From manufacturers to mayors, AV success requires multiparty buy-in

Thanks to maturing technology and a broad range of benefits, cities are speeding up the adoption of autonomous vehicles, writes the Boston Consulting Group’s Nikolaus S. Lang

The tide has turned. Big cities around the world are dropping their earlier wariness and beginning to embrace autonomous vehicles (AVs). Public opinion is similarly coming around as people grow frustrated with rising traffic and parking shortages. With the technical problems largely solved, cities and their industrial partners are now working at solving the remaining regulatory and commercial challenges.

Those developments were in full view in Boston, where it took the municipal and state governments only four months to approve a series of AV trials. The World Economic Forum (WEF) and The Boston Consulting Group (BCG) have been collaborating on the future of urban mobility for several years now, and have worked with Boston as the partner city for AV deployment since summer of 2016. The successes so far are further evidence that the future of urban mobility will be autonomous.

Consumers and cities pushing for AVs

The past year has seen a flurry of activity around autonomous vehicles across the key stakeholders. Cities, consumers and automotive OEMs and suppliers are all making strides. In BCG interviews with 50 city policymakers worldwide back in 2015, 88% already expected to have commercial AV operations by 2025. In a separate customer survey with 5,500 respondents from 30 large cities, 58% said they were willing to try out an autonomous car. They were most interested in avoiding the tedious search for a parking space. Only 37% were willing to share a robo-taxi, but the number jumped to 50% when the ride included a discount due to the economies involved (see exhibit 1 for detailed research findings).

Recent examples across the world show the push towards AVs. In the United States, the state of California has given out licenses for AV testing to dozens of commercial operators, while Ann Arbor officials worked with the University of Michigan to set up a 23-acre mini-city for testing driverless cars. In Europe, Gothenburg sees considerable activity with the Drive Sweden initiative and Volvo’s Drive Me project. In Asia, Singapore has advanced testing with nuTonomy and others, and is planning for commercial applications from 2018. Japanese officials are encouraging AV trials in a variety of environments, from cities like Tokyo and Nagoya to small rural towns with growing elderly populations.

Megatrends Q3 - BCG chart-1

Activity has also increased among nearly all the automotive OEMs. GM has made big-play investments in ride-sharing provider Lyft and automation start-up Cruise; Ford created a new company, Smart Mobility; VW founded its own mobility brand Moia, while Daimler launched several services for its ‘moovel’ ecosystem, to name a few.

Boston shows the way

Boston’s process is especially revealing. Back in 2015, the city government launched “Go Boston 2030: Imagining Our Transportation Future.” The initiative generated a broad citywide plan for investments to improve mobility for underserved residents, reduce carbon emissions, and promote economic development. Early activity focused on expanding public transportation and bicycling. But AV technology soon came to the fore.

The WEF working group chose Boston for the trials because it is a good mix of car-centric American and public-transit-centric European city archetypes. Winter weather and the irregular city layout would help to test the limits of the technology. The collaboration with local and state governments culminated in January 2017 when nuTonomy, a start-up based on research at the nearby Massachusetts Institute of Technology (MIT), began testing autonomous cars in the up-and-coming Seaport district next to downtown. From kick-off to having AVs on the road took just four months, a blueprint for other cities.

The cars in question were electric Renault Zoes, equipped with a range of sensors to feed the autonomous driving software. Among the autonomous hardware were three Velodyne LiDAR sensors, a Mobileye camera, two additional cameras and a host of radars. Safety drivers rode along to oversee the trials and take over if necessary. They initially limited activity by speed, time of day, and weather conditions. As the cars demonstrated “agile learning” and reached milestones around performance, they expanded the testing, including South Station downtown, one of the two busiest commuter hubs.

The tide has turned. Big cities around the world are dropping their earlier wariness and beginning to embrace autonomous vehicles

That agile learning included some issues for which researchers had not prepared. The Seaport district has numerous seagulls swooping low in search of food. The ever-watchful AVs initially saw the looming seagulls as a hazard and took steps to avoid them, until the researchers adjusted the programming to ignore such small flying objects. Snow was a more predictable challenge, and the cars are learning to handle those obstacles as well.

With 300 miles driven, the team has had no unanticipated system failures. The most common scenarios for the safety drivers to take over control involved the unusual behaviour of other traffic participants, such as drivers going in the wrong direction on one-way streets, construction vehicles blocking the street, or emergency vehicles expecting everyone to pull over.

A key next step is having passengers in the vehicles and testing the AVs as a real transportation option. Recently, nuTonomy announced a partnership with ride-sharing provider Lyft in Boston to define the on-demand AV user experience. In addition, Optimus Ride and Delphi were approved as the next two companies to test AVs in Boston.

The benefits of autonomy are outweighing concerns…

While the AVs were zipping around Boston’s downtown, a team from BCG’s advanced analytics group Gamma was conducting a complex traffic simulation. They were drawing on real traffic and road information from throughout the city to suggest how AVs would influence traffic flows in the city, especially along the key metrics of Go Boston 2030.

The team modelled out two different scenarios: first was “Private Car Evolution,” which presumed that a third of current personal car trips would convert to self-driving private cars or self-driving taxis. The second was “Robo-Transport Revolution,” where self-driving taxis and minibuses replaced personal car trips entirely as well as a portion of public transit ridership.

Megatrends Q3 - BCG chart-2

In both scenarios, Boston needed fewer vehicles and parking spaces, CO2 emissions fell dramatically, and people spent less time in travel. Not surprisingly, the robo-transport scenario had a more pronounced impact, as parking spaces were cut in half and emissions fell by two-thirds.

These findings are just a few of the overall benefits from autonomous vehicles both for the city as a whole, and for individual. Safety is another major benefit, and models have shown up to 90% reduction in crashes from AVs. Boston lost 22 people to traffic fatalities in 2016, so there is substantial margin for improvement over human drivers. And more people would have access to mobility services, including residents on the outskirts and elderly or disabled citizens.

As people recognise the benefits around safety, reliability and access, they overcome their lingering concerns about AVs (see exhibit 2 for holistic view of AV benefits).

…but some questions remain

Municipal leaders worldwide are looking for new solutions to meet rising urban challenges, and AV-based mobility services are an essential building block. Technologically, the AVs are ready, but commercial structures are still emerging, as entrepreneurs try out business models for managing robo transportation fleets. How should they coordinate the various transport modes? Should there be an open interface, with one unifying customer-facing app for everything? Helsinki is testing that with its recently launched Whim app.

As more cities embrace autonomous transport, conventional automotive companies will have to move away from pure manufacturing and toward mobility services

The legal hurdles are also significant, especially around liability for road traffic incidents. Germany as a first mover on the global stage recently passed a law to broadly legalise the operation of AVs as long as a driver is ready to override the system. While the new law doesn’t yet include complete autonomy (SAE Level 5), it paves the way for Germany to take a pioneering role in the adoption of AVs.

A new future for the automotive industry

As more cities embrace autonomous transport, conventional automotive companies will likely have to go beyond technology investments and redesign their role. They’ll move away from pure manufacturing and toward mobility services. They will need not just new business models but also a new kind of product development, as the traditional seven-year product lifecycle of cars cannot keep up with the fast-moving technology.

Their target market will also change, as sales shift from private individuals and families and toward fleet operators, including potentially the municipalities themselves. Unit car sales will fall, but revenue could rise if the companies can capture a significant share of the value created by autonomy. That’s especially likely if they can help design an effective business model for mobility services.

The sooner they do this, the greater their likelihood of leading the way for autonomous car design. Otherwise, the non-car innovators in this space, from Google to Uber or Lyft, will gain customer loyalty and turn the manufacturers into commodity operators.

Ongoing trials in Boston and around the world are demonstrating the potential for autonomous cars to solve pressing urban problems around safety, reliability and access. Cities are now actively working to lay the groundwork for future mobility services. It’s time for the broader automotive ecosystem to catch up and support this emerging new industry.

This article appeared in the Q3 2017 issue of Automotive Megatrends Magazine.