Self-Driving Cars Are Coming – But First, 5 Issues Need Fixing

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Companies like Google Inc (NASDAQ:GOOG) have been hard at work creating self-driving cars. A new report from Morgan Stanley (NYSE:MS) on the coming shift in the auto world promises that the vehicles will be on the road sooner than people realize, and has a look at the problems that the technology is going to face in its first years.

Self-Driving Cars Are Coming - But First, 5 Issues Need Fixing

According to the report self-driving cars could save the U.S. economy an estimated $1.3 trillion each year. Getting cars to drive themselves will be the “easy part” according to the analysts. Cars that can operate some of their own functions are set to arrive in the next 12-18 months according to the report. Self-driving cars are going to change the way the world works.

Self-driving car technology

There are a few kinks to work out from an investment perspective. The view of the analysts is that the technology will work, it is on the way, and investors need not worry about it apart from preparing for its introduction.

“The uncertainty around timelines of adoption for most new technologies in the auto industry is largely due to having to solve complex technological problems. That is not the case for autonomous vehicles—the technology to make a self- driving car happen is largely available today and only incremental R&D is required,” according to the analysts.

The auto industry has been slow to adopt technology in recent decades. There is more impetus than ever for innovation right now, however. Companies like Tesla Motors Inc (NASDAQ:TSLA) have shown that there is value in a different type of car, and companies like Google Inc (NASDAQ:GOOG) are circling. Auto companies are scared that self-driving cars are the next big thing. They can’t afford to miss out. That means self-driving cars are coming.

Self-driving car problems

The major issue around self-driving cars is liability, according to the analysts. In a car crash involving a self-driving car, whose fault is the crash? Insurance companies and the firms designing and selling self-driving cars will need to decide what happens in those situations.

The liability issue is one of the most important problems facing the self-driving car, and it is one that will have to be solved before the cars are ever allowed on the market. If the responsibility for a crash is taken away from drivers, insurance prices could fall, but those costs would be moved to the companies making or supplying the vehicles.

Global delivery is a second problem that the industry will have to confront if it wants to put the self-driving car at the forefront of transport. The Morgan Stanley analysts are strict in their belief that self-driving cars need to penetrate the emerging and developed world if they are to be successful.

Consumer adoption will be difficult for self-driving cars. As the industry eases into the technology and a vehicle takes a small amount of control from the driver at a time the change is hoped to be easier, but people only buy a new car every few years. If the vehicles are around by 2020, people who bought a normal car in 2014 could be in for a big change.

Side-by-side with consumer adoption is legislature adoption. The cars will need to be specifically legalized in every jurisdiction before they will be allowed on the roads. Building the popular and political support for that adaption may be difficult because certain powerful industries have vested interests in a static auto industry.

The fifth big issue with self-driving cars is an ethical one. The vehicle will likely never be able to address every situation that a human driver can, and some situations may require illegal or illogical responses that human drivers are comfortable with. Once self-driving cars become the norm, situations like these may cost human lives. The net lives saved will be in the positive, but it will not change the fact that a self-driving car caused harm.

Self-driving cars are on the way. It is for the companies involved in their manufacture and the governments involved in their regulation to decide how to deal with the five big problems. The Morgan Stanley analysts are sure that they will be able to, but investors will need to watch those decisions in order to make returns off of the introduction of self-driving cars.

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