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Automakers, governments, start to prepare for the launch of Autonomous Vehicles

Consumer demand
By Paul Hodges on 13-Mar-2022

A wave of innovation is now underway in Electric Vehicles (EVs) as discussed last month. But they are really just a stepping-stone to Autonomous Vehicles (AVs), and Robo-Taxis. As VW confirm, the car company of the future will be “a software-based supplier of mobility solutions“. GM CEO, Mary Barra, has recently taken her first ride in one, and was clearly excited by the experience as the video confirms (please click to watch it). So it seems were members of the public on early trials.

Europe and the USA are also developing rules for the launch of Autonomous Vehicles (AVs). The issue is simply that automakers understand that the rise of EVs means the end of their traditional technology-led business model. Instead, companies such as GM and VW are working with regulators to become “software-based suppliers of mobility solutions”.

  • France’s 6-month presidency of the European Council prioritises the deployment of AVs, and proposes a 2030 end for Internal Combustion Engine (ICE) sales
  • In the UK, the Law Commissions have proposed the creation of an Automated Vehicles Act, to reflect the “profound legal consequences” of self-driving cars

The issue is that it seems unlikely that many people will buy an AV for personal use. A car is the second most expensive individual purchase after a house and yet it is used for only an hour/day on average. And often that hour is spent in traffic jams. Instead, therefore, AVs will likely usher in a new paradigm – providing cheap, reliable and flexible transport for people living in cities and towns, without the expense of ownership.

Unlike Tesla, the legacy automakers such as VW, GM and Ford are deliberately operating ’below the radar’ with AV development. Instead of making extravagant claims to provide an “all-singing, all-dancing” model, they are using the traditional stage-gate approach to demonstrate progress as the chart confirms:

Level 1, “Feet-off; Level 2, “Hands-off”; Level 3, “Eyes-off”; Level 4, “Mind-off”.“

The lack of “buzz” and the continuing problems with Tesla’s exaggerated claims for its “Auto-Pilot” – which is actually at Level 2 – has led many to assume that roll-out is many years away. But as the Mary Barra video shows, GM is operating AVs in Level-4 mode (ie geofenced) on the streets of San Francisco. And GM and others are on track to launch Level-5 by 2025 – in turn this will allow Robo-Taxis to start operating anywhere where there is demand for the service.

It is early days for cost assumptions. But logic suggests that many people will happily swap their car for a Robo once safety is assured. But the economic/ political implications of a move away from personal car ownership need careful study:

  • Governments are already set to lose major revenue as fuel tax-paying ICEs disappear, and will need to accelerate plans to introduce road-use charging for AVs
  • Robo operators will need to develop high-quality data on patterns of personal mobility, as usage will likely to be charged on a “bundle-basis” as with smartphones
  • Cities need to plan for the opportunity to reclaim prime acreage that is currently used for parking – San Francisco, for example, has 440k on-street parking spaces
  • Accident rates will drop and individuals/corporates will gain economic and social benefits from lower costs and fewer delays – but lenders/insurers will lose business
  • Employment patterns will see major change as car dealers, taxi/truck drivers, garages, auto financing/insuring occupations and others slowly disappear

Automakers are ahead of the game in terms of strategic planning. They soon realised the move to EVs meant their traditional business model, based on proprietary engine technology, would inevitably become obsolete. And so they quickly realised they need to pivot to focus on AVs and become software-driven. The rest of us need to catch up.