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Page 1: Autonomous cars: a big opportunity for European industry · PDF fileAutonomous cars: a big opportunity ... cruise control, self-parking, highway autopilot and more. ... Autonomous

Digital Transformation Monitor

Autonomous cars:a big opportunity forEuropean industry

January 2017

Internal Market,Industry,Entrepreneurshipand SMEs

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Autonomous cars:a big opportunity forEuropean industry

The prosperity of connected cars also propel the progress of autonomous driving, which is commonly agreed by theauto industry as “the capability of a car to drive partly or fully by itself, with limited or no human intervention”.Semi to high autonomous cars has been set to the short-term objective of 2020 by the auto industry. OEMs, Tier 1suppliers and new entrants are all aligning their strategies with the evolution of autonomous cars.

• Safety: Ability to sense and alert theroad problems and automaticallytake in-time actions to preventpotential accidents. Today’s safetypackages generally refers toAdvanced Driving Assistance System(ADAS). It covers features such asautomatic braking, collisionprotection, and emergencyassistance. As the technologies getmature, ADAS will soon become partof the autonomous driving package.

• Connected car features: Telematicsand infotainment services that existtoday within cars having connectivityfeatures. The objective is to improvethe car’s operation. Remote car lock/unlock, optimized fuel consumptionand entertainment will be among thebasic services. Those packages will beoffered in the form of subscription-based services, aftermarket systemsor simply through smartphone appsintegration.

Connectivity on the fastlane

Beyond connectivity-enabled functions,an autonomous car will understand itsenvironment and the passengers. It willalso “learn” to react and adapt todifferent situations during the entiredriving process.

More innovations coming to the vehicle

Autonomous car implies the capability ofa car to drive partly or fully by itself,with limited or no human intervention.Three primary functions can be fulfilled:

Autonomous cars:redefining theindustry

1• Autonomous driving: Capability of

automating the activity of driving thecar. Features will include adaptivecruise control, self-parking, highwayautopilot and more. It is commonlyaccepted that the automated drivingcould be framed at six levels asshowed below, with regard tohowthe system plays in the dynamicdriving tasks on a sustained basis.¹

Relying on a set of technologybreakthroughs

Apart from connectivity and short-rangecommunication, autonomous cars areequipped with sensors and laser systemsto monitor the road and trafficconditions.

The artificial intelligence (AI) andmachine learning combine external datato car data, enabling a wealth ofintelligence to increase the learning andunderstanding capability. The cars willbe likely to adapt to the moods of driveras well as to the traffic and weatherconditions.

Autonomous cars well on-track

Roadmap of development

A major of auto manufacturers focus onthe partial to high automated cars with ashort-term objective of 2020. This is thecritical year when high automated cars(Level 4) are most likely to be available.

At this level of automation, hands-freecars will still need human control overvehicles in defined-use cases. The fullautomation is expected to debut muchlater – within the following 5 to 10 years.

Figure 1: Six levels of Automated Driving Systems development

Source: SAE International STANDARD J3016, 201520

© Martial Red/Shutterstock.com

25 gigabytes

Today’s car processes up to

data per hour. ²

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Autonomous cars: a big opportunity for European industry

Revenue restructuring

Over the period of 2015 to 2020, thevehicle price will remain half of totalconsumer spends on the car over anaverage 5-year life cycle.²

Connectivity-enabled revenues, despitesmall share- approximately 7% of totalexpenses2 for a premium car model by2020, holds many potential to trigger asignificant redistribution of revenues.

As Figure 3 indicates, the total revenueof three product and service packages isexpected to increase 24.3% from 2017 to2022, up to 142 billion EUR.

The share of autonomous driving inconnectivity-enabled revenues isexpected to surpass that of connectedservices package by 2022. Assisteddriving features, as the early stage ofautonomous cars, accounts only 24% ofrevenues, whereas it will grow to 35%by 2022, almost catching up to the safetyproduct sales (37%). 3

Data golden mine

Car holds potential to be another mobiledevice carrying a huge amount of data assmartphones. Some plug-in hybrid carsgenerate 25 GB of data in just one hour.⁴The sheer amount of data available arenot just from the car itself throughsensors, controllers and processors, butalso come from external - the roadinfrastructure, cars in the surroundingand the entire Internet.

The data-driven services remains the topopportunity for automotive makers.Beyond “traditional” data empoweredservices such as telematics system, OEMsand Tier 1 suppliers are also investing innew business such as predictivemaintenance and mobility services,aiming to better adapt their positioningto the market trends in the long term.

Predictive maintenance

Autonomous cars cannot go apart withsensing technologies, data science andmachine learning. Those technologies, inreturn, improve the predictivemaintenance of connected car era to anew level, by identifying the correlationbetween multi-sourced data and specifictypes of failure and repair work.

The benefits of predictive maintenanceare multifold. Lower repair frequencyand overall maintenance costs are directbenefits, as customers can get immediatealerts before the failure occurs andminimize repair work.

Improved vehicle performance seems tobe the indirect welfare. Automakers willbe capable of identifying the fault patternof a particular equipment of a given carmodel. It thus provides a feedback loopthat enables automakers and dealer toimprove quality and customersatisfaction.

Different approach to the introduction ofautonomous systems

Tesla’s Autopilot is so far the onlypartial-autonomous system on themarket. Meanwhile, BMW, Volvo, Nissan,Mercedes, Audi, GM, Ford and Toyota arethe forerunners introducing severalautonomous features, such as departurewarning and auto-parking.

Players are taking different approachesfor the implementation. Most traditionalautomakers are introducing autonomoussystems progressively into their existingmodels, preparing the customersadopting the new features slowly.Whereas some manufactures like Fordand Renault, and the Internet ‘upstarts’ -Google and Apple, are testing the waterof the fully autonomous.

Intelligence transport system (ITS)

Compared to the connected car per se,the self-driving car is more dependent onthe connection to the outside. Apart fromthe operator’s network (currently 3G and4G for connected cars), there is a greaterneed to communicate with otherautonomous cars (vehicle-to-vehicle,V2V), with infrastructure (V2X) and withtraffic facilities and central. For example,the stop-and-go mode for a congestedtraffic situation relies on thecommunications with other vehicles,facilities and central ITS station.

To meet the wider communicationdemand, Intelligent Transport Systems(ITS) is being developed. The goal is tocreate standards and specifications forthe use of information andcommunications technologies (ICT) infuture transport systems.

7.6 bn to 50 bn EUR³

From 2015 – 2022, revenuefrom autonomous driving isexpected to increase from

Revealing fullpotential andopportunities

2

ITSs are not restricted to road transportas they also include the use of ICT forrail, water and air transport. Figure 2shows intermodal communications willempower a variety of services, such astravel assistance, passenger informationand trip planning.

At current stage, basic services can bewarning drivers of upcoming roadwork,or changing speed limit. Automanufacturers are beginning to integratethe V2V communication into theirautonomous cars, for example,Mercedes’ all-new E-Class. Meanwhile,Netherlands, Germany and Austria havebeen starting the cross-border ITSproject since early 2015.

Source: ETSI, 2015

Figure 2: The Intelligence transport system (ITS)

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Data security and privacy concernsremain widespread. 35 % of consumersare willing to trade driving data for aninsurance discount of 10 %.² US carinsurers already offer discounts of up to30% based on individual drivingtelematics data. It is believed that thisdata-based discounts will continue,leading to a lower standard premiumlevel by 2020, particularly triggered bythe availability of ADAS features for semito high autonomous cars.

Car ownership shifts to mobility pattern

Car sharing or car pooling servicesintroduced by Uber and Lyft lead a car-as-a service trend - consumers purchasemobility services instead of owning themeans of transportation. Apart fromindependent players like Uber, carsharing services also lured majorautomakers including General Motors,Volkswagen, Daimler and BMW.

In addition, manufacturers are preparingthemselves to reposition in the futureautonomous driving era, where anetwork of on-demand autonomous carswill be built through the partnership ofOEMS and Uber-like companies. GM,Toyota and Volvo are at forefront, amongothers, to undertake such collaboration.

Automaker

Partner forautonomous

cars-as-a-service

Launch time

GeneralMotors

Lyft 2016

Volvo Uber 2016

Ford Uber 2016

Toyota Uber 2016

Transformation of adjacent industries

Apart from the consumer market, somemanufacturers also eye on thetransportation and logistics domain,particularly through a B2B approach.Promising services include fleetmanagement, automation of delivery andpickup services, and self-driving truckplatoons. Truck platooning is an IoTapplication into autonomous trucks,allowing second and third trucks in theline to mimic each of the first truck’sactions without driver intervention.

Volvo, Scania, Daimler, MAN, DAF Trucksand Iveco have initiated a successful trail- European Truck Platooning, in whichself-driving truck platoons converged inRotterdam in April 2016. In fact, with theintention of integrating driverless techinto commercial trucking in the nearfuture, the expected benefits can bereduction of costs and carbon emission,reduced accidents, and bypassing therigid regulation limit of drivers’ workinghours.

Increased road safety

Human errors and inattention accountfor more than 90% of road accidents5,typically caused by typically speeding,alcohol, distraction, fatigue. Autonomousdriving, as human errors and judgmentare likely to be eliminated, could reducethe accident rate and auto fatalities. Astudy6 found that the crash rate for self-driving cars was 3.2 crashes per millionmiles, opposed to the average human-driving of 4.2 accidents per million miles.

Nevertheless, the autonomous cars arestill years away to meet the safetystandards. Because even semi to highautomation still need humanintervention at specific cases. Followingthe fatal accident of Tesla in 2016, theOEMs such as Google, Audi and BMWcontinue testing the autonomous cars, inorder to tackle the safety challenges.

Social costs reduction

With regard to societal effects,autonomous cars will lead to thedropping down of the public costsassociated with accident prevention andmanagement, as well as healthcare andother social costs linked to car accidents.

Beyond that, optimized routing andsynchronized driving of autonomouscars may hopefully reduce vehicleemissions, as well as mitigate the burdenfor infrastructure investment (forinstance, additional lanes or trafficsigns).

Although the development remains atearly stage, many new services based onit could be imagined in the coming years:extended warranty due to optimized carperformance, or flexible repair tariffdepending on warranty claims. BMW hasbeing testing similar services since 2015.

Redefining the insurance industry

Facing the proliferation of datagenerated by autonomous cars, insurersbegin to rethink the business model aswell. Pay-as-you-drive (PAYD) is anexample showing how insurers tailortheir portfolios to new landscape.

PAYD is a type of auto insurancewhereby the costs are dependent upontype of vehicle used, measured againsttime, distance and place. Thanks to moreadvanced sensors and intelligencesystems within autonomous cars forusage monitoring, drivers could haveflexible premium fees, and have optionalvalue-added services such as tracking ofstolen vehicles.

Note: Due to rounding, numbers shown here may not add up precisely to the totals provided.Source: Strategy &, 2015 3

Figure 3: Estimated autonomous car revenue by product package, 2015 - 2022

Autonomous cars: a big opportunity for European industry

© Syda Productions/Shutterstock.com

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1 SAE International STANDARD J3016, 2014,Taxonomy and Definitions for Terms Related to On-Road Motor Vehicle Automated Driving Systems,Available at:http://standards.sae.org/j3016_201609/

² McKinsey, 2014, Connected car, automotive

value chain unbound, Available at:https://www.mckinsey.de/files/mck_connected_car_report.pdf

³ Strategy &, 2015, Connected car report 2016:Opportunities, risk, and turmoil on the road toautonomous vehicles, Available at:http://www.strategyand.pwc.com/reports/connected-car-2016-study4 IBM, 2014, Big data on wheels, Available at:http://www.ibmbigdatahub.com/blog/big-data-wheels5 International Organisation for Road AccidentPrevention, 2011, Available at:http://www.alertdriving.com/home/fleet-alert-magazine/international/human-error-accounts-90-road-accidents6 Virginia Tech Transportation Institute, 2016,Automated vehicle crash rate comparison usingnaturalistic data, Available at:http://www.vtti.vt.edu/featured/?p=4227 University of Michigan Transportation ResearchInstitute, 2015, UMTRI survey shows driver concernsover autonomous cars, Available at:http://safecarnews.com/umtri-survey-shows-driver-concerns-over-autonomous-cars_ju6203/8 2025 AD the year of automated driving, 2016, THEBLAME GAME: WHO PAYS IF DRIVERLESS CARSCRASH? Available at: https://www.2025ad.com/in-the-news/blog/driverless-cars-and-liability/

References

Customer utilities

There would be substantial benefits forcustomers. Apart from safer driving andlower insurance premiums mentionedbefore, time efficiency will be anotheradvantage.

By eliminating the need to steer thevehicle, semi-autonomous cars will gainabout one hour to each driver’s day. Thework-related activities would bepossible to undertake in-car, and areexpected to achieve 10% - 15%productivity.³ Besides, improved trafficflow will lead to less overall time spendon the road.

Many challenges to overcome

Questions around cultural concerns andwillingness to buy

Despite the optimism of industrialplayers, customer acceptance remainsquestionable considering the efforts andcosts in driving habits switching,learning, safety concerns andsignificantly increased prices.

Many customers still enjoy driving anddo not want to cede any control tocomplete automation with no steeringwheel. A survey found that 96.2% ofpeople would like to have a steeringwheel as well as accelerator and brakepedals available even if their vehicleswere self-driving. 7

Indeed, the cultural pattern of drivingalso varies from region to region – asillustrated by the dominance (by far) ofautomatic transmissions in the USA,while manual transmission is dominantin Europe.

Accountability and liability

Despite the efforts of regulators andgovernment spin in the regulation andstandardisation, many doubts existaround the autonomous cars,particularly on the accountability andliability in an accident. Allianz claimedthat currently there is no action on theliability law, and a human will be still beheld accountable in the near future. 8

In addition, there is still no clarity incertain areas such as for a steering-wheel-less case or a driverless bus inpublic transport. For instance, currentUS Federal regulations stipulate that aturn signal should be linked to a steeringwheel’s movement. How this will bereformalised to no-wheel case should befigured out.

Data security and privacy

There also exist considerable need forclear legislation and a legal frameworkthat will support data security andprivacy before a full rollout. It isconsensus that consumers will be dataowners, whereas data access andexploitation remains unregulated.

On top of that, we see challenges insoftware reliability and assuring cyber-security if cars are connected to trafficmanagement centres and to the Interneton a large scale. Cyber-securitystandards need to be agreed upon todefine the minimum security embeddedin the hardware; as well as what theboundaries are for software andconnectivity.

Autonomous cars: a big opportunity for European industry

Semi-autonomous cars willgain approximately

One hourto each driver’s day.

Looking forward tothe future…

3

Standardisation and regulatorydrivers

Steady progress of standardisation

A number of initiatives aroundstandardisation are proceeding,addressing the technical andinfrastructure hurdles. The family ofWireless Access in VehicularEnvironments (WAVE) standards areestablished to support a reliable V2V andV2X wireless communication. TheEuropean TelecommunicationsStandards Institute (ETSI) is involved inthe ITS system.

More recently, in 2016, a 5G AutomotiveAssociation was formed by key playerslike Audi, BMW, Daimler, Huawei andQualcomm. It focuses on technical andregulatory issues leveraging next-generation mobile networks, andcommitted to push forward thecommercial availability and globalmarket penetration.

Improved regulatory environment

Regulators are working on removing thebarriers to the development andadoption of autonomous cars by creatinga homogeneous legal framework. Clearstandards for OEMs and consumers arebeing developed, particularly in theareas of data privacy, cyber-security, andinteroperability across borders.

European Commission is indeed workinghard to enable interoperability andlaunched the US/EU StandardizationsHarmonization Working Group in 2014.

Further, Google formed a coalition withFord, Volvo, Uber and Lyft in April 2016,to lobby lawmakers and regulators onthe legal barriers.

Earlier 2016, the National HighwayTraffic Safety Administration (NHTSA) ofthe US has admitted that the systembehind a self-driving Google car could beconsidered the driver under federal law,which was seen a major step forward.

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About the Digital Transformation MonitorThe Digital Transformation Monitor aims to foster the knowledge base on the state of play and evolution of digital transformation inEurope. The site provides a monitoring mechanism to examine key trends in digital transformation. It offers a unique insight intostatistics and initiatives to support digital transformation, as well as reports on key industrial and technological opportunities,challenges and policy initiatives related to digital transformation.

Web page: https://ec.europa.eu/growth/tools-databases/dem/

This report was prepared for the European Commission, Directorate-General Internal Market, Industry, Entrepreneurship and SMEs;Directorate F: Innovation and Advanced Manufacturing; Unit F/3 KETs, Digital Manufacturing and Interoperability by the consortiumcomposed of PwC, CARSA, IDATE and ESN, under the contract Digital Entrepreneurship Monitor (EASME/COSME/2014/004)

Authors: Vincent Bonneau & Hao Yi, IDATE; Laurent Probst, Bertrand Pedersen & Olivia-Kelly Lonkeu, PwC

DISCLAIMER – The information and views set out in this publication are those of the author(s) and should not be considered as theofficial opinions or statements of the European Commission. The Commission does not guarantee the accuracy of the data included inthis publication. Neither the Commission nor any person acting on the Commission’s behalf may be held responsible for the use whichmight be made of the information contained in this publication. © 2017 – European Union. All rights reserved.