Guest Feature Story by David Kiley

More than 1,000 auto industry stakeholders gathered at the 54th annual CAR Management Briefing Seminars to discuss and debate the mobility revolution that is gripping the global industry. Indeed, more than one attendee suggested that the “mobility industry” is now a better, more accurate term to use going forward than “auto industry.”  “We have never been in a more disruptive period in our business,” said Carla Bailo, President and CEO of CAR. “This is an era of the same kind of disruptive technology as when the Wright Brothers established flight,” said Bailo.

The flight to electric vehicles and autonomous driving capability has far reaching transformative implications for automakers, suppliers, policymakers, and consumers in the form of cyber security, city planning, capital allocation, marketing, financial results, engineering, liability law, human capital, and politics.

A dominant topic of conversation among industry panelists, and point of debate, is the speed in which the U.S. and other key markets around the world will adopt EVs and increasing levels of autonomous mobility. Trying to forecast consumer adoption and government policymaking around both EVs and AVs has enormous consequences for every stakeholder. And yet, that speed of adoption, while forecasted by various entities, remains a huge wild card.

Autonomous Driving Futures

Level 5 autonomy, a vehicle that operates without a driver, must see its surroundings, perceive obstacles and act safely based on its perceptions, is a level of technology that many at the conference debated in terms of value proposition and feasibility. “The perception in the industry was, a couple of years ago, that it (autonomous driving) is paved with gold,” said Farid Khairallah, portfolio director of safety domain control units for ZF. “But now the industry is looking at it from a more sober, practical point of view. It’s not that easy to go there,” Kairallah told the conference audience.

There are levels of autonomy before Level 5, and the industry has to find ways to make money on those levels over the next 20 years. Forecasts on Level 5 rollout at any kind of scale average around 2035, with some believing it will be more like 2040.

“The technology is ready now for Level 4 autonomy,” said Willard Tu, senior director – Automotive Market for XILINX, which is supplying smart systems and software to automakers and suppliers. Level 4 vehicles are designed to perform all safety-critical driving functions and monitor roadway conditions for an entire trip with a driver in a geo-fenced area. It does not cover every driving scenario. But cost, consumer acceptance, insurance considerations, and government policy is not there yet. Tu said that there is a great need for standards to be agreed upon by industry and government. “We need an agreement on how to do a lot of things…scale is dependent on standards.”

A few years ago, one of the biggest worries was not that consumers would not embrace AV technology, but that the legal liabilities and insurance issues would thwart acceptance and building scale. Mike Scrudato, senior vice president and strategic innovation leader, Munich Re America, says that is not the case. “In actuality, AVs going through risk management of insurance will help the process of consumers having trust in the technology.”

“In actuality, AVs going through risk management of insurance will help the process of consumers having trust in the technology.”

-Mike Scrudato  |  Munich Re America

Steve Gehring, vice president of vehicle safety and connected automation at the Association of Global Automakers says the industry has a lot of educating to do for policymakers in the area of autonomous vehicles. “If we are just submitting materials to NHTSA, and not engaging them about what the technology is, where it is going, what is meaningful data, then we’re really missing an opportunity,” said Gehring in a panel discussion. “There is a lot of work to do to bring state, local, and federal regulations into line if there is to be full deployment on public roads,” he said. “And, there is a steep learning curve for some legislators and government officials.”

The Trump administration has recently dismissed the Advisory Committee on Automation in Transportation (ACAT), an Obama-era federal advisory group on autonomous vehicles. It consisted of 25 members coming from various branches of the transportation world, including General Motors CEO Mary Barra, Duke University’s auto industry expert Mary Cummings and Apple’s environment, policy, and social initiatives head Lisa Jackson, to advise the Department of Transportation (DOT) in drafting federal policies around new deployment of automated transportation but a definitive completion dates have not been set. A lack of commitment and coordination at the federal level will slow standards.

A Mobility EcoSystem Built On Safety

Hand-in-hand with an autonomous driving future, is what is going on already today in creating a new mobility ecosystem. The ecosystem now can consist of walking to one’s car, driving one’s car to work, taking a shuttle from a parking area or structure, and reversing the process to go home. Going forward, though, not only are automakers and start-ups rethinking the role of the private vehicle, but disrupters–Uber and Lyft, start-ups like May Mobility ‘s autonomous shuttles and taxi vehicles, and GM’s Maven ride-sharing company–along with cities and towns are rethinking the use of public road space. Roads are being carved up to allow new bike lanes, and electronic infrastructure is being installed to support autonomous vehicles, as well as vehicles equipped with L3 and L4 autonomous tech in order to reduce traffic fatalities and improve quality of life for workers and citizens.

Traffic fatalities have been trending up since 2014, topping 40,000 in 2018. Many analysts point to the rise of smartphone usage and an increase in distracted driving.  There is consensus that technology, which has spawned the trend can also solve it. Thus, the rollout of collision avoidance, driver alert, lane-keeping, and other camera and sensor-based technologies that will eventually make up a suite of technologies achieving Level 4 and Level 5 autonomous mobility is viewed as desirable, and returning profit to OEs and suppliers no matter the pace of full autonomy.

Indeed, automakers like Honda and Toyota are focused on better commercializing Level 2 advanced driver systems, while they advance Level 3, 4, and 5 systems implanting a plan that balances investment with consumer interest, industry standards, and changing infrastructure.

Sue Bai, chief engineer-automobile technology research division for Honda R&D Americas says her company has an ambitious goal of helping to create “a collision-free society.” That may sound wishful given how long it will take vehicles fully equipped with collision-avoidance technology, and making the tech work properly at scale, but it is a clarion strategy for all industry participants.

Bai, who also sits on the Society of Automotive Engineers committee establishing autonomous mobility standards, says Honda is doing extensive research on intersections and tech that will allow a city’s public electronic infrastructure to communicate with vehicles about obstacles, pedestrians, and other accident-inducing situations before the hazards are even detected by the car’s cameras. That’s because 20% of all traffic fatalities occur at intersections.

Pilot programs such as those Ms. Bai described are important because lessons learned from early adopters can be quickly transferred to other cities and regions, rapidly speeding the implementation of life saving strategies. When success stories spread, and other companies and cities rush to jump on board.

Wayne Powell, vice president, Electronic Systems Division Toyota Motor North America Research and Development told CAR’s MBS audience that it makes its accident avoidance systems available to rivals free of licensing fees, and that it has five million vehicles on the road in the U.S. with Automatic Emergency Brake systems. Front-to-rear collisions represent more than one-third of traffic fatalities, and AEB can prevent a lot of those.

According to Powell, one of the most challenging problems to solve on the road to autonomous driving is predicting and influencing driver behavior. For example, if a company layers collision avoidance technology into a vehicle, that may lead to drivers defaulting to “bad behavior” and driving habits in terms of becoming less attentive. “That is literally the toughest thing to solve,” said Powell.

When it comes to navigating investments in the new eco-system, which includes EVs, shuttles, trains, bike sharing, E-scooters, ride-hailing services, one of the driving market forces is the reduction of personal vehicles in cities and less reliance on single-occupant vehicles. “People are very distraught over congestion, pollution and deterioration of the quality of their lives as it relates to mobility, commuting, traffic and smog,” said Michelle Avary, head of autonomous and urban mobility, World Economic Forum LLC.  The time is passing of car companies being the dominant influencers of how we move. “The concern of communities now and going forward is how to make the mobility systems work better for people,” said Avery.

“The concern of communities now and going forward is how to make the mobility systems work better for people”

-Michelle Avary  |  World Economic Forum

More Disruption Coming

While some small start-up ride-hailing and road-sharing companies have come and gone or are languishing, the original disrupters like Uber and Lyft are growing in scale and influence. Nat Beuse, head of safety at Uber Advanced Technologies Group, says with new mobility solutions comes a period of earning trust from users.

Uber is testing autonomous ride-hailing vehicles, but each time there is a mishap, there is intense media scrutiny that comes from a built-in skepticism that vehicles should be driving themselves without a driver having both hands on the wheel.

Uber was responsible for the first recorded case of a pedestrian fatality involving a self-driving (autonomous) car following a collision that occurred March 18, 2018. The victim was pushing a bicycle across a four-lane road in Tempe, Arizona when she was struck by an Uber test vehicle, which was operating in self-drive mode with a human driver sitting in the driving seat.  As a result of the fatal incident, Uber immediately suspended testing of self-driving vehicles in Arizona. Uber also decided not to renew its permit for testing self-driving vehicles in California when it expired at the end of March 2018. But the company is now testing such vehicles in Pittsburgh. “If there is one thing I would like people to know is that we do vast amounts of testing of these systems in closed courses before they ever get on a public road,” said Beuse, who said the company does not use the term “safety drivers”, but rather “mission specialists” to describe the drivers in the test vehicles. Uber has also hired mission and process engineers from NASA and nuclear reactors to work on the certification of its AVs.

Dollars and Sense and M&A

Attendees of the conference had a lot to say about profitability, return on investment and lowering costs on EVs and AVs. With scale for both still several years off, the return on investment cycle, and size of investments required, is extremely long by comparison with other tech developments over the last fifty years.

“Automakers and suppliers have to continue to make money,” said William Knapp, Head of Urban Mobility Concepts Americas Region for Daimler. “And the winners and losers will be determined by placing the best and smartest bets.”

Increasingly, some of those bets are involving partnerships, like ones created between Ford and Volkswagen and BMW and Daimler on both EVs and AVs, focusing on Level 3, 4, and 5 autonomous systems being designed and engineered to fit with EVs for the most part and not necessarily internal combustion engines.

Partnerships are becoming increasingly common because automakers are betting that the basic hardware of both EVs and AVs will not set them apart as brands. Brands will continue to focus on design, and hardware and software integration, as well as customer attention and execution of vehicle-delivered services to differentiate from rivals.

“Companies do not see this technology as brand differentiating, and even if they did, they could not afford to develop it on their own with the return on investment so far out,” said Ian Simmons, vice president, innovation development corporate engineering and R&D Magna International Simmons.

“Companies do not see this technology as brand differentiating, and even if they did, they could not afford to develop it on their own with the return on investment so far out”

-Ian Simmons  |  Magna International

To that end, PwC reported to the conference that while there is a falloff in major merger deals in 2019, in part owing to the lack of activity by Chinese companies, there is a rise in companies taking minority interests in start-up and other companies to gain access to new technology and get preferred status with emerging companies working in the EV and AV space.  PwC’s Dietmar Ostermann, Senior Automotive Partner and US Auto Advisory Leader, who led a discussion about auto supplier trends in the mergers and acquisitions area, noted that many companies in Europe especially are restructuring because of a softening global auto market and demands of capital investment to keep up with OE needs in the area of EVs and AVs. Michael Simonte, President of American Axle, said his company is looking for more acquisitions, and working with private equity, which remains interested in the auto sector, for financing. “The risk involved in pursuing new technology and the uncertainty over the timing of payback is driving deals,” he said.

In the arena of EVs, IHS Markit principal auto industry analyst Stephanie Brinley says the firm expects EVs to have a 6% share of new cars sales globally by 2025. Meantime, investments in the technology and infrastructure has already been going on for more the last two decades. “Some way, we have to make this pay,” said Brett Smith, director of the Propulsion Technologies & Energy Infrastructure Group at CAR.

Hacking The Future

While the future of the mobility industry is entirely dependent on electronics, sensors, computer code, and connectivity, a growing concern among all stakeholders is cyber security. The US government, OEs and suppliers monitor cyber attacks daily, and there can be, according to Ami Dotan, CEO and co-founder of Karamba Security in Bloomfield Hills, MI, thousands of attempts per day to hack auto companies and individual vehicles.

Staffers at Keen Security Lab, a cyber-security research unit, last year, noted Dotan, discovered a multitude of security vulnerabilities in three BMW models. Those could be exploited by hackers to remotely take control of a vehicle.

All automakers are aware of the problem, though European brands are leading the industry when it comes to cyber-crime prevention. Among solutions, according to Dotan, is employing a system of “real-time codes” that change to fend off hackers who might range from high-tech car thieves to terrorists.

It’s not a “what if” scenario, as Dotan showed attendees overnight data each day of hackers and would-be hackers attempting to crack into systems from China, Russia, and other countries.

Wired For The Future

There was little talk or discussion about the internal combustion engine at this year’s CAR Management Briefing Seminars. That’s not to say that there aren’t improvements to be made in ICE cars in the area fuel economy and performance.

As the industry migrates to forecasts of 6% EV share by 2025, and perhaps 50% by 2035 or 2040, automakers and suppliers will in fact make the bulk of their profits from selling gasoline-powered trucks and SUVs. But the industry largely knows how to make money selling ICE vehicles.

There is so much high-stakes betting on the future with billions of dollars going into EVs and AVs, discussing, debating, and learning what the road looks like to get there is what companies are still learning about, and it was a great reason to leave the grind of the ICE age behind and drive into the sun of Traverse City to discuss the big hairy unknown of a future dominated by vehicles that aren’t here yet.

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