How OEMs and Suppliers Can Forecast with Confidence in the Autonomous Vehicle Landscape
By Keith Miller, Director at The Martec Group & Lance Smith, President of Executive Embedded Software Consulting
After years of lofty promises and ambitious roadmaps, the autonomous vehicle (AV) industry is approaching an inflection point. Automakers and suppliers are reevaluating their investments, asking whether the next leap forward in vehicle automation is justified by consumer demand, technical feasibility, and long-term profitability.
Level 4 and Level 5 autonomy—the fully driverless future once heralded as imminent—has largely stalled. Major players have retreated, shuttering or absorbing their once-high-flying robo-taxi and delivery ventures. At the same time, Level 2 and 2+ systems such as GM’s Super Cruise and Ford’s BlueCruise have seen broader adoption in mass-market vehicles. These systems enable hands-free driving under defined conditions while maintaining a safety net: the human driver remains in the loop.
Now the industry faces a pivotal question: Is Level 3 autonomy—the next evolutionary step—truly needed? Or have consumers and the market already found their equilibrium at Level 2/2+?
The Industry at a Crossroads: Promise vs. Practicality
As with electric vehicles (EVs), the AV landscape illustrates the danger of overestimating both readiness and demand. A few years ago, nearly every major OEM declared bold plans to go “all-in” on electrification and high-level autonomy. Yet, as the EV market has demonstrated, early enthusiasm can outpace infrastructure, consumer adoption, and profitability.
Level 3 autonomy may be heading toward the same reality check EVs experienced. The jump from Level 2/2+ to Level 3 is exponentially more complex. It’s not just a matter of adding sensors or rewriting code. It’s a wholesale increase in risk, liability, and resource demand.
Unlike Level 2/2+, where the driver must remain attentive and ready to intervene, Level 3 systems allow drivers to disengage—reading a book, checking email, or conversing hands-free—while the vehicle manages the drive. But that privilege comes with a catch: the OEM assumes much greater responsibility for system performance and environmental awareness, including the risk of failure during “hand-back” moments, when the driver must suddenly retake control.
For that reason, Level 3 systems are currently limited to a handful of luxury and EV models, such as those from Mercedes-Benz, BMW, and Tesla. These are expensive, lower-volume applications, where manufacturers can absorb or offset the engineering costs. For mass-market producers, however, the business case is far murkier. Most non-luxury OEMs, meanwhile, remain on the sidelines, either pausing or cautiously assessing whether the business case for Level 3 autonomy can extend beyond premium segments.
The industry is entering a risk-versus-reward era—where every advancement in automation must be justified not only by technical possibility, but by clear consumer demand and commercial viability as well.
The Complexity Behind the Wheel
The leap to Level 3 autonomy demands far more than incremental improvements to existing systems. It requires new sensor architectures, high-performance compute domains, and advanced software capable of handling nearly infinite “corner cases”—rare but critical driving scenarios that the system must recognize and respond to safely.
Beyond the technical hurdles, there’s also an organizational reality that’s often overlooked. As the complexity of automation grows, the demands on engineering teams grow exponentially—not linearly. Level 3 programs may very well require new tools or processes, and they would almost certainly stretch capacity across the entire development lifecycle once they become a primary focus. Every milestone becomes harder to achieve under aggressive timelines, as OEMs work to validate countless driving scenarios and integrate more advanced software. In many cases, the pursuit of Level 3 autonomy risks diverting talent and focus away from other active safety and ADAS programs that are already delivering proven value today.
The manpower alone is staggering. You’re talking about thousands of engineers, millions in test equipment, and years of validation. For most OEMs, every engineer pulled into L3 development is one pulled away from advancing active safety and driver-assistance systems that already save lives today.
LiDAR, a key component in many L3 designs, adds another layer of challenge. While it offers precise distance sensing, it remains costly and imperfect in adverse weather. Many OEMs (Tesla, most notably) are pursuing camera-only approaches to avoid these drawbacks, but those strategies come with their own performance trade-offs.
Then there’s the issue of insurance and liability. As autonomy increases, determining fault in collisions becomes less clear-cut. Vehicle repairs involving recalibration of vision systems can already drive up costs dramatically, a trend that could intensify as ADAS (Advanced Driver-Assistance System) technologies grow more sophisticated.
All told, it’s a risky and expensive pursuit. Which raises the question: is the reward worth the risk?
Reading the Market: What Do Consumers Actually Want?
The answer may depend less on technology and more on psychology. The consumer appetite for hands-free driving is real…but perhaps not boundless. Market adoption of Level 2/2+ systems has been steady, not explosive. While these features offer convenience, they still rely on an engaged driver, and consumers appear largely comfortable with that balance.
At the same time, few buyers are clamoring to pay the requisite premium for full autonomy. Even if the capability existed, it’s unclear whether drivers value it enough to justify the cost. That uncertainty mirrors the EV market’s experience. Consumers love the idea, but not necessarily the price point or infrastructure burden. The same calculus applies to higher-level autonomy: enthusiasm in principle, hesitance in practice.
That’s why understanding willingness to pay—the threshold at which consumers perceive added automation as worth the cost—is critical. Without that insight, OEMs risk building supply far ahead of demand, just as some did with EVs.
Market Research: Bringing Clarity to Complexity
In this environment of volatility and high stakes, guesswork is costly. The winners in the next chapter of autonomous driving will not be those who move fastest, but those who move smartest—guided by data, validated assumptions, and a clear understanding of both consumer and industry dynamics.
This is where strategic market research and consulting come into play. By combining consumer insight with technical and business analysis, OEMs and suppliers can make evidence-based decisions about where to focus their investments.
Key areas of study might include:
- Voice of Customer (VOC) Research: Quantify consumer awareness, attitudes, and willingness to pay for advanced automation features. Understand how preferences differ across segments: luxury vs. mainstream buyers, urban vs. rural markets, etc.
- Vehicle-in-Operation (VIO) Analysis: Assess penetration rates of current ADAS technologies in the field, identifying adoption trends and potential saturation points.
- Competitive Landscape Assessments: Track how peer OEMs and suppliers are allocating resources across L2/2+, L3, and future technologies.
- Expert and Engineering Interviews: Conduct blinded B2B interviews with automotive engineers and program managers to gauge industry sentiment and identify emerging constraints or pivot points.
- Review and Analyze Published Reports and Publicly Available Data: For instance, Martec has conducted studies on the impact of ADAS technologies on the collision repair market, analyzing published incident and mileage data to quantify and triangulate signals of safety improvements over time.
- Economic and Risk Modeling: Weigh the financial and reputational risks of pursuing L3 autonomy against the projected lifetime value of features delivered through evolving L2/2+ systems or subscription models.
Ultimately, the goal is to bring clarity, to help decision-makers see through the fog of hype and uncertainty, and make strategic choices grounded in real data—before, or perhaps in lieu of, considerable investment being put at risk.
Charting a Sustainable Path Forward
For now, most high-volume OEMs appear to be settling into a pragmatic middle ground. Level 2/2+ systems continue to advance rapidly, incorporating navigation-based route following, automated lane changes, and even evasive steering—features that deliver tangible safety and comfort benefits without the immense risk burden of full autonomy.
That evolution may be the smarter, steadier path forward. We’ve “seen this movie before” with EVs—grand promises followed by a market correction. The industry can avoid repeating that cycle by aligning innovation with real-world demand. That starts with listening to consumers and looking at the data.
In other words, the road to autonomy isn’t about who gets there first…it’s about who gets there wisely.
Keith Miller serves as Director at The Martec Group, focusing his practice in part on the automotive and mobility sectors. He can be reached at [email protected].
Lance Smith is an executive consultant with extensive expertise in the complete software development lifecycle within embedded controls environments, particularly in the aerospace and automotive sectors. He has particular expertise working in the ADAS space at General Motors, involved with the launch and subsequent evolution of SuperCruise, the industry’s first true hands-free L2 driving system. Learn more at execembedsw.com.
