Autonomous Vehicles

A number of well known companies, such as Tesla, Google, Apple and the auto companies, have demonstrated a significant interest in developing autonomous vehicles ostensibly as a path to reducing human input, which is generally considered to be the primary cause of vehicular accidents.  Considering that more than 30,000 people lose their lives on America’s highways every year, along with an even greater toll of serious injuries, improvements in vehicle safety are a laudable objective.

The auto and light truck market is huge.  In the U.S. alone, current annual sales of more than 17 million vehicles, at an average retail price of more than $34,000, add up to annual revenues of nearly $600 billion.  Any new technology that impacts a market of this size, is very likely to provide a number of interesting investment opportunities.

The word autonomous means different things to various interested parties.  Most new cars already incorporate a number of features that could be precursors of a fully autonomous vehicle.  It should be noted that autonomous means having the power of self-governance, that is, without human interaction.  Thus, most current vehicle concepts might more accurately be viewed as automated.

In the United States, the National Highway Traffic Safety Administration (NHTSA) has proposed a formal classification system with five levels.

  • Level 0:  The driver completely controls the vehicle at all times.
  • Level 1:  Individual vehicle controls are automated, such as electronic stability control or automatic braking.
  • Level 2:  At least two controls can be automated in unison, such as adaptive cruise control in combination with lane keeping.
  • Level 3:  The driver can fully cede control of all safety-critical functions in certain conditions.  The car senses when conditions require the driver to retake control and provides a “sufficiently comfortable transition time” for the driver to do so.
  • Level 4:  The vehicle performs all safety-critical functions for the entire trip, with the driver not expected to control the vehicle at any time.  As the vehicle would control all functions from start to stop, including all parking functions, it could include unoccupied cars.

It is worthwhile to note that the Society of Automotive Engineers (SAE) has developed an alternative classification system based on six different levels.

Looking forward, it would be reasonable to expect continuing evolution in the application of automated systems, although the rate of innovation and gain is difficult to calculate.  It is important to recognize that automated and autonomous are not synonyms.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA®