The transportation industry is changing in response to the widespread adoption of advanced driver assistance systems (ADAS) – new methods of building vehicles using cutting-edge software, technologies and sensors are being developed, and longstanding OEMs and Tier 1 suppliers are evolving to offer more comprehensive portfolios. Public concerns about the safety and reliability of self-driving vehicles mean the road to full autonomy will be anything but smooth, but increasing familiarity with the safety and convenience features of ADAS will gradually change consumer perception.
Report Introduction:

The transportation industry, which is nearly 9% of the US GDP ($1.75 trillion) and well over $4 trillion globally, is facing four major concurrent disruptive forces that will reshape this large market sector:
  • The electrification of vehicles, aircraft and watercraft.
  • Connectivity (and the resulting analytics that are enabled by this connectivity).
  • New use-utility models (mobility as a service, ride sharing, fractional ownership).
  • The introduction of robotic autonomy of the vehicles and crafts themselves.
The definition of autonomy is rather clear to industry insiders (Level 0 to Level 5), but less so to consumers. This is gradually being clarified by the introduction of advanced driver assistance systems (ADAS) that perform limited autonomous functions, such as braking in emergencies or maintaining a following distance during highway driving. This is serving to familiarize drivers with these systems, initially in an assistive capacity (passive ADAS), but intervening with greater frequency and assertiveness (active ADAS). 451 Research consumer survey results reveal that while drivers are fine with the vehicle assisting in some capacity, only 16% are comfortable with the vehicle driving itself without human intervention.

Self-driving capabilities require fundamental architectural changes to how vehicles are built. These changes include drive-by-wire technology, deployment of centralized high-speed computing and the addition of numerous interdependent sensors such as ultrasound, radar, LiDAR and cameras (for video analytics). Several automotive OEMs have invested in and acquired companies to bring these capabilities in-house. This has impacted the structure not only of the vehicles, but also of the industry itself, as OEMs evolve core competencies to include their role as systems integrators of best-of-breed AV sensors, compute systems and AI software. While this has challenged the incumbent preferred partner status of Tier 1 suppliers, these partners have also aggressively invested (and developed in-house technology) in the segment to remain relevant in this rapidly changing market. These market dynamics have driven an active M&A environment that has seen over $21bn invested in this sector since 2015, according to the 451 Research M&A KnowledgeBase.

As technically daunting as it is to integrate multiple sensor inputs and make real-time decisions in the robotic operation of vehicles, the non-technical challenges will prove equally difficult. Safety concerns are well-grounded, based on tragic incidents with driver assistance systems, and have chilled the early enthusiasm of regulators that originally strove to appear friendly and foster sector innovation. Currently, the laws surrounding trials of fully autonomous vehicles (AVs) vary considerably country by country (and state by state in the US), making large-scale testing challenging and costly. Ironically, lawmakers appear to have no problem with mandating the inclusion of safety-related ADAS, such as automatic emergency braking, paving the way for more regulation in the future.

451 Research believes that two tracks for autonomy will most likely transpire in parallel over the next 10 years. The first of these is the progressive introduction of active ADAS (replacing passive ADAS), which will automate more and more of the driving function (Level 2 to Level 3) in passenger vehicles. The second – and far more disruptive – track is the introduction of fully autonomous (Level 5) capabilities into the shared-use automotive market, particularly taxis and ride-sharing services, to reduce the cost per mile by removing the driver labor cost. This is the first target for Waymo (Google), Uber, Lyft and others, given the size of these markets and the opportunity for those vendors and adopters that are first to market. We believe that these two markets, consumer passenger vehicles and shared-use vehicles, will ultimately evolve differently (although sharing some points of intersection), and that Level 5 vehicles will become the norm for ride-hailing and taxi services, as well as long-haul trucking applications.

This Technology & Business Insight report on the autonomous vehicle market is based on a combination of insights and data gathered through direct interviews with each of the vendors mentioned in the report (with a few exceptions) spanning a wide variety of vertical applications and our analysts' deep experience in the IoT industry. 

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