Driverless car market worth $87 billion by 2030

There’s no one at the wheel, but there may be gold under the hood in the coming generation of “driverless cars.”

Despite considerable skepticism, “autonomous” self-driving cars have become part of a hot tech trend that is proving to be a major business opportunity. A report released this week suggests that cars with self-driving features will create an $87 billion global industry by 2030.

Google has conducted extensive road testing of its driverless cars, and the biggest names in the car business in Europe, North America and Asia are jumping on the driver-free bandwagon.

“We have seen a lot of activity and a lot of hype in the automotive value chain,” said Cosmin Laslau, lead author of the report from Lux Research.

Every modern vehicle has some autonomous functions such as cruise control, putting them into what engineers call Level 2. Level 3 cars have fully autonomous driving but require the driver to take over at certain intervals. Level 4 cars, the holy grail of the industry, are fully autonomous with zero input from the driver.

The Lux analysis notes that a few major companies have jumped at the booming market, investing sizable chunks of money into the development of automated vehicles.

“The industry is well aware of this and [is] starting to make the partnerships [to] get the funding to get there,” said Mr. Laslau. “That being said, some are more aggressive than others.”

Automotive players such as Volvo, Mercedes-Benz, Nissan and Ford have touted self-driving vehicles on the agenda for the next decade.

Volvo’s self-driving vehicles are scheduled to be launched by 2017. As part of the company’s Drive Me project, 100 of these autonomous vehicles are being driven on the streets of Gothenburg, Sweden.

Volvo’s autonomous car project is carried out by Volvo Car Group, the Swedish government, the Swedish road administration and other partners. The total investment is around $75.9 million.

Eyes and ears

With sophisticated sensors, radar, lasers and advanced mapping technology, these self-driving cars have eyes and ears on the roads, theoretically allowing the driver to sit back and relax.

“The test cars are now able to handle lane following, speed adaptation and merging traffic all by themselves,” Erik Coelingh, Volvo Car Group technical specialist, said in a statement. “The technology, which will be called Autopilot, enables the driver to hand over the driving to the vehicle, which takes care of all driving functions.”

Automakers hope the next generations of driverless cars will carry even more autonomous features.

The Lux report suggests that Level 1 vehicles, with no autonomous features, will be obsolete by 2030. Level 2 cars with some autonomous features will represent 92 percent of all cars sold, and Level 3 cars will make up 8 percent of all cars sold.

Even by 2030, however, a completely autonomous Level 4 vehicle will not be ready for the mass market, the report found. It suggested that in an optimistic environment, 700,000 units may be sold in 2030 but “Level 4 has not even been demonstrated in academic research labs, and it is unclear if full autonomy can ever work.”

The report put China on top financially in the long term, with $24 billion in revenue annually by 2030 from the driverless car industry. The United States will follow with $21 billion, and Europe will receive $20 billion, the report said.

Multiple hurdles

Although hefty profits await, the report said, multiple hurdles face the makers of autonomous vehicles.

Perhaps the largest is American consumers’ hesitation to hand over control to an autopilot driver. The report cites Subaru’s findings that 80 percent of its Japanese buyers prefer autonomous features, while only 8 percent of Americans do.

Mr. Laslau said, however, that Level 2 can act as a transitional staging ground.

“That kind of step-by-step approach is going to acclimate people into those capabilities,” he said.

The report said the youngest and the oldest drivers are the ones most likely to reap the benefits from self-driving cars.

“Younger generations that have grown up with technology like smartphones and complex software — ’digital natives’ — may be more open to the technology, but, at the same time, older generations may reap bigger benefits from autonomy: A rising number of older drivers are dying in car accidents,” the report said.

Other challenges include the regulation of self-driving vehicles and how insurance and liability will change. Who is at fault, for instance, if a driverless car is involved in a crash?

Road test

California may be offering solutions.

The California Department of Motor Vehicles on Monday approved regulations for manufacturers to test self-driving passenger vehicles on public roads. Although nothing prohibits manufacturers from testing these cars, Bernard Soriano, deputy director at the California Department of Motor Vehicles, said it is necessary to stay on top of emergent technologies.

“As the technology changes, we need to ensure that the technology rolls out in a way that still keeps the motoring public safe,” Mr. Soriano said.

The manufacturers will be required to get permits. Mr. Soriano said the manufacturers also are required to have $5 million in insurance coverage. Regulations for pedestrians driving autonomous passenger cars on public streets are expected to be announced in December.

Nevada, California, Florida, Michigan and the District of Columbia have some sorts of regulations for autonomous vehicles, Mr. Soriano said. He hopes collaboration between agencies and jurisdictions will create consistency.

“No one wants to see a patchwork of regulations,” he said.

Proponents tout autonomous vehicles as safer, energy-efficient and better able to handle long commutes and routine driving such as airport shuttle service.

While car manufacturers are hoping to market the benefits and reap the profits, software companies stand to make the most money, the Lux report found. The “software opportunity” is projected to grow from $500 million today to $10 billion in 2020 and $25 billion by 2030.

Google has been working on an autonomous car project since 2009, logging about 700,000 miles on roads in Mountain View, California. Google uses a Lexus RX450h enabled with its software, which allows the car to detect objects in its path — whether it be a bus, pedestrian or construction material.

“A self-driving vehicle can pay attention to all of these things in a way that a human physically can’t — and it never gets tired or distracted,” Chris Urmson, Self-Driving Car Project director, said last month on Google’s Official Blog. “As it turns out, what looks chaotic and random on a city street to the human eye is actually fairly predictable to a computer.”