With the promise of £100 million investment for intelligent mobility made by the Chancellor in the first 2015 Budget, The Society of Motor Manufacturers and Traders (SMMT) has recently published a report produced by KPMG’s economists and automotive experts, emphasising that connected and autonomous vehicles should be a strategic priority for the UK, that will require collaboration across industries.
The report Connected and Autonomous Vehicles: The UK Economic Opportunity, forces an annual economic benefit of connected and autonomous vehicles to the UK to be worth £51 billion by 2030, raising as high as £121 billion for autonomous vehicles alone by 2040 - as well as the societal benefit of “thousands of lives” being saved due to hoped for reduction in numbers of road accidents.
As the report has been commissioning for industry incumbents, naturally it assumes continuation of current trends and smooth increments of, non-disruptive, technological development.
This includes patterns of ownership. The KPMG report suggests growth to over million UK jobs in the sector, whereas a Barclays plc analyst this month been reported to have forecast that US auto sales may drop about 40 percent in the next 25 years because of shared driverless cars. Large-volume automakers “would need to shrink dramatically to survive,” Johnson wrote. “GM and Ford would need to reduce North American production by up to 68 percent and 58 percent, respectively.”
The KPMG report does, however, provide some helpful pointers to the possible wider market impact and knock-on economic impact of connected and autonomous vehicles - and the resulting opportunities and challenges.
Expanding the UK industrial base
According to SMMT, full connectivity of vehicles will transform Britain – by expanding its industrial base, improving safety, congestion, efficiency and tailpipe emissions, and will drive up productivity and liberating space usually devoted to vehicles in urban areas.
It forecasts that by 2030, every single new car will have some form of connectivity, while more than a quarter will be fully autonomous, preventing more than 25,000 serious accidents and saving thousands of lives.
The report states that, currently, some 770,000 people are employed across the sector in the UK, with more than a fifth of those directly employed in manufacturing. The era of the connected car will see the industry helping to provide jobs for more than a million people.
A quarter of vehicles fully autonomous by 2030
The authors classify vehicles according to into different degrees of autonomy, from level zero, to level 1 (with driver assistance), level 2 (partial automation), level 3 (conditional automation), level 4 (high automation) to level 5 (full automation).
Based on current trends, KPMG expects that all vehicles produced in the UK by 2027 will have at least level 3 technologies embedded in them and that there will be a 25% penetration of fully autonomous vehicles by 2030.
Direct and wider benefits
The report says that the beneficiaries of connected and autonomous vehicle technology will likely include sectors that provide integrated transport, those that provide vehicles as a service, telecoms, in-car services companies, insurers, urban planners, and the public through increased productivity and labour market flexibility.
The projected economic benefits of these changes, plus the direct benefit of development of the UK as a centre of excellence in connected and automated vehicle technologies, caused KPMG to forecast is an annual economic benefit of £51 billion in the UK, reflecting a GDP growth forecast to be an additional, cumulative 1% by 2030.
In addition, KPMG forecasts that connected and autonomous vehicles are increasingly likely to be electric, shared use vehicles.
Separately and even more bullishly, in January Morgan Stanley cited research saying that autonomous cars could contribute $1.3 trillion in annual savings to the US economy, with global savings estimated at over $5.6 trillion, representing 8% in annual GDP, the reallocation of which, it suggested, could have major implications.
This report claims that productivity gains would come to $507 billion annually in the US, where Americans spend some 75 billion hours a year driving. Related businesses, such as telecoms, software, media, freight transportation, semiconductors and insurance, will also likely face disruption and opportunity.
Areas for attention and an array of opportunities
In discussing areas for attention, the report states that regulators should, “focus on removing barriers to the development, testing and adoption of connected and autonomous vehicles by creating a framework that provides clear standards for manufacturers and consumers in important areas such as liability, data and privacy, cyber security and connectivity across borders.”
It states that standards and clarifications are required, with regard to testing, liabilities, privacy, digital Infrastructure, cyber security and telecoms.
In addition, the report highlights three areas requiring collaboration across industries:
Decision-making software – Advanced software and algorithms are suggested as required to make sense of the complexity of data received from the vehicles’ sensors and how to choose between least-worst options in the event of a potential crash. Substantial work is stated as required due to the reputational risks faced by vehicle manufacturers.
Vehicle cyber security – KPMG claim there’s opportunity to support cyber security from a hardware and software point of view; “ECUs and MCUs will need to be developed which have sufficient levels of resistance to cyber attacks and likewise with software and networks”, it is claimed.
Data opportunities – According to the report, connected and autonomous vehicles will generate vast amounts of data if consumers choose to share it. “This has the potential to open up a range of opportunities for consumer engagement and indeed monetisation for the data owner. This will become a source of competitive advantage for OEMs, technology companies and insurers as well as supporting automated traffic flow management”.
John Leach, KPMG’s UK Head of Automotive concludes the report by stating, “technology needs to be developed by vehicle manufacturers and their suppliers – especially decision-making algorithms, mapping, sensors and cyber security.”
“Policy makers need to develop regulatory frameworks to allow the industry to flourish … Privacy, liability, cyber security and telecommunications standards nevertheless need to be developed and the UK’s continued membership of the EU is helpful in this regard.”