16 June 2023
The prospect of autonomous vehicles carrying passengers and goods to their final destinations has dazzled the public imagination and driven billions of dollars in investment in the development of advanced driver assistance systems (ADAS) over the past decade. By 2035, market analysts predict that ADAS technologies could generate $300 to $400 billion in revenue for legacy car manufacturers and system manufacturers.
Despite some setbacks that have delayed the widespread adoption of autonomous vehicles, leading mobility stakeholders remain committed to ADAS technology development and its potential to transform the future of transportation, from reducing road accidents to increasing transportation logistics and supply chain efficiency.
The ADAS technology investment strategy has changed and looks set to continue to do so. As legacy automakers undergo extensive restructuring to allow mass production of electric vehicles (EVs), ADAS technologies have become more focused on systems that can create value for manufacturers in the next five years. In 2021, investors poured a record $9.7 billion into the development of ADAS technologies. By 2022, these investments fell by nearly 60% to $4.1 billion.
These smaller, more targeted investments are signs that ADAS systems are maturing, and more legacy automakers are focused on bringing ADAS technology, but not fully autonomous vehicle technologies, to market based on consumer demand.
In light of these trends, we expect additional Level 2 and 3 ADAS technologies to continue to be introduced into passenger cars at an increasing rate over the next five years, while Level 4 ADAS technology capabilities are more likely to be in focus for commercial trucks. Below, we describe the trends and developments that have brought us to this point, and the issues and opportunities they present to automotive industry stakeholders.
The road ahead: Passenger cars
Apartment: Legacy automakers and mobility stakeholders will introduce several new Level 2 and 3 ADAS technologies designed to improve passenger safety and reduce accidents in passenger vehicles, but the driver must remain ready to override the system and maintain control of the vehicle. According to SAE J3016, Driving automation systems for on-road motor vehicles (better known as SAE Levels of Driving Automation), there are six levels of ADAS technologies ranging from Level 0 (no driving automation) to Level 5 (full driving automation).
Level 2 ADAS includes “partially automated” ADAS systems that combine automated functions, such as acceleration and steering, with the driver remaining fully engaged in the driving tasks at all times. Level 2 ADAS technologies require vehicles to be equipped with lidar systems, increasing component costs significantly, although some of the sensor and computing costs are decreasing.
Level 2 ADAS includes features such as low-speed object monitors in the path, adaptive cruise control that can navigate normal traffic, pilots in severe traffic jams and adaptive braking. It is expected that legacy automakers and mobility stakeholders will continue to invest in Level 2 ADAS adoption as they continue to develop more advanced autonomous systems.
Legal considerations: Safety architecture development and guidance are core components of ADAS system development, including robust consumer-facing information explaining that Level 2 ADAS technologies are not substitutes for relinquishing human control of the vehicle.
Apartment: Level 3 ADAS includes “conditionally automated” technologies, which still prioritize human driver control. With Level 3 ADAS, human drivers can transfer safety-critical functions to ADAS in certain traffic and environmental conditions, such as light or moderate traffic or in clear, rain-free weather.
This level of automation requires advanced sensor packages, hardware backups and sophisticated software to keep passengers safe, which carries additional component costs for each vehicle. The maturation of Level 3 ADAS technologies over the previous four years, as well as consumer demand for them, has been deemed to justify continued investment in the development of these systems for passenger cars.
Legal considerations: In addition to the legal considerations involving Level 2 ADAS technologies and consumer education discussed above, as the autonomous capabilities of ADAS systems become more advanced and can assume conditional control of the vehicle for longer periods of time, manufacturers and investors of Level 3 ADAS should . is aware of the need to develop and update ADAS cyber security and data protection measures.
Implementing reasonable cybersecurity and data protection practices is critical for a number of reasons, including becoming a market leader in cybersecurity and data protection that inspires further investment and consumer confidence in products.
Level 4 and Level 5 ADAS Technologies: In It for the Long Haul
Apartment: Due to the high development and validation costs of Level 4 ADAS technologies, which are expected to exceed $1 billion per system, it is more likely that Level 4 ADAS would first be considered and adopted for commercial use, primarily commercial truck use. Level 4 ADAS, or “high automation” technologies, are designed to perform all safety-critical driving functions and monitor roadway conditions throughout the ride.
Level 4 ADAS technologies are limited to the “operational design domain” of the vehicle. In other words, ADAS is not designed to account for all driving scenarios. Currently, Level 4 ADAS is the highest level of autonomous driving technology available. Level 5 ADAS technologies, which do not require human attention and eliminate the “dynamic driving task”, are still in the conceptual phase. At the current rate of development in ADAS, Level 5 ADAS technologies may not begin to appear as an option on US public roads for another 7 to 10 years.
Legal considerations: Manufacturers and investors should be prepared to address the critical legal differences between US and European autonomous vehicle standards, especially in light of the research and development costs associated with Level 4 and 5 ADAS technologies.
Level 4 ADAS technologies, installed in Class 4 to 8 trucks, can revolutionize the commercial trucking industry by reducing long-term costs and increasing supply chain efficiency. During the COVID-19 pandemic, supply chain routes between seaports to rail depots and distribution centers stalled due to labor shortages, causing bottlenecks in the consumer goods and manufacturing industries.
The pandemic highlighted the need for additional support for seaports for rail depots and distribution centers, among other trucking and shipping needs. Level 4 ADAS systems in commercial trucks could allow for 24/7 service on critical support routes. In terms of last-mile transportation, several package delivery services have invested in Level 4 ADAS technologies that can support the delivery of goods from distribution centers and final buyers.
Level 4 ADAS technologies are currently in use and in testing phases, and their presence on the road is likely to continue to expand, particularly in states that have encouraged Level 4 ADAS development and deployment, such as Michigan, Arizona, Nevada, Texas and Florida.
Level 4, and the future development of Level 5, ADAS technologies could eventually support the trucking industry. The Teamsters and other labor groups have pressured state lawmakers to pass laws that would limit the use of such ADAS technology by, for example, requiring at least one safety driver in the cab of every semi- or fully autonomous commercial truck.
Legislation is pending in a number of states that could impede the rollout of Level 4 or 5 ADAS technologies in the commercial truck sector, and as such, while Level 4 ADAS technology in commercial trucks appears to be the way of the future, its rollout may remain state-dependent , with the exception of federal intercession (which appears to remain unlikely).
Level Up: What’s Next?
Due to the advancements in autonomous driving technologies, the next five years are critical for legacy car manufacturers and mobility investors to capitalize on their investments and become market leaders in the Level 2, 3 and 4 ADAS technology segments. The shift in ADAS investment shows that certain stakeholders are satisfied with the development of their autonomous vehicle systems and will expand their product offering supported by internal research and development, albeit with the short-term focus on passenger cars and light trucks at Level 2 or 3 ADAS deployment, while commercial vehicles are likely to be the primary focus for investment in and deployment of more advanced technology.
Opportunities and challenges continue to emerge in the ever-evolving automotive and mobility space, including hydrogen fuel infrastructure development; securing EVs, EV supply equipment and the electric grid from cyber threat actors; and introduction of more complex ADAS technologies in passenger and commercial vehicles.
Morgan Lewis’ Automotive & Mobility team provides a unique insight into the complex legal and regulatory issues automakers, component manufacturers, technology suppliers, distributors and other mobility stakeholders must consider before stepping today on the trends driving the industry tomorrow.