There have been significant recent developments in the autonomous vehicle sector.

Firstly, the UK government published its consultation entitled the 'Pathway to Driverless Cars' and secondly the tragic death of a driver of a Tesla Model S while the car was in its autopilot mode, which allows the vehicle to accelerate, brake and change lanes in response to traffic.

Pathway to driverless cars

The government's consultation is a continuation of its policy to invest in the sector and place the UK at the vanguard of the autonomous vehicle sector. Autonomous vehicles will profoundly affect the way in which we travel and move goods. However, the adoption of semi or fully autonomous vehicles raises pertinent questions about data protection, product liability, insurance and public infrastructure which the government (and those in other countries) need to consider before this paradigm shift in how we travel and our relationship with the motor vehicle becomes a reality.

Data protection

It has been widely reported that Google and Apple, two of the largest companies in the world, neither of which are a vehicle manufacturer, are both developing autonomous vehicles and/or related technology.

There is a huge potential revenue stream in mass produced vehicles, the enabling technology and, more likely, the infinitesimal amounts of data that will be generated through the use of autonomous vehicles.

To take advantage of this data (which is already produced and used from Sat Navs and manufacturers' own in-car solutions) companies will need to think about what model to adopt when processing the data.

The conundrum facing companies is whether it is better to collect and process the data through their own systems, fit a third party device to gather and process the data for its use or fit a device which collects data for a service provider who can then process and monetise?

Although the potential to monetise the data is vast and varied, the pitfalls in handling the data incorrectly are huge with the information commissioner able to fine or even prosecute for breaches. Currently the commissioner can levy a fine of £500,000 although that is set to change in May 2018 when (or, following Brexit, if) the EU data protection framework (the General Data Protection Regulation) comes in to effect.

The fines that the commissioner can impose (depending on the type of infringement) significantly increase to the higher of 4% of annual worldwide turnover and #20 million.

In addition, negative publicity from data misuse could be damaging to corporate brands and could result in fall in revenue.

Product liability

Modern cars already implement many separate semi or fully autonomous features such as anti-lock braking, brake assist, traction control and cruise control.

The common feature of these is that they require the driver to remain in full control of the vehicle. As the technology develops and becomes more prevalent on cars and the car becomes less reliant on the driver, liability is likely to move away from the driver and to the manufacturer because the vehicle will be controlled by the technology installed by that manufacturer.

Manufacturers will need to consider how to manage this shift in risk. The recent fatality involving a Tesla Model S will be instructive as to what position manufacturers (and possibly the courts if it is litigated) will adopt.

The increased automation will mean that the likelihood that manufacturers will have to recall vehicles will also increase. In recent years, car manufacturers have recalled millions of vehicles to address defects in windows, airbags, defective accelerator pedals, and defective brakes to name but a few. Any defect, however small, is likely to result in extreme reputational and risk-based pressure on manufacturers to remedy the defect quickly.

As software takes over, this might become far less onerous as updates can (potentially) be applied remotely and perhaps even automatically. However, this is clearly a vital area for manufacturers to manage and get right to ensure confidence (perhaps the most significant hurdle facing autonomous vehicles) is built and maintained. A 'bug' in the software of an autonomous vehicle could result in disastrous consequences.

Insurance

The first personal driverless car insurance policy was recently launched onto the insurance market. It is intended for drivers using existing driverless features on their vehicles or if they are buying a car with an autopilot feature.

In the long-term, car insurance premiums are likely to fall as cars become more autonomous. The fall in premiums and shift in risk from driver to manufacturer is likely to fundamentally alter the personal car driver insurance market and may lead to consolidation within the sector, particularly for insurers dealing solely with personal driver insurance.

Infrastructure

In order for autonomous vehicles to become viable, governments will need to ensure that public infrastructure (road signs, motorways, mapping etc) is fit for purpose.

This will likely require significant maintenance to ensure cars can read the surrounding environment to navigate safely. It is likely that governments will need to liaise with each other so that, to the extent it is possible, regulations are harmonised. This is particularly relevant for Europe considering the large volume of freight traffic moving through the member states.

What next?

The automotive sector will change beyond recognition when autonomous vehicles become commonplace and are a product demanded by consumers.

Companies should devise a strategy considering the following related challenges/questions:

  • Does the company wish to respond to the government consultation thereby becoming part of the big conversation about driverless car technology?
  • Strategically, is it better to collect and process the data through the company's own systems, fit a third party device to gather and process the data for its use or fit a device which collects data for a service provider who can then process and monetise?
  • How will the shift in product liability risk be managed as control of the vehicle moves away from the driver and over to the technology installed?
  • How will product recalls be affected as a result of the shift of control to technology?
  • What changes to public infrastructure will be required as the technology develops and how will those changes be communicated to governmental bodies and maintained to ensure the safe use of the vehicles?