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Autonomous Vehicles Future: Driverless Cars Executive Insights Volume XIX, Issue 58 Mapping the Road to Autonomous Vehicles There’s no doubt that over the long term, 3. Industrial: Discovering and organizing the right business autonomous vehicles (better known as self-driving model to produce a commercially viable product cars), combined with electrification and shared While these challenges are significant, they will eventually be overcome. The path forward on No. 3 in particular (creating mobility, will have a massive impact on society. a business model to produce a sellable product) is just becoming clear. Many pundits debate the extent and speed of the expected effects. Will autonomy act as a “lighter fluid” for the spread of shared mobility services? How soon will urban real estate Figure 1 developers be freed from the need to provide space for parking? SAE International’s definitions of automation levels for on-road vehicles What will the impact on logistics do to retail? We like to say that these potential long-term effects depend on • Level 0: No automation (full driver control) how we get “from 1 to 100” — that is, from the launch of self- • Level 1: Driver assistance (vehicle controls either driving cars to a day when autonomous mobility is ubiquitous. steering or speed under certain conditions) But while prognostication is fun, the map to that destination is still far from clear. • Level 2: Partial automation (vehicle controls both steering and speed under certain conditions) What is becoming clearer, however, is the first leg of the journey, • Level 3: Conditional automation (total vehicle control or how we get “from 0 to 1” — from where we are today to the with expected human intervention) successful commercialization of the first fully self-driving vehicle. • Level 4: High automation (total vehicle control with no Three key challenges intervention under certain conditions) Going from 0 to 1 requires solving three key challenges: • Level 5: Full automation (total vehicle control with no 1. Technological: Achieving full autonomy (i.e., Level 4 or 5 on intervention under all conditions) the SAE International automation scale — see Figure 1) Source: SAE International 2. Regulatory: Creating the conditions for safe and effective operation Mapping the Road to Autonomous Vehicles was written by Robert Haslehurst and Alan Lewis, Managing Directors, and John Moran, Senior Manager, at L.E.K. Consulting. Rob, Alan and John are based in Boston. For more information, contact [email protected]. Executive Insights Racing to commercialize an autonomous vehicle the technology — or the achievability and subsequent potential For years, automotive and technology companies have raced to of full autonomy — seriously enough. And tech companies were develop self-driving vehicles separately — and myopically. failing to acknowledge how much more difficult cars are to manufacture reliably compared with smartphones or laptops. Tech companies have viewed autonomous vehicles as a tech challenge, one that offers the potential to disrupt incumbent That’s finally changing. A challenge as advanced as “dinosaurs” in a mature industry and create enormous value, commercializing a Level 5 autonomous vehicle suggests a strategy much as smartphones have done. as old as Adam Smith: specialization. Large auto original equipment manufacturers (OEMs), on the Tech companies are forgetting the “body” and other hand, have viewed autonomy as an evolution: developing focusing on the “mind” and adding incremental new features to their own existing Unlike consumer electronics, cars have tens of thousands of vehicles over time (first on premium cars, then gradually trickling hardware components, all of which need to perform according down through their portfolios). to extraordinary safety and quality standards. Over the past 100 years, automakers have refined their ability to deliver new cars — With their parallel, but limited, perspectives, both sides were more than 90 million1 annually — across several hundred models failing to consider the whole picture: Auto OEMs weren’t taking Figure 2 The pace of auto OEM autonomy patent filing is exploding Annual autonomy technology references in U.S. patent filings by auto OEMs (2007-2016) CAGR% 700 2007-2012 2012-2016 650 Total 6% 85% Traffic sign recognition N/A N/A 600 Night vision N/A N/A Collision warning 15% 39% 515 Automatic parking 32% 55% 500 ADAS N/A N/A Vehicular communication N/A 90% systems Intelligent vehicle (8%) 153% 400 system Computer vision (7%) 108% 300 205 Image processing 2.5% 70% Number of patents filed in the U.S. 200 127 100 54 LIDAR 20% 78% 41 36 28 34 16 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: L.E.K. analysis, USPTO. OEMs included here are BMW, BYD, Daimler, Faraday Future, FCA, Ford, General Motors, Honda, Hyundai, Isuzu, Mazda, Mitsubishi, Nissan, PSA Group, Renault, Suzuki, Tata Motors, Tesla, Toyota, Volkswagen and Volvo. Page 2 L.E.K. Consulting / Executive Insights, Volume XIX, Issue 58 INSIGHTS@WORK® Executive Insights Figure 3 • Next-gen startup Faraday Future, as part of a strategic shift, Two business models emerging to develop and just abandoned plans to build a Las Vegas auto plant commercialize a fully autonomous vehicle These tech companies are leveraging their software resources and experience to master machine learning so that their AI The “Android model” versus the “Apple model” platform minds can not only sense the environment but also “Android model” “Apple model” independently learn how to make more intelligent decisions about vehicle operation. Any aspirations to compete head-to- head with the automakers in making an actual vehicle have fallen AI “mind” by the wayside. Automakers are getting serious about full autonomy Meanwhile, the traditional automakers are no longer simply working on adding self-parking and other driver-assistance Vehicle technologies to luxury cars. Perhaps concerned that they will “body” become hardware manufacturers subservient to powerful operating systems providers, as we have seen play out in other industries, they are now preparing for a future of full autonomy. Source: L.E.K. analysis Some are signaling the seriousness of their intentions through high-profile personnel changes: For example, Jim Hackett, the with different, evolving feature sets. In other words, there are former leader of Ford’s autonomous vehicle efforts, was recently myriad reasons why there hasn’t been a new automaker of scale named CEO of the automaker. Others are taking their intentions in decades (and Tesla’s not there yet). directly to investors and the public, such as when GM’s CEO Mary Barra recently told The New York Times, “We definitely want to Tech companies like Apple and Alphabet, parent of Google, have be first” to develop a fully autonomous car. GM is now mass- now realized that they don’t need to build hardware to win the producing self-driving Chevy Bolts to create the largest fleet of autonomy game. Their collective conclusion is that they will never autonomous vehicles to date. beat the auto industry at making a car — the “body” — and instead should focus on what they do best: building revolutionary software platforms — the “mind” — this time in self-driving AI. To Figure 4 that end: Alphabet’s (Google) Waymo has the clear lead among tech players • Waymo, the self-driving car unit of Alphabet, scrapped the development of its own custom vehicles last year and Total autonomy-related U.S. patent filings, select tech players (2007-2016) formed an initial partnership with Fiat-Chrysler to use the 2,400 automaker’s Pacifica minivans 2,100 • Apple’s Tim Cook announced recently a major pivot with 1,800 regard to Project Titan, its stealth car venture, to focus on 1,500 making an autonomous platform as opposed to an actual 1,200 vehicle 900 • Uber, it was recently revealed, has considered a collaboration 600 with a major automaker on its self-driving project Number of patents 300 • Baidu, one of China’s largest tech companies, said recently 0 that it will open-source a self-driving software platform after Alphabet / Uber Tesla Faraday being inspired by Google’s approach with Android Waymo Future • Nvidia unveiled in January a partnership with Audi to use its Source: USPTO, L.E.K. research and analysis vehicles to bring the tech company’s AI driving platform to market Page 3 L.E.K. Consulting / Executive Insights, Volume XIX, Issue 58 INSIGHTS@WORK® Executive Insights To prepare for a future of full autonomy, auto OEMs have virtuous cycle where the leading platform extends its advantages, significantly stepped up their investments in self-driving vehicle including safety, and pulls away from the rest. research and technology. The pace of auto OEM autonomy tech U.S. patent filings is exploding, more than tripling from 2014 to With the self-driving mind outsourced to a leading tech player, 2016. however, a wide range of auto OEMs will have to partner with the platform and produce competitive self-driving vehicle Two models emerge: “Android” and “Apple” hardware. The potentially huge demand and range of uses for We see two business models emerging to develop and autonomous vehicles could support a wide range of producers of commercialize a fully autonomous vehicle. the bodies — again, similar to the range of PC and smartphone OEMs running Windows and Android, respectively. The first model is centered on a division of labor between hardware and software; call it the “Android model” (see Figure But a second model may also be emerging, led by prominent 3). Tech companies are fighting to build the winning mind — an players like Ford, GM and Tesla. These OEMs are unwilling to AI platform to operate autonomous vehicles — while a set of auto relinquish the operating system and focus only on hardware. Rather, OEM partners and their suppliers will build the vehicle bodies. they have doubled down on both the mind and the body.
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