Digital transformation and legal infrastructure in automotive

The automotive industry is undergoing its digital transformation, from manufactures to providers of integrated mobility solutions. The importance of legal Infrastructure for new technologies is increasing.

Old regulations

We have seen a field of heavy regulation, in particular in the field of on board diagnostics and emission control. As for the latter, the settings for testing environments (the “new European driving cycle”, NEDC of 1997) as well as effective testing controls have favoured car makers creating an image of lower emissions than in real life usage. While it is difficult to simulate the variety of driving situations, we need to recognize that regulations creating output which is unrelated to everyday consumer experience is, at the end, just “l’art pour l’art”. In addition, the pressure to produce lowest emission results beyond what is technically feasible has created temptations to manipulate the results, leading over a long period to the “Dieselgate”.

Latest regulatory requirements

One of the most recent regulatory requirements is the new worldwide light vehicle testing standard ("WLPT"), which targets real driving conditions under "normal" conditions and "normal" ways of driving. In addition to a bandwidth of parameter like time, track mix, speeds, elevation profile, further features like air-condition, daylight, etc. are included. Accordingly, WLPT is not designed for theoretical comparisons between vehicles like the NEDC. Combustion processes and emissions require identical parameters like density, temperature, humidity – which in reality does not work. Rather, WLPT shall remain unpredictable, also to allow ad-hoc tests and to evaluate and reassess the boundaries of the parameter mentioned above (which corresponds to a suggestion by the International Council on Clean Transportation ("ICCT")).

The most important, non-automotive regulations that will impact the automotive sector are the EU General Data Protection Regulation (GDPR) and the EU Cyber Security Regulation (NIS Directive). Connected drive will largely depend on consent-based and privacy by design driven technology solutions, in order to manage the eco-system of data based services. At the same time, the integrity and reliability of connected drive systems will strongly depend on having robust regulations for certified cyber security systems in place.

Legal Infrastructure for new technologies

The amendment of the Vienna Convention on Road Traffic is a very important step, in order to facilitate semi-autonomous and autonomous drive. It is a big step that “autonomous systems” will be permitted as long as they can be overridden by the driver. In addition, we will need a reliable legal framework addressing security issues related to semi-autonomous and driverless cars, including robust insurance coverage for cyber risks. In Germany, we see that the debate of “data ownership” is moving towards a debate on access rights to sensor and vehicle data, to create a level playing field between OEM, suppliers, telematics providers and insurers, each for developing innovative services around mobility.

In the upcoming years we will see evolving regulatory conditions for the functional safety of advanced driver assistance systems (ADAS) and autonomous driving, as the technology moves towards series production. Around the globe, several programs have been started to evaluate latest technology as to its compatibility with today's and anticipated future traffic and mobility requirements, especially regarding the interface to the driver and other traffic participants.

In the United States, the NHTSA together with the DOT have started public hearings on regulatory aspects on autonomous driving and safety earlier this year, with the intent to provide a recommendation for regulation by July this year. However, we expect that this recommendation will be delayed due to the fatal accident that happened early May with a Tesla S in autopilot mode (the vehicle did not recognize a white truck against bright sky causing the vehicle to run underneath the body of the truck). We should not be surprised if the NHTSA and DOT await the interim results of the NHTSA's accident investigation to be included in their recommendations. In that context, it is certainly questionable if a beta version of software of a safety critical function of a vehicle is released to the public. However, one would have to clearly differentiate between the technology used and available end of last year, today and tomorrow!

Likewise, the European Transport Safety Council and has assessed the safety potential of automated driving, and has published its recommendations in May this year.

On both sides of the Atlantic, the Human Machine Interface (HMI) is seen as the key gate keeper for the success of autonomous driving. Stakeholders are investing a lot in researching how to keep respectively get drivers/passengers involved, to ensure manual take-over whenever needed. In that context, additional education on system operation capabilities or even driver license needs are under discussion – which would completely overturn what the car industry has been trying to accomplish with autonomous drive over the past decades.

Actions for the Turkish Automotive Sector

We would think that aligning with the regulations on the European side will carry the Turkish automotive sector to the next stage, including for the area of ADAS. Further, we see great potential for developing Turkey into one of the significant markets for innovative urban mobility solutions. If you look at the dynamic growth rates of car-sharing models in Western Europe, in addition to electro mobility and integrated modal transportation, you can see a real opportunity for a much more efficient and eco-friendly transportation environment. The large Turkish metropolitans have the chance to make a real step change – and they should incentivize the innovators, including innovative, digital mobility solution providers. As in many other sectors, data domains and data services will move into the centre of big data enabled solutions.

Economic conditions in the EU and expectations

The recent Brexit decision is adding uncertainty to a challenging phase in the EU. At the same time, we see great opportunity through the digital transformation of all industries, including the automotive sector. The EU Digital Agenda is an impressive framework to enable this change, as much as our German Federal Government through its initiative “Industrie 4.0”. Disruptive innovation is opening much potential in particular for the young digital work force.

Effects of the automotive industry on the economy

The automotive industry is undergoing its digital transformation, from manufactures to providers of integrated mobility solutions. In that sense, it can be a significant driver of innovation – with a heavy impact on the entire supply and distribution chain, as well as on insurers, innovators and platform operators of digital mobility services.

We are living in fascinating times where our entire concept of mobility is transforming. The opportunities for Turkey are immense. In light of the long-standing, excellent relations between Turkey and Germany, German car makers should strongly help Turkey enter this new phase of mobility rather sooner than later.

About Bird & Bird

Bird & Bird is a leading international law firm, focussed on advising businesses that are transforming or are being transformed by the use of technology. It is known for its deep knowledge of the Automotive and of the Tech & Coms sector. It has about 1,200 lawyers in 27 offices throughout Europe and Asia, and holds a cooperation agreement with BTS, the leading technology law firm in Turkey.