Through recent conversations with clients and participation in industry events, our cross-practice, cross-office Connected & Autonomous Vehicles team has identified trends and refined its outlook on issues related to the underlying technological advancements and other evolutionary aspects of the transportation business. Below is a summary of what we are hearing from a broad spectrum of industry participants, including representatives from OEMs, tier-one suppliers, and technology companies (both start-ups and established providers) and a variety of consultants, including system security experts, and our thoughts on the impact on the future of connected and autonomous vehicles (CAVs).

1. The Pace of Technology Evolution

a. There is still work to be done, particularly around the edge cases, but many believe the technology is there to support level 5 autonomy and deployment of such CAVs on a limited basis on public roads in the next several years.

We have not seen evidence of a material lag in technology advancement from recent crashes and other incidents involving autonomous vehicles. Rather, the industry and regulatory bodies are seeking valuable lessons as they do detailed investigations of each incident that will inform both the development of the technology and the regulatory framework for testing these vehicles. In a recent investigation, NHTSA has taken note of such efforts and, in an unusual step, included in its report a statistical analysis of the safety benefits of autonomous vehicle technology.

b. Widespread use of level 5 autonomous vehicles will take significantly more time, with estimates ranging from 10–30 years. Players with deep understanding and experience in wide-spread commercialization of vehicle technology, development of successful business models for delivering transportation in the future, and consumer acceptance will be required for mass consumption of autonomous vehicle products and services.

2. Considerations in Adapting the Business Model to New Technology

Connectivity, the adoption of increased driver assistance features and software technology integration throughout the entire ecosystem—from purchasing and ownership to use and service—is already transforming the industry and participants’ business models. The industry will need to further develop approaches, and allocate contracting parties’ responsibilities and risks, with respect to the following issues:

a. How to structure cooperative relationships among vehicle manufacturers, component suppliers and technology companies to:

i. build or bring into the vehicle the connectivity and various applications and services powered by such connectivity; and

ii. address the impact connected technology has on vehicle development and lifecycle.

b. How to digitize the purchase or lease transaction, as well as allow in-vehicle purchases (from a dealer, OEM or independent third party), without an exchange of currency or credit card information, while remaining compliant with PCI Data Security Standards, as well as other data privacy laws and industry standards and best practices.

c. How to learn from other “as a service” technology and business transaction models to develop solutions offering “transportation as a service” separate from car ownership and to foster continuing relationships with retail customers beyond purchase, service and repair.

d. How to remotely update software to provide additional services, transmit vulnerability patches and perform other warranty or repair actions in a secure manner.

e. Whether and how to charge for connectivity—continuing a subscription model based on data usage or using other models.

f. In light of the increasing importance of voice recognition as the primary interface in a multi-modal human-machine interface, how to meet the continued need to improve it.

g. Recognizing the value of the large amounts of data that will be generated by autonomous vehicles, how to use, in a manner consistent with privacy laws, caches of consumer data generated, as well as how to adapt data analytics and predictive maintenance technologies to use and analyze data to more efficiently and effectively maintain and enhance vehicle performance.

3. Solutions to the Issues of Continuing Advancement and Encouraging Adoption

a. As noted above, consumer acceptance will be a key factor in widespread use of autonomous vehicles. To advance such acceptance, the industry and regulatory authorities will need to make consumers familiar with—and trusting of—this new technology by:

i. Emphasizing safety in all aspects of design, construction and performance.

ii. Treating cybersecurity as a core safety issue, with all industry participants increasing implementation of data security and privacy protocol and governance processes to protect the security of the vehicle and the privacy of consumer data.

iii. Providing legal and regulatory guidance around testing and standards for autonomous features (pending national legislation and clarification of the role of state and local authorities in regulating AVs and addressing global commonality in the approach to CAVs).

iv. Accounting for the interests of bystanders—e.g., pedestrians, bicyclists and other drivers.

The need to solve the issues around the consumer acceptance required for widespread use of autonomous vehicles suggests early adoption models will likely have fleet owners operating in a more controlled environment—possibly with dedicated lanes for delivery vehicles or other geographically restricted operations.

b. Furthermore, advancement of autonomous vehicle technology requires:

i. Finding new approaches to testing and validating highly complex integrated systems and securing them and allocating responsibilities and risks associated with the integration thereof among contracting parties.

ii. Creating technology standards that address the telecommunications industry’s desire to open the dedicated spectrum for V2V communication without creating interference.

c. Widespread adoption to realize the safety benefits of the technology may require:

i. Consumer incentives to encourage adoption and allow for more rapid fleet turnover, such as the inclusion of more driver assistance features as standard options.

ii. Technologies and services that allow consumers to envision CAVs as part of a larger ecosystem—e.g., the Smart City, the Connected Home.