Along with electric vehicles, automakers' investment in autonomous cars is changing their business model to outsource more parts traditionally made in-house to free up cash, said Francisco Riberas, CEO of metal parts maker Gestamp. "It's a huge amount of money they need [for new technologies]. I think that is why outsourcing is now accelerating,” he told Automotive News Europe.
Some of those big investments that Riberas eluded to are well known.
- General Motors spent $1 billion to buy Cruise Automation last year. This year GM announced it would add 1,100 jobs at the California-based autonomous specialists over the next five years.
- Ford announced in February it would invest $1 billion in artificial intelligence startup Argo AI over the next five years, making it a major investor.
- U.S. Chipmaker Intel spent $15.3 billion on Israeli camera sensor maker Mobileye in March. The move will help Intel in its battle with rival chipmaker Nvidia. Intel this year also bought a 15 percent stake in the 3-D mapping firm HERE, which was jointly purchased in 2015 for $3.1 billion by Daimler, Audi and BMW from Nokia.
When they are not purchasing or investing in tech firms, automakers and suppliers are joining forces to assuage the feeling of "uncertainty" that they might be lagging, IHS's Juliussen said. The latest announcement came from Delphi, which in May said it would join the BMW/Intel partnership to help the German automaker debut its first fully autonomous car in 2021. To reach that target BMW knows it will need some help.
"We are not the best in making radars and vision controls, so we work with Mobileye," BMW Group CEO Harald Krueger told journalists during a roundtable discussion in Munich last month. "We do not make chips, so we cooperate with Intel."
Automakers and tech firms have been helped in their efforts to launch self-driving cars by the surprising willingness of legislators in Europe and elsewhere to let them test autonomous cars on public roads. The greater freedom will help increase the global test fleet for autonomous cars from about 200 to 250 now to 2,000 to 3,000 by the end of 2018, IHS believes. In Europe this year, BMW will launch 40 self-driving 7-series sedans and Volvo will test autonomous XC90 SUVs with 100 families in Gothenburg, Sweden.
Governments are keen to promote testing of autonomous driving both to attract investment and to help reduce accidents. "Most of the advances are positively contributing to safety, so an excessively cautious approach could stifle this advancement and actually cost lives," UK Business Secretary Greg Clark said at an industry conference in London this year.
Germany has gone even further. It is poised to enact a new law that will essentially allow Level 3 and Level 4 automated driving for any car as long as a licensed driver remains at the wheel to take over when necessary. "This will make Germany a pioneer for automated driving," Audi CEO Rupert Stadler said at the firm's financial results press conference in March.
Audi will launch what amounts to Level 3 automation in its new A8 flagship sedan later this year "as soon as legislation has passed," Stadler said. Drivers will be able to take their hands off the wheel and read a newspaper, send emails or whatever they like in highway traffic jams at speeds up to 60 kph (37mph) as long as they're ready to take over when asked.
This puts Audi into Tesla territory for pushing the boundaries of autonomous technology. Daimler, despite its apparent lead in the sector, has said it won't have a Level 3-capable Mercedes on the market until the end of the decade while BMW’s Level 4 car, the iNext electric crossover, will launch in 2021.
Some believe Audi already has Level 3 technology on the Q7 SUV. "Audi doesn't call it that. But when I look at its capabilities I know they can do it," said Mike Tzamaloukas, vice president of navigation technologies for supplier Harman, which helps automakers interpret data from autonomous cars. Tzamaloukas expects this subtle rollout of ever-smarter automated driving technologies to continue. "In two to three years, we will see more and more cars coming out that are Level 3," he said. Whether they are certified as Level 3 is another matter entirely. "That could take another decade," Tzamaloukas said.
The updated Mercedes S class that arrives later this year is heading in that direction by reading its own maps and slowing down for tight bends. The forthcoming Volkswagen Arteon, which succeeds the Passat CC, will know if the driver is incapacitated and automatically steers itself to safety before stopping. To certify cars as Level 3 requires showing authorities test data that proves the likelihood of technology failure killing anyone is one in a million, the so-called ASIL-B (Automotive Safety Integrity Level B) part of the ISO 26262 road safety standard.
No one can be that confident, Harman's Tzamaloukas said. "Right now, everyone in some ways can see the light at the end of the tunnel for 80 percent or even 90 percent of cases. But it's very difficult to see how your safety objectives will satisfy ASIL standards," he said. "Depending on who you ask and how conservative they are about the brand name, it may take a decade to get to a level of reassurance that their car is not killing anybody."
Skipping Level 3
The problem is so tough that some automakers have said they will bypass Level 3 and go straight to Level 4 or Level 5, both of which give the car full autonomy, with Level 4 restricted to certain zones.
"It is possible that Level 3 may be as difficult to accomplish as Level 4," Toyota's Gill said. The CEO of Google's Waymo autonomous driving division, John Krafcik, has called Level 3 "a myth." The issue is the handover. If the driver is absorbed in a conversation, can the person react quick enough to take over in an emergency? "Considerable research shows that the longer a driver is disengaged from the task of driving, the longer it takes to re-orient," Gill said.
Volvo CEO Hakan Samuelsson agrees. "Volvo considers the Level 3 driving mode unsafe and will thus skip this level of autonomous driving," he told a conference in Brussels this year. Volvo's first autonomous car will be Level 4 when it arrives in 2021. Ford will also skip Level 3 to offer a Level 4 car, also in 2021. In Europe, the problem is compounded by potential rule changes at country borders.
Level 4 by 2021 is a popular target for automakers. "Many of our customers are predicting Level 4 by 2021," said Harman’s Tzamaloukas.
But don't expect vast fleets of self-driving cars, warns Bernstein's Warburton. "Talk of companies such as BMW and Ford putting AVs [autonomous vehicles] on the road by 2021 needs to be taken with a pinch of salt -- these are very low-volume, high-cost products that will operate in limited geographic areas and not be available for general purchase," he wrote in a report.
A host of issues remain. Will authorities ever allow Level 5 cars to drive around on their own when there's a possibility they could be loaded with explosives? Will countries tolerate the loss of jobs that will surely accompany a move to fully autonomous vehicles without at least a compensatory tax? How will companies differentiate brands when they're essentially selling a self-driving waiting room? What about the issue of increased traffic from so-called "zombie cars," driving around without a passenger and looking for parking after having dropped off someone? The U.S. state of Massachusetts recently proposed a tax on any future zombie cars in attempt to eliminate that scenario.