The regulatory picture
Governments too are preparing for AFVs, as part of a broader legislative focus on accommodating and encouraging the use of AVs, by enabling certification, development and deployment of AFVs in their various regional and national jurisdictions.
The US has yet to enact national legislation, but public authorities such as the National Highway Traffic Safety Administration (NHTSA) have already released AV guidelines and standards. These are not enforceable but pave the way for formal legislation. In addition, 41 states have enacted legislation or executive orders relating to AVs. Each state has passed its own regulations surrounding the testing of AVs, covering issues around who can operate an AV, safety requirements for AVs and/or public trials, and the AV approval processes.
Similarly, China has enacted legislation (known as “Proposed Amendments of the Road Traffic Safety Law”) which outlines what companies must do to successfully road test their use of AVs. At a municipal level, the city of Shenzhen has issued draft regulations covering the entire process for the deployment of AVs. Japan has initiated a road legislation reform to allow introduction of L4 AVs. The proposed changes are expected to be presented by the end of 2022.
Much needs to happen, and there isn’t much time
Despite the significant progress, there is still important groundwork to be done before the rollout of AFVs. With 2025 purported launch dates looming, it is clear that more than three years’ worth of effort is required to prepare the world for AFV adoption by this time. There are several areas to consider:
Reconfiguring supply chain infrastructure: Freight owners and operators will have to reconfigure their supply chains to remain competitive. As mentioned earlier, a hub-and-spoke distribution model may be the best match for AFVs operating in the middle mile and therefore might be the best strategy to dramatically reduce operational costs.
But this will require a considerable rethinking of infrastructure, as well as finding and constructing new hubs in more efficient locations. Commercial real estate organisations and developers are becoming more aware of this potential, and they will be working with first-mover transport players to make the most of the limited number of locations in this new infrastructure paradigm.
Clearer and more uniform regulation to support efficient rollout of the technology: A fast and effective AFV rollout needs support from legislation, to ensure a safe introduction of the technology and to provide clarity on the rules and responsibilities affecting stakeholders so they can make informed decisions as to whether to participate and how.
Governments around the world have more work to do to advance their legislation and policies in this area, with Australia in particular lagging behind the US, China and Japan. As mentioned earlier, these countries have already introduced or enacted significant legislation to accommodate AVs. Unsurprisingly, these are also the countries spearheading the rollout of AV technology.
Changing the way our road signs work: Fundamental to AFV technology is an ability to read and/or communicate with the surrounding environment. AFV OEMs, governments, telcos, and road operators will need to develop and agree on an international set of visual and mobile communication standards that allow AFVs to reliably capture inputs from the road, such as variable speed restrictions, lane closures and other roadworks, and other day-to-day driving restrictions.
It could be argued that such standardisation is not required for autonomous vehicles on the road today (which generally are equipped with autonomous capabilities below Level 4 or are undergoing trials), but that comes at a cost, in terms of both development and local adaptation, and the hardware required for vehicles to read analogue inputs.
And at some point, as AV technology moves past Level 4, regulators and others need to plan for the prospect of road signage and other communication standards being minimised or done away with altogether.
Implications for the employment market: The introduction of AFVs will see shifts in demand for certain skills, requiring employers across several sectors to think hard about how they redeploy existing workers and train or reskill others.
Challenges will emerge mainly on two fronts. Firstly, over 2 million truck drivers across the US and Europe3 will need retraining or a completely different pathway to other employment in other parts of the economy. Secondly, employees across all points of the supply chain that interact with AFVs are likely to require at least some form of training. This includes, for example, warehouse operators who will load, unload or otherwise interact with AFVs.
The technology required by AFVs — hardware and software for microprocessors, and cameras and other sensors — also needs development and maintenance. This will drive enormous opportunity and demand for skilled technology developers and maintenance technicians.
Fewer accidents, different insurance products: The spread of AFVs will go hand in hand with a fall in the accident risk rate of up to 94% due to the elimination of human error. This presents a problem for insurance companies: insurance becomes less valuable when the risk levels drop. Also, if insurance companies decide to work with AFVs, they will need to develop a deep understanding of the AFV technologies in the market to accurately determine their associated risk profiles and deal with ongoing hardware and software updates to their insured AFV assets.
Finally, in a world where a vehicle’s operating risk is determined by its installed software and hardware, we may see a shift in risk allocation and therefore a change in the insured party. Such shift would require insurers to radically adjust their commercial models and build new customer relationships.
A new direction for truck manufacturers: While human-driven trucks are not likely to become obsolete overnight, their use will steadily decline as AFV technology evolves and is adopted by transport operators. To remain relevant, traditional truck manufacturers will be faced with the decision of investing to develop or acquire their own autonomous capability or partnering with the technology players in this area (e.g., Aurora). Failing to do this quickly will see them operating in a declining market, needing to play catch up to be competitive in the future freight industry.
The AFV revolution is nearly here
We expect to see a growing number of AFVs on our roads from 2025 onwards. The enormous opportunities in cost reduction and service efficiencies will provide a significant competitive advantage for those companies that adopt AFVs in their supply chains. Those that do not will quickly fall behind.
For those in the transport sector, the message is clear: there is much to do and little time to prepare for the substantial change that is already on the way.