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March 4 (The following statement was released by the rating agency)
Fitch Ratings believes that automated driving is a central research and development topic for automotive manufacturers and suppliers that could generate major revenue and profit growth in the medium to long term. However, we caution against the potential disappointment regarding the scale and speed of return on investment that some investors may expect in the near future. We believe that a high and sustained return on the large investments required to build a robust and profitable position in the field of autonomous driving is still more than a decade away.
In particular, we believe there could be similarities between fully-autonomous driving and what is happening with electric vehicles compared with expectations a few years ago. An accelerated and sustainable growth of electric vehicles involves not only the technological development of the vehicles and their batteries, but also a wide acceptance by the customer, quick decline in prices and coordinated approach with other sectors and governments in charge of infrastructures, whose budget and priorities are not necessarily aligned with those of the auto industry. As a result, growth prospects of electric vehicles sales have been revised down and they remain a loss making proposition for auto manufacturers.
Nonetheless, in our view, a major difference with electric vehicles is the ability for suppliers and manufacturers to offer a gradual move towards fully self-driving cars. We believe that automated driving is an expanding topic driving a material increase in investment efforts from major auto suppliers. In our view, automated driving fits perfectly within the current thriving themes in the auto supply industry, which include fuel-efficiency, safety and connectivity.
The ability for a supplier and then a manufacturer to be able to offer tools and features facilitating automated and, later, autonomous driving could bolster their brand image as providers of high-end and advanced technology. This could boost their sales and, in turn, their profitability as they are able to charge higher prices and generate bigger margins.
In particular, automated driving is a key strategic focus for Continental AG (BBB/Stable), which dedicates material resources to that field, including more than EUR100m in R&D and more than 1,300 engineers. Robert Bosch (F1) is already testing self-driving vehicles, although it acknowledges that the technology is far from being ready to be installed in a mainstream car. However, we believe that all the research dedicated to this field supports the group's credit profile as a lot of the investment can be used in other areas of the group.
Autonomous driving necessitates advanced research focusing on the vehicle, its driver and the environment. In particular, it includes the development of sensors, cameras, laser, radars, ultrasonic to monitor the driver's attention and the communication between cars, the infrastructure and the overall environment and then manage the engine, the brakes, the transmission, and the dashboard.
In light of the enormous complexity to integrate a car with its environment, notably other vehicles and elements, which are not connected with it, the road to a fully self-driving car will be gradual. The first step is a partially automated car, which includes features when the driver could have to take over such as self-parking and traffic jam assistance. This will be followed by highly-automated driving when constant monitoring of the system will not be necessary but the driver should be able to take over when informed in advance. Fully self-driving cars will be the last step when the driver can totally dedicate themself to other tasks and let the system manage the vehicle.