From Procurement to Profit

Mapping a Route to Self-Driving Cars

As Congress makes headway on legislation to expedite the rollout of self-driving cars, automotive and technology companies are already forging ahead in spite of lingering regulatory uncertainty and other challenges, according to a new survey conducted by law firm Foley & Lardner LLP.

Foley’s 2017 Connected Cars & Autonomous Vehicles Survey found that traditional automakers and suppliers have been joined by emerging and mature technology companies in the race to fill the streets with driverless cars.

However, there still are significant barriers to these technologies reaching their growth potential and gaining acceptance by the general public.

Different Technologies, Different Obstacles to Growth

While the terms “connected cars” and “autonomous vehicles” are often used interchangeably, there are clear differences in where the technologies currently stand and their obstacles to growth.

For connected cars, which have sensor-enabled communication systems, the largest percentage of respondents (31% ) view cybersecurity and privacy issues as the most pressing concern.

By contrast, respondents identified safety (35%) and consumer readiness to adopt (24%) as the top obstacles to advancing autonomous vehicle development.

“Connected car technologies are already prevalent today,” said Mark Aiello, co-chair of Foley’s Automotive Industry Team and partner in the Detroit office. “Thus it’s not surprising that cybersecurity and privacy are top of mind with industry executives.”

For the deployment of autonomous vehicles to be successful, consumers will have to be convinced of the viability of self-driving cars and their potential to reduce accidents.

Impact of New Entrants and Evolution of the Sales Process

The business strategies and operations of traditional automakers and suppliers are influenced by emerging and established technology companies that see opportunities along the supply chain.

Only 15% of respondents believe that accelerated technological innovation and new industry entrants are not disrupting traditional automotive supply chains.

Those in the automotive industry increasingly expect their primary competition to come from nontraditional sources – including technology startups (22%) and established technology companies (22%) – over the next three years.

Respondents also expect the automotive sales process to continue evolving as new technologies enter the market.

A large majority (77%) anticipate that automakers will bundle more connected services and/or autonomous features at the point of sale.

Industry Seeks Stronger Regulatory Framework

Legislation advancing in Congress would address regulatory obstacles to deployment of self-driving cars and preempt state laws – a welcome development in an industry seeking greater regulatory certainty and an alternative to the patchwork of differing state requirements.

Nearly two-thirds of respondents (62%) believe nationally consistent rules from the federal government are the best way to regulate connected cars and autonomous vehicles.

Cybersecurity and IP Issues

While survey respondents underscored the importance of devoting resources to connected cars and autonomous vehicles, more than half (54%) struggle to fund and commit the necessary time to develop and implement these technologies.

They also acknowledged having concerns around shortcomings of roads and public infrastructure (39%) and regulation and legal risks (37%).

Respondents identified cybersecurity attacks (63%) and intellectual property protection (58%) as most concerning to their companies.

Northern California and Detroit Leading the Way

Silicon Valley, with its high concentration of capital and innovative technology companies, and Detroit, with industry veterans who know how to build and sell millions of cars, were identified by respondents (70% and 46%, respectively) as the top two regions that will lead the development of connected cars and autonomous vehicles.

The automotive industry is increasingly investing in startups and acquisitions.

New entrants are positioning themselves for successful integration into traditional supply chains through partnerships with incumbents.

On the international side, respondents anticipate the most innovation from Germany (38%) and Japan (20%), both of which have significant automotive industries and are supporting and investing in technology initiatives in this space.

While respondents are starting to eye China (12%), this percentage will likely rise quickly, especially on the supplier side, given the backing of China’s government and the emphasis it is placing on electronics and battery technology.

More than 80 executives, a majority with C-suite or director-level titles, at leading automakers, suppliers, startups, investment firms and technology companies completed the 2017 Connected Cars & Autonomous Vehicles Survey.

For more information and to download the complete report, click here.

Foley & Lardner LLP has more than 900 lawyers in 19 offices across the United States, Europe and Asia.

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