Who’s in the Driving Seat?

Who’s in the driving seat? How the rise of autonomous vehicles will transform the relationship between man and car

Self‑driving cars may soon be a common sight on our roads. The industry is working at breakneck speed and investing billions in pioneering technology to create cars that can run safely without human intervention. The question of whether robotic cars will spoil people’s pleasure in driving is no longer even an issue. Individual drivers will have the freedom to choose when to let the “autopilot” take the strain (in congested city streets, for example) and when to take the wheel themselves (perhaps on an inviting stretch of open highway or an alpine pass).

Evolving scenarios: the road ahead The transition to autonomous vehicles (AVs) will take place in several steps. They are not expected to be part of everyday life before 2035. 1 5–10 years Self-parking • Controlled, AV-only structures/lots environments • Moderate level of automation 2 • Low to medium speeds Dedicated AV highway lanes 3 Connected 10–20 years urban centers • Less restricted environments • High level of automation 4 • Medium to high speeds Public AV transportation 5 Expanded AV Beyond 20 years highways • Large, connected vehicle networks; no constraints • On-demand mobility and 6 fleet services • Customized consumer AVs Fully AV ecosystem Source: UN World Urbanization Prospects, World Business Council for Sustainable Development, Factiva, Navigant Research, EY analysis European Commission, Directorate General Information Society and Media, Informal document No.: ITS-13-07 4 | Who’s in the driving seat?

Are we ready for driverless cars? It is rather surprising how receptive people are to the subject This vote of confidence is likely to become stronger over time. of autonomous driving even though almost nobody has actually Three quarters of drivers aged under 45 could imagine handing experienced it to date. This was confirmed by an EY survey of the steering wheel to a robot, while only half of those above 1,000 drivers in Germany: more than 4 in 10 could imagine of 65 would consider this option. letting an autopilot steer their car. The proportion increased to 66% if they were given the added option of taking over the wheel in an emergency. Only 12% would categorically refuse to use a self-driving vehicle as a means of transport. The option to intervene is important Can you imagine traveling in a self‑driving vehicle that What if you were able to intervene in the case negotiates traffic without human intervention? of an emergency? 4 4 17 12 25 ■ Yes 31 ■ Yes ■ Maybe ■ Maybe 18 ■ Probably not 25 ■ Probably not ■ Absolutely not ■ Absolutely not ■ I don‘t know yet 23 ■ I don‘t know yet 41 Figures in percent Figures in percent If we leave the technical and legal details of autonomous will replace people in the future and take away their work, driving aside for a moment to focus on the real challenge posed thereby destroying jobs. Rather, the question is to what extent by this subject — the interaction between man and car and people are willing to entrust their lives to a machine. therefore the wider man-machine relationship — the fundamental issue becomes clear. The question is not whether machines Who’s in the driving seat? | 5

Triggers for development of autonomous vehicles: security aspects One of the key motivations for developing autonomous vehicles is to improve safety: avoiding traffic accidents and fatalities by eliminating human error from the driving process. Trendicators 95 8 2 6.3 95% of road accidents 8th leading cause 2x increase in delay 6.3 billion urban caused by human of death globally: hours due to dwellers accounting error road accidents congestion by 2050 for 70% of population by 2050 Source: UN World Urbanization Prospects, World Business Council for Sustainable Development, Factiva, Navigant Research, EY analysis European Commission, Directorate General Information Society and Media, Informal document No.: ITS-13-07 6 | Who’s in the driving seat?

Despite all the technical advances since the invention of the car, there are still one million deaths on the roads each year. And completely eliminating traffic accidents presents an enormous 21st century challenge. The car of the future could learn a lesson or two from autopiloted planes and Global statistics show that cars trains that all but drive themselves. Even if dozens of fatalities result from a single plane are by far the most dangerous crash or a serious train accident, global statistics show that cars are by far the most mode of transport because dangerous mode of transport because they are controlled by people. Simulating or they are controlled by people. copying the human brain by means of artificial intelligence is not enough. To make a machine trustworthy, it has to be better than man — without emotion, consciousness or creativity, but instead equipped with 100% reliability that cannot be undermined by any distraction. Who’s in the driving seat? | 7

Many unanswered questions As soon as we hand over the steering wheel — and responsibility In the case of a plane being flown on autopilot the situation is — to an autopilot, we give a machine control over subsequent quite different: the technology is critical to our survival because events. The question that arises as a result is how much room we are not capable of piloting the plane ourselves. When for error we are prepared to allow a robotic car. In this case, traveling in an autonomous car, however, the driver has freely it helps to distinguish between critical errors and other errors. chosen not to be in control. A defective ATM or a faulty television set may be annoying, but they are not critical to our survival. When we get into a self- driving car, however, we are entrusting our own and our family’s lives — to bits and bytes, knowing full well that there is no such thing as absolute safety. Who will be liable in case of an accident? So, if a driverless car malfunctions, who will be at the receiving and the car itself cannot apologize or make amends. end of our disappointment and anger? Should we be furious What, therefore, will be the consequence for the relationship at the developer of the autopilot, the car manufacturer or the between man and car? software programmer? It is illogical to be angry with a machine, 8 | Who’s in the driving seat?

Advantages and disadvantages for the driver In your opinion, what are the advantages of self-driving cars? 54 % Better flow of traffic 54 expect that self-driving cars will lead to better Increased safety 48 flow of traffic, Reduction in consumption 40 and emissions Greater convenience 32 Time for other things 31 0 % 20 % 40 % 60 % 48 %Note: Figures in percent More than one reason may have been selected expect increased safety. In your opinion, what are the problems associated with self-driving cars? 58 % Spoils the fun of driving 58 are concerned that the fun of driving will Unresolved liability issues 46 be spoiled, in case of an accident Too unsafe 44 Lack of capacity to deal 28 with large volumes of data 46 % 0 % 20 % 40 % 60 % Note: Figures in percent are concerned about unresolved liability More than one reason may have been selected issues in case of an accident. For decades, a car’s worth was dominated by emotional very least, a more pragmatic interaction. On the other hand, considerations, with it serving as both a status symbol and the bond of trust may deepen when control is relinquished to treasured possession. Man and vehicle formed a close bond an autopilot. A completely new type of relationship between because the car represented a valuable asset that needed man and car may well emerge. protection. But can this continue to be the case? Trends toward integrated mobility concepts such as car sharing may lead to an estrangement between man and machine or, at the Who’s in the driving seat? | 9

From being a status symbol to running on autopilot: the changing relationship between man and car Low High Levels of L0 L1 L2 L3 L4 autonomy = Driver control + Vehicle control + Connectivity* Source: EY analysis * Connectivity includes vehicle-to-device, vehicle-to-vehicle, vehicle-to-infrastructure and vehicle-to-home While in the past people took responsibility for maintaining their cars in top condition, it is now cars that will take responsibility for the safety and well-being of their passengers. This role reversal will transform the way cars are viewed in future: superficial features such as design or engine power will take a back seat, and more intrinsic values such as safety, reliability and connectivity will come to the fore. Other industries, such as music and photography, have already experienced this shift from a purely “extrinsic” product orientation to an “intrinsic” benefit orientation such as functionality. 10 | Who’s in the driving seat?

Upheaval in the automotive industry Remember the paradigm shift within the music industry: with the or a desire for excitement. As motorists, we constantly have to emergence of digital technology and internet downloads, physical follow a middle path between these two extremes. Autonomous delivery mechanisms such as the CD and the vinyl record became driving, however, will remove the need for this balancing act. It obsolete. Music remains, but companies have radically altered will transform the journey into a time for other activities such their products in line with market demands. Those that failed to as reading, working or sleeping. Ultimately, the lines between recognize and embrace the shift toward user-centeredness in commuting, work and leisure time will become blurred. good time saw their business fizzle out. The automotive industry is now facing a similar painful transformation. Ultimately, autonomous driving describes a totally new tension between man and car: the relationship between freedom, common sense and life is shifting. Logically we know that we should drive at a maximum speed of 30 km/h to avoid accidents, but in reality we often exceed safe limits, impelled by impatience Shaping the future of the automobile What is the upshot for the automotive industry with its 129- close cooperation in the past, they are now increasingly year-old roots? The shift to autonomous driving will ultimately recognizing the win-win potential for both sides. The greatest force car manufacturers — in a symbolic sense — to relinquish the challenge remains the differences in development cycles between steering wheel while still being in charge of the vehicle. In effect, the traditionally long-term oriented automotive industry and the automotive industry must find a whole new business model the fast-moving digital industry. It still requires a great deal that intensifies the experience of the intrinsic value of the car and of synchronization on both sides before the two industries replaces the old attractions of design and horsepower. This will harmonize perfectly. require a new set of skills, and innovative collaborations between car manufacturers and companies from the IT and internet industries. Here, developments are already afoot. New links between automotive manufacturers and digital players are being forged on a monthly basis. While these organizations have avoided Who’s in the driving seat? | 11

Rinspeed “Budii” redefines human-machine interaction Reach out to robots The vision of autonomous driving will soon become a reality a steering column, however. In theory, it will make endless and will fundamentally change the interaction between man adjustment options possible: for example, during automated and automobiles. While the research centers of the automotive driving in the daily commute it parks the steering wheel in the industry are still feverishly working on the technical solutions, center with minimum space requirements or it serves as a table progressive thinkers such as the Swiss idea factory Rinspeed or attentive personal valet. This is made possible by the unique are already giving concrete thought to how automated private and multi-redundant “steer-by-wire” technology from Paravan. transport will transform the car and the man-machine system. Besides fundamental conceptual changes, this will also have For the automotive idea factory Rinspeed the robotic arm in to involve issues of ethics and society. “Budii” is a symbol and food for thought at the same time. Rinspeed-CEO Rinderknecht puts it as follows: “The autonomously In the past, the robots in the factories merely assembled driving car will require more than solving technical problems and cars for people. In the new “Budii” concept car from Swiss legal issues in the next two decades. We not only have to redefine automotive visionary Frank M. Rinderknecht, the machine the interaction of man and machine, but must also raise questions now literally reaches out to man: if the occupants of the about responsibility, tolerances and expectations.” According to autonomously driving electric vehicle feel like having some fun Rinderknecht, autonomous driving will undoubtedly offer the at the wheel on a twisty country road or off road, a robotic arm opportunity to make traffic more people-friendly and reduce will hand the steering wheel to the driver of front passenger as the number of traffic accidents worldwide. “But even the best desired, thereby transferring command. The sensitive 7-axis technology will not be perfect, albeit less prone to error than unit from Augsburg-based market leader is more than merely humans. That is something we will have to accept,” says 12 | Who’s in the driving seat?

Frank M. Rinderknecht. “We should not develop a blind, but rather a healthy trust in the new capabilities of the hardware and software.” “In the future, cars will do just as we do: they will keep learning every day, and as a result will get better and better at mastering the complex challenges of modern-day private transport.” To this end, “Budii” will take information from its surroundings, its own “experiences” and those of other vehicles along its route into consideration. The long-term result will be a cognitive and intuitive autopilot. The Swiss company demonstrated what such a “friend on wheels” could look like with the trans-urban SUV “Budii” at the 2015 Geneva Motor Show. Who’s in the driving seat? | 13

The onus lies on us to face the challenges of this revolutionary invention on the roads. 14 | Who’s in the driving seat?

How EY can support you EY is actively involved in the development process for autonomous driving. We act as an intermediary between relevant industries and support the economic modeling of new business concepts. We also help in searching for partners and facilitating collaborative projects, including those in the fields of risk management and IT. Your contact: Peter Fuß Senior Advisory Partner,Automotive Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft Mergenthalerallee 3–5 65760 Eschborn/Germany Phone +49 6196 996 27412 Email [email protected] de.ey.com/automotive Frank M. Rinderknecht CEO Rinspeed AG Strubenacher 2–4 CH-8126 Zumikon/Switzerland Phone +41 44 918 2323 Email [email protected] rinspeed.com Imagesource: © Rinspeed AG

EY | Assurance | Tax | Transactions | Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. © 2015 EYGM Limited. All Rights Reserved. EYG no. ED0136 BKL 1504-030 ED None In line with EY’s commitment to minimize its impact on the environment, this document has been ® printed on FSC -certified paper that consists of 60% recycled fibers. This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. The views of third parties set out in this publication are not necessarily the views of the global EY organization or its member firms. Moreover, they should be seen in the context of the time they were made. www.ey.com