Summary

The future of mobility is in flux. Connected and autonomous vehicles (CAV) are developing faster than the pace that governments are regulating.
This leaves startups in the space uncertain over which areas they should invest in. It also leaves government entities limited in their ability to harness the potential of CAV technology to increase the efficiency of transportation.
Leveraging public private partnerships (PPP). AVs are not the only cure that will solve the United States’ transportation woes but it could lead to massive benefits if harnessed correctly through PPP.

AV/V2X Overview

Industry vernacular can easily overwhelm the common reader but it remains important for this discussion to make the distinction between connected vehicles, AVs, and V2X systems.

Connected Vehicles. This term refers to a broad swath of features that allow for greater customization, automation, and data transferability. Many vehicles already operate connected systems through features such as GPS, driver assistance sensors, and embedded central computers.
V2X Systems. Also called V2E, this term refers to a vehicular communication system that supports the transfer of information from the vehicle to all parts of the traffic system that might impact its effectiveness. Its potential is massive, allowing vehicles to communicate with each other and the environment around them. Imagine a system in which traffic could be better managed if drivers shared their desired destination and progress/route towards it.
Connected Autonomous Vehicles. These are vehicles that have integrated the above features in addition to the ability to make independent decisions. The extent to which AVs are truly independent without restrictions depends on the level of its technology as well as the local regulatory environment.

Benefits Of Investment

The benefits of an increasingly CAV-based system point to a decrease in collisions and cognitive load for drivers, while at the same time creating a more efficient infrastructure. Drivers would have to spend less energy driving, potentially extending the range many drivers would be able to go without getting tired. Increased communication between cars could lead to improved traffic management because of routing visibility and predictive modeling (consider your commute to and from work or school). Thai would also have safety benefits as there would be less reliance on humans to indicate their intent on the road. Below is a report from BCG and the World Economic Forum examining the potential impact of AVs.

The most striking projection in the report shows how less parking spaces would be needed as more Mobility-as-a-Service (MaaS) companies implement CAV tech which opens the door to continuous vehicle mobility. In layman terms, this means that cars never sit idle! Whilst we agree with this notion at Dynamo, we think that parking will still be required in more centralized areas similar to a bus depot or existing taxi dispatch centers.

The knock-on effect of reduced parking requirements is a more friendly environment for pedestrian, micro, and public mobility options. Given the constraints of existing infrastructure and space, CAVs might offer a convenient solution that could amplify some of the benefits of these mobility alternatives while maintaining the flexibility of vehicle ownership. It’s important to enable these alternative transportation modalities to avoid a “mobility desert” for those who cannot participate in traditional automotive ridership. To be blunt, we don’t believe CAVs, walking, micromobility, or public transit are mutually exclusive - they are complementary.

Reasons For Reluctance

Without government support and communication, the benefits of a CAV system might not be fully realized. Firstly, developing AVs can be cost intensive, limiting the amount of players in the space. You’re also unable to maximize V2X/V2E capabilities without a third party managing compatibility issues as well as investing in road infrastructure with the ability to communicate relevant signals. There are also equity issues to consider as overall transport efficiency increases do not necessarily lower the barrier to entry for people without the resources required to own a vehicle.

Another area of concern is around liability. Whose responsibility is it if an accident happens because of an AV? Currently, there is little to no regulatory infrastructure to handle this kind of issue. Also, who sets safety standards? Our portfolio frequently cites a lack of standards that makes it difficult to be held accountable. Governments have to be proactive or else CAV technology could suffer major setbacks.

Lastly, are concerns around cybersecurity and data privacy - you don’t want your car to be controlled by nefarious actors nor do you want your mom to know the number of trips you make to the wine store. AV technology could have serious vulnerability to criminal actors due to hacking. There are also issues to consider around data privacy and data vulnerability as connected vehicles collect more and more information from their drivers.

Enter PPP

PPP are collaborations between a government agency and a private company for the purpose of funding, building, and or operating projects. In the case of CAV technology, it could involve public involvement in many parts of the process from helping fund AV manufacturing to building V2X road infrastructure. If done well, merging private technology with government oversight and funding could produce outsized results for transportation as a whole. Clear and proactive involvement from the government does not have to be collaboration on specific projects but considering the nature of CAVs as a potential solution to a variety of transportation issues, it would benefit all parties for it to do so. In the words of Katie Angotti, AV policy manager for the San Francisco Municipal Transport Agency: “We need active collaboration between AV companies and the city to test and determine how the operations and business models can support city goals.”

The common critiques of PPPs are that they overpromise and underdeliver on expectations while coming with a heavy price tag. In the case of CAVs, the biggest issue is that the technology and implementation is still in the theoretical stage. It is a hard sell for governments to invest in and regulate an industry that does not yet really exist. As investors, we highlight the importance of these efforts but have yet to see any meaningful progress or results.

CAV technology is still relatively new so we don’t have many large scale PPP CAV projects in the US. We do have a plethora of small-scale research project collaborations between private companies and local government entities trying to figure out the potential of CAV technology in their areas. There are a couple of very recent developments in places like Newark, NJ where Trenton officials were just awarded a $5M grant to implement an all-electric autonomous minibus transit system. There are also a plethora of projects happening in Europe regarding AV testing and implementation so we should have a robust sample of data relatively soon. We are excited to see if this yields tangible benefits as it would help establish frameworks for bringing this technology to market in a meaningful way.

Final Thoughts

At some point, CAV technology will be limited in it’s roll out by a lack of regulatory clarity. Equally, people can only move as fast as the technology and infrastructure allows them to. In order to harness the potential benefits of this technology on public good, governments have to be proactive.