Supportive regulation key to keeping APAC’s ‘robotaxis’ in the driving seat

Robotaxis are shaking up Asia-Pacific’s (APAC) transportation industry but, to improve affordability and convince potential customers of their safety, regulation needs to keep pace with technological advances.

Autonomous taxis and other autonomous vehicles (AVs), powered by sophisticated onboard computers, sensors, and satellite navigation software, are being trialled in a number of countries globally. APAC is ideally positioned for potentially world-leading growth in the sector.

In China, at least 19 cities are testing robotaxis on public roads¹, while they are also being tested in Japan, Korea² and Singapore³. By 2040, China will operate the world’s largest robotaxi fleet of about 12 million self-driving vehicles, followed by the US with around 7 million, according to research company BloombergNEF⁴.

There are six categories of autonomous vehicle, determined by the Society of Engineers⁵, with Level Zero being no autonomy and Level Five being full autonomy. Globally, the ceiling for robotaxis so far has been Level Four, which means they can operate by themselves in most circumstances but need a remote human operator in case of emergencies. Level Four AVs are rare and have hitherto been limited to testing in a few cities in China and the US. Meanwhile, Singapore recently launched a Level Four robobus⁶, although this is restricted to connecting hotels within a resort complex.

At Lombard Odier, we believe that, globally, the autonomous vehicle sector will see near-term rapid growth as the world transitions to an economic model that leverages the vast value-creation potential of environmental and social sustainability

Huge potential

At Lombard Odier, we believe that, globally, the autonomous vehicle sector will see near-term rapid growth as the world transitions to an economic model that leverages the vast value-creation potential of environmental and social sustainability.

Between now and 2050 we will move from 20% economy-wide electrification to 70%, as industries transition from fossil fuels to renewably generated electricity⁷. Robotaxis, which are almost exclusively electric and promise a more efficient use of power, could play a significant role in this.

While forecasts vary, the consensus is that the global robotaxi market value will rise exponentially over the next 5-10 years: one estimate anticipates a rise from USD 1.71 billion in 2022 to USD 108 billion by 2030⁸.

This economic potential is partly founded on the opportunity for robotaxis to improve road safety. The brain, or “driver”, at the wheel of a robotaxi can be thought of as a very sophisticated large AI model. Since the same AI model drives every robotaxi in a given fleet, it gains driving experience at a rate no human driver can match. The average American could drive up to 700,000 miles over the course of their lifetime⁹. The AI “driver” for Alphabet’s Waymo, the largest commercially operating robotaxi fleet in the world, has now driven over 40 million miles, and as a result is already significantly safer than a human driver¹⁰. To date, Waymo has seen a 78% reduction in injury-causing crashes, and robotaxis are becoming safer with every mile logged¹¹.

Discover our conviction about the transition to net zero here.

Regulation – APAC leads the way

In the long-run, it is clear that regulatory support for robotaxis will reduce accident rates further – to achieve this, regulations must keep pace with technology development.

APAC has taken a proactive and progressive approach to constructing industry frameworks and regulations, positioning the region at the forefront of the sector globally. Essential for defining safety standards, determining accident liability, and even protecting customer privacy, regulations play a key role in convincing the public to use AVs.

Here, China has led the way, with regulators highlighting AV technology as a national priority and setting a development roadmap to have 60% autonomous vehicle penetration by 2030¹².

In December 2023, China’s first regulation on the commercial operation of AVs took effect, setting rules for different types of vehicle. For instance, roboshuttles or robotrucks require in-car safety operators, while robotaxis can use remote operators. The rules state that the ratio of robotaxis to remote operators cannot exceed 3:1, and that operators need to pass certain skill tests. There are also rules specifying what data the companies must report when accidents happen¹³. While the move is important, the technology is developing faster still, with several Chinese cities having already approved tests without any remote human-driver monitors¹⁴.

Meanwhile, in Japan, operators and manufacturers must currently comply with previously existing laws amended to cover AVs, such as the Road Traffic Act and the Act on the Protection of Personal Information¹⁵. However, the government has introduced a working group to discuss legal liability relating to AVs¹⁶, an important step given that several companies are planning to launch robotaxi¹⁷ and ride-sharing services¹⁸ in the coming years.

Singapore has also introduced regulations for AVs¹⁹, covering testing, safety and liability, while other APAC countries – including Thailand²⁰ – are evaluating their legal frameworks.

Scaling-up and cutting the cost

Such oversight should offer confidence to would-be investors, who will be vital in further developing AV technology and scaling-up the roll-out of robotaxis. Despite the significant progress already made, tech advances are still needed to help robotaxis react safely to unexpected events on our roads, such as animals running across highways or severe weather events. High profile lawsuits involving the role of autonomous vehicle technology in accidents have already been filed²¹.

However, improving AV technology, and readying it for mass adoption, is costly. High input costs have so far meant high journey prices for passengers, which some fear might keep demand low²². But as the technology scales, the cost will fall. According to McKinsey, the cost per mile for a robotaxi could drop by more than 50% between 2025 and 2030²³. Should the cost fall significantly below that of human-driven taxis, and should this lead to greater consumer demand and wider rollout of the technology, improved return on investment could follow.

The shift from a predominantly privately owned transport system to one that is increasingly shared, will be an important part of the sustainability transition, and will partly be made possible through the lower cost per mile of robotaxis

The Holy Grail

Affordability is just one barrier to public take-up, however. Users must also feel safe. With the technology still in its infancy, the industry’s short-term goal must be to convince the public that AVs are as safe, if not significantly safer, than human-driven transport.

As governments and businesses aim to reduce their greenhouse gas emissions, robotaxis offer another potential benefit. At Lombard Odier, we believe technology has always been a driving force in promoting sustainability. It plays a vital role in achieving our sustainability goals as we navigate the global transition to a CLIC® economy – one marked by Circular materials, Lean consumer models, Inclusive health, and Clean energy²⁴.

The shift from a predominantly privately owned transport system to one that is increasingly shared, will be an important part of the sustainability transition, and will partly be made possible through the lower cost per mile of robotaxis. In addition to the reduced emissions, an exponential increase in vehicle utilisation – as cars run 24 hours a day rather than sitting idle for long periods as with conventional, privately-owned vehicles – will maximise materials efficiency.

We are convinced that the transition to a sustainable economic model will be underpinned by such innovation – and it is here that investors have a central role to play. In APAC, the key is for regulators to allow the robotaxi industry to find the right balance between innovation, safety and winning the confidence of potential customers.

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