The dramatic change which the automotive industry is undergoing, driven by the emergence of new technologies, is most apparent in the impact of connected car technologies. These technologies could transform both the industry and the very nature of driving itself. But while it may be less apparent, rapid technological change is also transforming the relationship between the automotive industry and government regulators.
Government agencies are struggling to ensure that motor vehicle regulations achieve their public goals, such as protecting highway safety, while not slowing the emergence of new technologies that have potentially huge social, economic, environmental, and other benefits. These challenges are certain to continue for years, since the pace of technological change shows few signs of slowing.
The tension between these potentially conflicting goals has been particularly clear in the United States, which is home not only to many traditional automotive firms but also to information and communications technology (ICT) companies that are moving into the vehicle sector for the first time. Regulators, policy makers, and legislators are working to keep pace with rapid changes in automotive technology. The development of new vehicle-to-vehicle (V2V and vehicle-to-infrastructure (V2X) technologies, with their potential for eventually bringing fully autonomous vehicles to US highways, poses public policy challenges in such areas as vehicle safety, liability, cyber security, privacy protection, spectrum management, and transportation and infrastructure planning. Addressing these challenges will take years, if not decades.
Government agencies are struggling to ensure that motor vehicle regulations achieve their public goals, such as protecting highway safety, while not slowing the emergence of new technologies that have potentially huge benefits
The rapid pace of technological change is also forcing regulators, legislators, and interested stakeholders (such as vehicle and component manufacturers, ICT companies, insurers, and safety and consumer groups) to consider new approaches to addressing public policy issues. This has already become apparent in the US, where regulators are looking to voluntary and market-based agreements as well as traditional regulatory mandates. The entry of non-traditional players into the automotive market is also blurring lines between regulatory entities with differing legal mandates or technical expertise. This trend is certain to continue, particularly if companies like Google or Apple become important players in the motor vehicle industry.
Several recent developments highlight the challenges in regulating a changing automotive industry. In September of last year, for example, the US Department of Transportation’s National Highway Traffic Safety Administration (NHTSA), the Insurance Institute for Highway Safety (IIHS), and ten vehicle manufacturers announced an agreement to make automatic emergency braking (AEB) systems a standard feature on cars sold in the US. AEB systems, which use V2X technologies to detect an imminent crash and automatically engage the brakes if the driver fails to do so, are installed as standard equipment on only 1% of cars sold in the US. In March, NHTSA and the IIHS announced the agreement had been expanded to include 20 OEMs that had agreed to make AEB a standard feature on new cars sold in the US no later than 2022.
NHTSA had been under pressure for some time to propose a new regulation (or “rule”) mandating the use of collision-avoidance technologies to reduce rear-end collisions. NHTSA decided not to proceed with a formal rulemaking, however, but to rely on a voluntary commitment by OEMs. NHTSA concluded that such an approach was the fastest way to get AEB systems installed on more new vehicles.
The rationale for this decision is clear: proposing and finalising a federal motor vehicle safety standard through a formal ‘rulemaking’ is an often contentious process that can take years – not to mention the near-certainty that a new regulation will be subject to legal challenge even after it is finalised. A voluntary agreement could have an impact much sooner. In fact, while the OEMs have agreed to install AEB systems as standard equipment no later than 2022, many are expected to do so well before then. NHTSA is taking other steps to expand the availability of AEB systems, such as including AEB as a recommended safety technology in its ‘five-star’ New Car Assessment Program (NCAP) – a market-based approach aimed at using consumer choice rather than regulatory mandates to speed the introduction of AEB systems that meet performance standards defined by NHTSA.
Critics have raised concerns about this approach, arguing that only a formal regulation has the legal authority to ensure that OEMs install AEB systems that meet minimal standards. These critics point to the automotive industry’s recent record of safety recalls and cheating on emissions tests to question dependence on voluntary commitments. Regulators clearly are not going to abandon formal rulemaking in the years ahead: NHTSA in the past has promulgated formal rules mandating that new vehicles be equipped with technologies that were previously just NCAP recommendations, for example, and NHTSA is currently crafting a rule to mandate that new passenger vehicles be equipped with dedicated short-range radio communication devices to ensure they have V2X communications capability.
Voluntary agreements are nonetheless likely to be used again in the future as rapid technology development poses new challenges to regulators and OEMs alike. In another recent example, the US Department of Transportation (DOT) and 17 OEMs in January announced an agreement on voluntary measures aimed at improving vehicle safety and the cyber security of connected vehicles. As part of that agreement, OEMs committed to expanding membership in the industry’s cyber security information sharing and analysis centre to include automotive suppliers and other companies in the ‘connected vehicle ecosystem’.
OEMs, component firms, ICT companies, and others in that ‘ecosystem’ are quickly developing new V2X technologies that do not fit easily into traditional regulatory categories. Regulating those technologies will require technical skills that are far different from those needed for traditional passive safety regulations. It will involve regulatory agencies, like the Federal Communications Commission, that have traditionally not regulated automotive technologies, while posing new challenges in federal-state relations. It will stretch the fabric of traditional automotive regulations by raising questions that were never even considered when those rules were written. Finally, it will lead regulators to consider innovative approaches that ensure they are meeting public needs like highway safety without slowing beneficial technological change.
These regulatory challenges will be particularly intense in terms of self-driving vehicles (SDVs), as was evident in a letter earlier this year from NHTSA to Google. That letter stated that, in certain instances, a self-driving car itself could potentially be considered a “driver” for the purpose of complying with federal vehicle safety standards. In so doing, the letter highlighted a particular challenge for regulators and SDV producers alike: how do you certify that an SDV is complying with federal safety standards written for vehicles with human drivers? Rule interpretations or guidance could address some issues, but NHTSA made it clear that there may need for a formal rulemaking to change its definition of ‘driver’ in light of the development of SDVs. Such a rulemaking would have huge implications for the entire connected vehicle ‘ecosystem’.
NHTSA stated in the letter that the development of SDVs raises policy issues that are “beyond the scope and limitations of interpretations and thus will need to be addressed using other regulatory tools or approaches.” Regulators, working with OEMs, ICT firms, and others, need to determine over the coming years how motor vehicle rules apply to SDVs. That process is likely to include the involvement of Congress – since current law may need to be changed to address the dramatic changes in vehicle technology – and the administration of the new US president, who will take office in January 2017.
This article appeared in the Q2 2016 issue of Automotive Megatrends Magazine. Follow this link to download the full issue.