance, Aurora Innovation Inc., the United States-based technology company, introduced Aurora Beacon in 2022. The software program is expected to assist fleet designers to realize maximum efficiency and optimize the network of autonomous vehicles. It will provide help in communicating key information with a set of tools to support dispatch, scheduling, monitoring, routing, and controlling commercial AV fleet. Aurora has also been developing its partnerships well-established delivery partners in the United States including, Uber Freight, U.S. Xpress, FedEx, and Werner Enterprises.

Moreover, according to the data from PitchBook, the investments towards autonomous logistics vehicles reached USD 6.5 billion December 2021, from USD 1.3 billion during the same period. Similarly, the company Robotic Research LLC based in the United States, raised Series A round funding of USD 228 million. The funding was mainly led by Enlightenment Capital and SoftBank Vision Fund 2, along with Henry Crown and Company, Crescent Cove Advisors, and Luminar. Robotic Research has announced its plans of directing the funding towards its commercial arm which provides vehicle-agnostic autonomy kits named AutoDrive. It has been installed in Class 8 trucks, 150 heavy-duty transit buses, and yard trucks that are in operation in Canada, the United States, Saudi Arabia, Europe, and Australia. The company has also automated trucks for operations in the United States Navy and Army for operations in areas with unavailability of GPS, roads, or any communication services.

Thus, autonomy in long-haul trucks and commercial fleet will be easier to achieve when compared to fully autonomous cars. With the rapidly growing logistical demands and rapid development in commercial autonomous vehicles, the AV trucking industry is expected to thrive in the near future.

Future prospects for the autonomous vehicles industry

Researchers are forecasting approximately 8 million autonomous vehicles from level 3, 4 and 5 categories will be operating on roads by 2025. As vehicles are slowing moving towards level 5 automation, the acceptance and confidence towards fully autonomous vehicles is also increasing. According to a recent survey conducted by Morning Consult, only 16% of respondents are very likely to ride autonomous vehicles as passengers whereas, 22% of respondents feel that self-driving cars are safer than average human drivers. These results are mainly due to the lack of knowledge and confidence within the community regarding development in autonomous vehicle technologies in the current scenario. However, with more trials and tests conducted on fully automated vehicles, the acceptance rate of AVs is expected to surge drastically.

Moreover, according to a research firm, autonomous vehicle adoption has been categorised into four waves. Wave 2, 3, and 4 are mainly focused on post COVID-19 period ranging from 2020 to 2030, 2030 to 2040, and above 2050. In current scenario, the focus towards assisted driving is more than the complete autonomy of driving systems. This is mainly owing to the high costs and unavailability of proper regulatory framework to support the growth of the technology. However, during the wave 3 post 2030, the systemwide efficiency and overall costs incurred on products, sensors, and even during manufacturing is expected to reduce drastically. This will further assist in high adoption of fully autonomous vehicles among different classes of the society. In addition, this will be aided by adoption and implementation of regulations amongst countries, which will not only help in cases of accidents, but also assist in regulating the industry on a global and nation level.

Currently, safety remains as the top factor affecting the large-scale adoption of autonomous vehicle on a commercial level. According to the report by a United States based safety regulator, nearly 400 crashes were experienced in cars with partially automated driver assistance systems, in the United States. In addition, 12 automobile companies also reported crashes involving partially autonomous driver assistance systems to the National Highway Traffic Safety Administration (NHTSA). Such incidences assist developers in recognizing the shortcomings in the system and creating better and more adaptable products in the autonomous vehicles sector.

Asia is expected to rise regardless of the current domination by European countries and the United States. China and Japan are expected to propel the technological as well as the industrial growth in the near future. As more companies and start-ups are entering the industry, the rising competitiveness is expected to drive the growth of AVs in Asian countries. With Japanese automotive manufacturers entering in the industry, the local government passed a bill in 2022 to legalize driverless vehicles in the country. According to Yano Research Institute, based in Japan, 62% of all vehicles in Japan will have minimum level-2 based technology by 2030.

Automated vehicles seemed like a futuristic trend which is now entering real world. With companies pouring funds and governments focusing on development of supporting regulations and infrastructure, the future of autonomous vehicles is highly lucrative.