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50 Citi GPS: Global Perspectives & Solutions February 2015 Autonomous Vehicles: Transforming Mobility as We Know It Itay Michaeli US Autos & Auto Parts Analyst Phil Watkins European Autos Analyst Figure 41. Global auto fatality stats Fatalities/ 1,000 vehicles United States 15 Germany 7 Japan 7 South Korea 26 China 36 India 315 Thailand 119 Brazil 71 Source: Autoliv company reports Automated vehicles offer potentially wide-ranging societal and business benefits from improved safety, improved fuel economy, new forms of mobility and the unlocking of time spent in the vehicle. As outlined in our report Citi GPS: The Car of the Future, a safer and more convenient vehicle will likely become less expensive and more enjoyable to operate. Eventually, fully automated vehicles and new forms of mobility services might allow greater access to cars for consumers who either cannot or do not drive. As cars become connected machines that can “see” and learn, road efficiencies could increase—think high-speed highways. Cars will be able to share their positions, experiences and driving tips with each other. New forms of human-machine interfaces, such as augmented reality, could completely change the way we interact with our surroundings. Despite major advancements in automotive safety systems throughout the past 20 years, road fatalities still claim over 1 million lives around the world each year (Figure 41). In the U.S. alone, annual fatalities top 30,000. The outlook is unfortunately even grimmer considering the aging population and the increasingly connected (i.e. distracted) driver. By 2030, road fatalities are poised to rank in the top 5 causes of death globally. Why should driving be this unsafe? It is estimated that 93% of US accidents are caused by human error, with Europe sporting a similar ratio. Alcohol remains a major US contributor involving ~30% of fatal crashes. Speeding is also a major factor at ~30%, driver distraction ~20%, lane keeping ~14% and failure to yield ~11%. It is estimated that if a driver is afforded an extra ½ second of response time, roughly 60% of accidents could be avoided or mitigated. So why should driving a car be this unsafe when the root of the problem is concentrated in driver error and impairment? Key Drivers of ADAS Demand We see three core drivers of future ADAS demand: 1. Regulations: In terms of regulation, the EU new car assessment program is leading the way by essentially requiring all vehicles to have ADAS by 2017 to achieve a 4-star rating on automatic emergency braking. We expect US regulation to be solidified over the next few years as well. 2. Possible Future Insurance Savings: As ADAS penetration rises and begins to prove out in real-world reductions in claim frequency/severity, the potential for lower insurance premiums might also accelerate ADAS demand. 3. Consumer Value: Safety ranks highly in consumer preference surveys and there is evidence that consumers are willing to pay premiums for a ‘value bucket’ of ADAS convenience applications – adaptive cruise control, traffic jam assist and soon automated highway piloting. © 2015 Citigroup
February 2015 Citi GPS: Global Perspectives & Solutions 51 ADAS is moving through different categories depending on the level of automation and driver involvement over the next 8 years Fully autonomous driving is not expected to be a reality until the early/mid-2020s ADAS Migration to Automated Vehicles Autonomous vehicles tend to be grouped into categories depending on the level of automation and driver involvement. ADAS tends to be considered Level 1— sensor/software provides assistance but the driver is driving as usual. Level 2 includes things like automated highway piloting where the driver is required to monitor the system as the primary operator of the vehicle even as the vehicle performs autonomous task. This is the next stage that’s likely to sweep the industry over the next 1-3 years. Level 3 is full automation where the driver doesn’t have to monitor the system but must still be engaged enough to take control after a brief warning (maybe 10 seconds). Think of the car driver playing the role of an airplane pilot. Level 3 is likely 4-8 years away but is already deep into the development process. The final level — Level 4 — is a fully autonomous driverless vehicle. Most expectations peg this becoming reality in the early/mid-2020s. Beyond technical and cost hurdles, driverless vehicles pose challenges from a regulatory, legal and security perspective. There’s a healthy debate around Level 3 vs. Level 4 vehicles — will drivers even want to give up the joy of driving? But what about mobility models like driverless tax-speeds (particularly at a safer low-speed) or mileage efficiencies in the fleet as cars start operating without occupants? And what’s the cost premium for going from Level 3 to Level 4? It’s clearly early to fully tackle all of these questions, but we do believe that there are some compelling use cases for the eventual driverless vehicle, particularly in fleets and 2 nd /3 rd car replacements. Google’s efforts in this area will undoubtedly be monitored closely and in doing so likely establish greater consumer awareness of ADAS and autonomous vehicles. Figure 42. Phases of automated driving technology Now Leap 1: 1-3 years (2015-2017) Leap 2: 4-8 Years (2018-2022) Final Leap: (2022+) ADAS: A critical line of defence but doesn’t drive the vehicle All ADAS + Automated braking, Automated throttle, Automated steering with forward vision and GPS connectivity. Key App = Auto Highway Piloting. Car can accelerate/brake/steer by itself through transitions, lane changes, intersections, country roads and cities. Drivers operate like today’s pilots do; standing by to take over in case of emergency or system failure. Driverless car. Versus Leap 2/3, key issues relate to legislation, security and incremental cost vs. consumer demand. We see a strong case for low-speed applications like taxis and car-pooling, but the mass adoption case is unclear yet. Source: Company Reports, Citi Research © 2015 Citigroup
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