Automakers Rethink Autonomy Goals as AV Hype Fizzles Out

For a number of users autonomous vehicles have been touted as the future of automotive. Yet Wards Intelligence Outlook Conference illustrated that optimism has been dampened. While automakers pumped billions of dollars into numerous self-driving projects, Glenn Sanders, principal analyst, autonomous vehicles at Informa Tech Automotive Group, finds that cracks have begun to show in the sector. Subsequently, valuations and stock prices have collapsed.

He says in his introduction at the Wards Intelligence quarterly event, that explored Autonomous Vehicles Hype Fizzles Out, OEMs Rethink Autonomy Goals, that many autonomous vehicle companies have closed their doors and that the development of the technology is taking too long for many impatient investors. He finds that this is causing many AV developers for consumer vehicles to divert some of their resources away from Level 3 or 4 autonomy development to focus more on ADAS in the near term. “Meanwhile, mobility companies with deep resources continue to focus on Level 4 for robo-taxis, shuttles and trucks,” he says.

The synopsis of the conference also comments: “2022 marked a turning point in the autonomous vehicle sector, with the cancellation of major AV projects by Volkswagen and Ford, and the closure of Local Motors, Optimus ride and others.”  At the Outlook Conference, Sanders looked at: “How automakers are responding by switching strategies and diverting resources away from AV development to focus more on improving and expanding the ADAS features that customers are demanding today.”

Changing development partner

With regard to the cancellations, Christian Buhlmann, head of product communications at Volkswagen Commercial Vehicles, wishes to clarify that: “Volkswagen did not cancel their AD development, we just changed the development partner.”

He adds: “The commitment of Volkswagen Commercial Vehicles to develop autonomous vehicles for its future mobility services remains unchanged. We are working with a new partner who provides the self-driving-system for our autonomous vehicles, which will be announced shortly. Correspondingly equipped ID. Buzz prototypes from VWCV are already on the road within a test program. With this step we are also strengthening the cooperation within the Group for the development of highly automated and autonomous driving at CARIAD.”

Nevertheless, Sanders found that during 2022 a number of AV projects were cancelled. Companies were also closed, or they were acquired. Valuations dropped, too, by 87%. Is this trend over? No, Sanders predicts that it will continue for the next year or so. He explains: “These are part of a hype cycle macro trend that many technologies go through.  When a technology shows promise and rapid progress, it causes excitement in the market and investor community.  This leads a hype cycle of large investments and inflated expectations. If technology development takes longer or is more difficult than expected, investors and the market become discouraged, leading to a trough of disillusionment. That is where we are today in the AV sector today.  The sector is expected to recover after a time of consolidation, as the engineering problems are eventually overcome.  Then it will climb the slope of enlightenment to become a viable market.”

Predictable slowdown

Sanders believes that the ‘fizzling out’ is a predictable slowdown, created by overheated expectations because there is still a need to solve the “few percent of rare edge cases”, which are taking years longer than most people anticipated.  Yet it’s likely that this slowdown will be resolved as he sees it as being an engineering problem that could eventually be resolved with enough money, resources and time in place. There is also a need for more commitment from companies and investors to see the technology through to market.

Big advantages

Buhlmann is buoyant about the prospects of Volkswagen Commercial Vehicles, suggesting that it has three big advantages. These include going electric with autonomous driving from the ID family. He says: “The volume production technology is an important basis for reliable operation and enables easy maintenance of the vehicles, which are, of course, intended to be almost permanently in use.”

Secondly, he reveals that the company’s new development partner is to be announced shortly and that the self-driving system available today, already offer a driving quality that requires very little intervention by the safety driver. Thirdly, he comments: “With our group subsidiary MOIA, we have already been gaining a lot of experience since 2017 in respect of its popular ride-pooling service in Hamburg and Hannover, which is now being further developed for driverless operation. We are therefore sure that Volkswagen Commercial Vehicles is very well positioned compared to the competition.”

Ford: “solid finish”

Ford believes that it’s also doing well. The automaker suggests that it’s Q3 2022 ended with a “solid finish”. However, it recognizes that 2022 was a challenging year despite claiming to have had a strategically fast start to 2023. It’s strategy now is to reorganize around “three customer-centered automotive business units: Ford Blue for popular gas-powered vehicles and hybrids; Ford Model e for breakthrough connected, electric vehicles; and Ford Pro for commercial products and services.”

The automaker nevertheless adds: “Ford has concluded that the auto industry’s large-scale profitable commercialization of Level 4 advanced driver assistance systems will be further out than originally anticipated – but development and customer enthusiasm for benefits of L2+ and L3 ADAS warrant dialing up the company’s near-term aspirations and commitment in those areas.

“In the third quarter, Ford made a strategic decision to shift its capital spending from the L4 advanced driver assistance systems being developed by Argo AI to internally developed L2+/L3 technology. Earlier, Argo AI had been unable to attract new investors. Accordingly, Ford recorded a $2.7Bn non-cash, pretax impairment on its investment in Argo AI, resulting in an $827M net loss for Q3.”

L3 vehicle drive

That said, Sanders suggests that there has been a cooling off in the drive to achieve Level 3 in consumer vehicles. He says automakers are focusing more on delivering improved and expanded ADAS features while still working to add Level 3 features down the road. He adds that Mercedes is leading by offering a single Level 3 feature in their S-Class and EQS models.

Other automakers are planning to release Level 3 features in their 2024 and 2025 models. Much depends though on regulations and on permitting processes being in situ by then. He says this is because there is still a lot of work to do both in technology development and in regulations.

Expanding ADAS demand

Meanwhile, Buhlmann finds that there is much demand for expanding ADAS features, particularly for public transportation in regard to mobility services as well as relates to the transportation of goods. He explains: “In a European job market in which the need for drivers far exceeds the number available, autonomous Transport as a Service will be the key solution in order to enable growth in the parcel express and courier sector.

“Only when, unlike at present, the delivery person no longer needs a driving license and becomes a passenger who can concentrate fully on the order of deliveries and the next customer will the job become of interest to other applicants. We are working here for our logistics clients on appropriate autonomous vehicle solutions.”

Talking from a consumer perspective, Sanders says consumers are eagerly paying for ADAS features. However, much depends on their reliability and ease-of-use. He offers an example: “Ford says that more than 80,000 customers have opted to pay for the BlueCruise ADAS system.  That’s a good start and shows there is definitely interest in the market.”

“In addition, a recent survey by AEye and PAVE shows that 65% of drivers feel safer with ADAS features turned on.  The survey also revealed that 78% feel that technology is important to solving road safety issues.  This all bodes well for demand for ADAS in the market, as well as the future of self-driving vehicles.”

As for the next quarter, Buhlmann says Volkswagen Commercial Vehicles has already been testing autonomous prototypes on a test field and on the road in a wide variety of traffic situations and driving maneuvers for two years. He adds: “This year, we will also be on the road in our future fields of application for commercial use and invite the media and other multipliers to experience the technology. In the following year, the focus will be on the safe transport of test customers who will also book their journey via app, as is the case today with MOIA.”

ADAS requires robustness

Sanders concludes that in the consumer market, there is a need to make ADAS more robust and there is a call to expand ADAS features. Level 3 technology will continue to be developed, but there won’t be a push to develop a complete Level 3 vehicle. Instead, he thinks there will be individual Level 3 features that will incrementally be added over time.

He adds: “For commercial vehicles, companies continue to focus on Level 4 for robo-taxis, robo-shuttles, and logistics trucks, especially long-haul trucks which will likely be the largest application for Level 4 vehicles.” So, there will be a change of focus this year and beyond, but the dream of autonomous vehicles is far from dead. Expectations and strategies have nevertheless had to change to meet market demand.