The Fuse

Outside the U.S., Self-Driving Cars Poised to Take Off

by Matt Piotrowski | April 20, 2016

While autonomous vehicles are on the cusp of taking off in the U.S., other countries are also making headway, with China likely to eventually emerge as the center of the new technology. The Boston Consulting Group estimates that within 15 years China will be the largest market for autonomous vehicles, as self-driving taxis will boost growth there.

While autonomous vehicles are on the cusp of taking off in the U.S., other countries are also making headway, with China set to eventually emerge as the center of the new technology.

A number of automobile and tech companies are aggressively moving forward in the Asian juggernaut to bring about a flood of self-driving cars by the beginning of next decade. The Chinese government has been supportive of this push, providing a conducive regulatory environment and helping build proper infrastructure. One major milestone came recently, with Chongqing Changan Automobile Co., Ford Motor Co.’s partner in China, having completed a 1,200-mile test trip with a self-driving car. The company is one of the top four automakers in China and is providing strong competition to the likes of Google and Tesla, with ambitions to have commercialization in a couple of years and fleets by 2020. Nissan, the top Japanese auto dealer in China, is working with the China Automotive Technology and Research Center to improve safety features, a move seen as a key transition to autonomous vehicles. Great Wall Motor Co., along with others, have set up research and development centers in Japan and other mature economies to shore up their technological efforts.

Beyond China, Western Europe and Japan are other big markets as they plan to bring autonomous vehicles to the roadways in the foreseeable future. With automated cruise control (ACC) having penetrated roughly 11 percent of those two markets in the past decade, which is about twice the global rate and well above the 6 percent in U.S., they appear to have consumers who are the most accepting of the new technology. Governments are also starting to take action. Just recently, a number of transport ministers in Europe signed the Declaration of Amsterdam, an agreement to expedite the evolution to using self-driving vehicles by harmonizing traffic and transport rules and regulations, building the proper infrastructure, and coordinating on a digital communication system so European cars can talk to each other.

Beyond China, Western Europe and Japan are other big markets as they plan to bring autonomous vehicles to the roadways in the foreseeable future.

Pilot programs in Singapore and Sweden, meanwhile, reflect the desire to move forward rapidly with autonomy. In Singapore, which is interested in driverless cars because of its dense urban populations, there has been a big early success story with start-up company nuTonomy, a spin-off from the Massachusetts Institute of Technology (MIT), moving forward on setting up a fully autonomous taxi service in the country. In Sweden, Volvo has announced that it seeks to put 100 autonomous vehicles on the road by next year.

Global autonomy market set to boom

bostongroup

As the graphic above from the Boston Consulting Group shows, autonomous vehicles are set to grow rapidly across the globe from 2025-35, making up almost a quarter of car sales two decades from now. Altogether, the autonomous vehicle market will total $77 billion in 2035. The growth from current levels is extraordinary, but there are many hurdles in the way, with various issues similar to those that the U.S. is facing.

Autonomous vehicles are set to grow rapidly across the globe from 2025-35, making up almost a quarter of car sales two decades from now.

One stumbling block to adoption is high initial prices. Fully autonomous capability adds some $10,000 extra to vehicles, according to the Boston Consulting Group, and the first partially autonomous capability is expected to have a price tag of $4,000-$6,000. This will turn off consumers, some of whom might be wary of the technology in the first place. Regulatory development is perhaps the biggest issue. Even though governments may be enthusiastic about self-driving vehicles, technology is moving faster than they can keep up with. The U.S. is still ahead of other countries, as a number of states have passed legislation to use autonomous vehicles, while the Department of Transportation has already funded research and development, and is proactively moving forward on trying to develop a regulatory framework for the technology. To be sure, the U.S. has its own headaches: It still has to deal with a patchwork of regulations that needs to be streamlined. Other factors that will affect adoption are liability laws and how quickly the proper infrastructure can be put in place.

Despite these hurdles, the trajectory of autonomous vehicles outside U.S. markets is upward—the benefits of reducing oil consumption, reducing urban pollution, and improving mobility access are likely to overcome the regulatory and cost barriers.