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Are you a driver or a passenger? Some consumers do have concerns about AVs, however. Given the responses of survey participants who said that they would not buy an AV, the biggest considerations appear to be reliability, cybersecurity, and uncertainty about AV interactions with other vehicles on the road. Despite their general enthusiasm, respondents expressed no clear preference for specific features, with about two-thirds describing themselves as very interested or somewhat interested in each of several autonomous capabilities.

See Exhibit 2. Roughly equal percentages of respondents expressed interest in capabilities such as automated searching for parking spots and autonomous valet parking, as well as self-driving on highways, in heavy traffic, or along a fixed route. And in a striking finding, 51 percent of respondents said that they are very interested or somewhat interested in buying a vehicle that has the full array of autonomous capabilities. Most interested consumers are also willing to pay extra for autonomous features.

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More than 50 percent of respondents said that they would be willing to pay extra for each feature individually and for all features together in a fully autonomous vehicle. The lack of a clear preference for a specific feature, however, presents OEMs with a challenge: which feature or features should they prioritize in their research and development? The respondents in our survey who are owners of premium nameplates showed the highest level of interest in—as well as the greatest willingness to pay for—both partially and fully autonomous vehicles.

Thus we expect AVs to make their first appearance in the premium segment of the auto market. But consumers in the volume segment also showed significant interest in AVs, with nearly half likely to consider buying a partially autonomous vehicle and 36 percent likely to consider purchasing a fully autonomous vehicle.

Given the intense interest across both premium and volume segments, we believe that OEMs with a solid position in both markets—such as Volkswagen, Toyota, and GM—could gain valuable scale by transferring AV technology from their premium nameplates to their volume nameplates as it becomes profitable to do so. The survey results demonstrate that consumers clearly perceive how AVs could make driving markedly safer and exert downward pressure on their insurance, repair, and maintenance costs.

See Exhibit 3. See Exhibit 4. The survey results also suggest that AVs could usher in a second revolution in personal productivity, perhaps one that generates even greater gains than those made possible by home appliances such as washing machines and dishwashers. This seems to suggest that many, if not most, consumers would be willing at times to give up the pleasure of driving for some other activity.

The functionality of AVs relies on innovative technologies to process the inputs from sensors and on software to interpret the inputs and translate them into action. Vehicle manufacturers and suppliers will therefore need to invest heavily in hardware, such as sensor technology and processors; software and IT; systems integration; and assembly to produce AVs on a commercial scale.

See Exhibit 5. Although some of these technologies are already commercially available, certain critical pieces of hardware—most notably, sensors—will need further development before they can be used commercially.

Automotive suppliers and a handful of tech companies have already developed a mix of sensors that rely on radar, cameras, ultrasound, and light detection and ranging lidar technology, as well as other computing and positioning systems. But some of the most vital enabling components—specifically lidar sensors and GPS—must be further developed, and their costs scaled down, before OEMs will adopt them.

See Exhibit 6. The unit costs of these and other components are highly variable, ranging from the tens of dollars to multiple thousands, because of the wide variance in technical specifications, scale of production, and maturity for each component. OEMs will no doubt use different combinations of sensor components to enable various autonomous features. During the course of this study, we worked with a broad array of OEMs and technology suppliers to identify the various architectures that are currently in play.

We found, for example, that different OEMs take different approaches to adaptive cruise control: some rely on a stereoscopic camera, while others use long-range radar in conjunction with a mono-vision camera. Different OEMs are likely to deploy varying configurations of other enabling technologies as well. Some fully autonomous vehicles, for example, may need to use three or more lidars in conjunction with additional sensors, safety redundancies, and GPS to give the vehicle a degree view of its surroundings.

Others might not need to use lidar at all, operating with a combination of radar and camera systems instead. To understand how widely the approaches of different OEMs may vary, consider just two of the many possible sensor-based solutions for achieving fully autonomous driving capability. OEMs that opt not to use advanced lidar systems to generate a full view around the vehicle, however, would instead employ several short-range radars and stereo cameras.

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So, to be considered as a viable alternative to short-range radars paired with near-range vision systems, lidar technologies will need to be competitive with those sensor combinations in terms of costs, accuracy, and failure rates. Whatever combination they choose, OEMs will rely on improved processing speeds to handle the large amount of data from the sensors that enable the car to respond quickly to time-sensitive situations—for example, when road obstacles must be identified and avoided. The other critical technology in need of further development is the software that will interpret sensor data and trigger the actuators that govern vehicle braking, acceleration, and steering.

The software will need to be highly intricate to contend with the complexity of the driving environment. To put things in perspective, the software in the latest Mercedes S-class vehicle, which is loaded with several ADAS features, contains roughly 15 times more lines of code than the software in a Boeing The quantity of code required will multiply as vehicle manufacturers move from ADAS to partial autonomy and then full autonomy.

Short-range communications technology—such as vehicle-to-vehicle and vehicle-to-infrastructure communication, collectively referred to as V2X—can be effectively applied to complex driving environments to enhance the safety of AVs. V2X technology can supplement on-board sensors to gather and transmit environmental data, enabling the car to, for example, peer around corners and negotiate road intersections, just as—in fact, better than—a human driver would.

Is V2X a prerequisite for AVs right off the bat? There is no consensus on the question among OEM engineers. But there is broad agreement that V2X technologies, which are today being developed in parallel with AV technologies, will enhance AV performance and overall safety. The complexity of the driving environment will likely govern the launch sequence of partially autonomous features as well.

For instance, highways present a less complex driving environment than do urban streets or parking lots, which are replete with nonstandard infrastructure and involve a high level of interaction with other vehicles, pedestrians, and objects. By contrast, low-speed environments, such as traffic jams, may present fewer risks than high-speed driving. These factors will influence the pace of adoption over the coming years. See Exhibit 7. We expect that by about , the cost of autonomous features initially developed for partially autonomous vehicles will have decreased to the point where adding the sensor and processing capabilities needed to enable fully autonomous vehicles will become economically feasible.

AVs will probably emerge in the premium segment of the market first, given the level of interest expressed by current owners of premium nameplates and their ability to pay.

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The price of autonomy will be fairly high at first, as Ford executives pointed out at the Consumer Electronics show. These features, which most likely will include single-lane highway autopilot and traffic jam autopilot, will help OEMs build the scale needed to make future features commercially viable, because many sensors are common across different autonomous features. For example, the sensors for long-range radar, as well as for stereo and mono video cameras—which in combination enable single-lane highway autopilot—are also components of other autonomous features.

Those future, higher-priced features include highway autopilot with lane-changing and urban autopilot. These consumers represent as much as 20 percent of the addressable market. ADAS features, in the meantime, will continue their growth in parallel.

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The penetration of partially and fully autonomous vehicles will also be influenced by several other factors, including their impact on insurance premiums and safety regulations. See Exhibit 8.

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As mentioned above, the penetration of these autonomous features over the coming years will allow for the introduction of fully autonomous vehicles by around It will take a generation—15 to 20 years after the introduction of the first autonomous features—to reach a global market-penetration rate of 25 percent. See Exhibit 9. This rate of penetration aligns with the historical penetration rate of earlier technological innovations, such as cruise control and adaptive cruise control ACC. Cruise control, introduced in the U. ACC, introduced in , has achieved about 6 percent penetration both in the U.

Although we expect that consumers will be significantly more eager to acquire autonomous features than they have been to acquire ACC in recent years, higher prices are likely to keep the speed of adoption in line with these past innovations. Overlapping consumer interest in a wide range of features will also create competition among option packages and lead to the cannibalization of partially autonomous vehicles by fully autonomous vehicles as they reach the market.

On the basis of these market economics, we estimate that penetration of vehicles with autonomous features—nearly all of them partial—will reach 12 to 13 percent of global vehicle sales by See Exhibit By , the penetration of vehicles with autonomous features could reach 25 percent. About 10 percent—or 12 million—of those vehicles would be fully autonomous; the remaining 15 percent—or 18 million—would be partially autonomous. In terms of regional market performance, we expect that consumers in Western Europe and Japan will be among the fastest adopters of these autonomous features.

We base this expectation on their history with ACC, which has penetrated about 11 percent of those markets—or roughly twice the global rate of adoption—during the past nine years. The adoption rate in the U. Several factors could have an impact on the timing and degree of market penetration that we have forecast on the basis of market economics. These include the following:. To understand how these factors in various combinations could determine how many AVs, especially fully autonomous vehicles, will be on the road in the years ahead, we have developed a series of several adoption scenarios.

The first is the base case, which maps the adoption path on the basis of market economics alone. No Frills. Under this scenario, consumers interested in purchasing an autonomous vehicle—but only at a fixed price point below the added cost of autonomous features—would be willing to downgrade other features, such as car or engine size and interior appointments, to gain the options they desire. OEMs would begin offering autonomous features and corresponding trade-offs within five years. They would then be able to increase the penetration of fully autonomous vehicles to roughly 15 percent by The development would have a significant impact on the market landscape as priorities in car design evolve.

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