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Archives of Business Research – Vol. 10, No. 8

Publication Date: August 25, 2022

DOI:10.14738/abr.108.12815. Chieppo, C., & Giglio, J. M. (2022). A Working Paper on the Regulatory Environment for Autonomous Vehicles. Archives of Business

Research, 10(8). 1-13.

Services for Science and Education – United Kingdom

A Working Paper on the Regulatory Environment for

Autonomous Vehicles

Charles Chieppo

Suffolk University

Joseph M. Giglio

Northeastern University D’Amore-McKim School of Business

ABSTRACT

Whether it be 5, 10 or 20 years from now, fully self-driving care, also known as

autonomous vehicles, are coming in the not-too-distant future. Yet despite the fact

that driverless robo-taxis are already operating in some jurisdictions, there are still

no federal regulations to guide their deployment. Autonomous vehicles will have –

in in some places are already having – dramatic impacts on consumer mobility

habits, the transportation and technology industries, and the economy as a whole.

Yet despite the major disruption they represent, there are no national regulations

guiding autonomous vehicle development. Instead, it is a state-by-state patchwork

of regulations that guide the industry. The lack of standardization a uniform

national regulatory framework would delay the development of autonomous

vehicles and make it impossible for developers to achieve the the economies of scale

standardization would bring – economies of scale that are critical for this new

technology to be economically viable.

Keywords: Regulation; Anti-trust; Technology; Future of transportation; Urban mobility

INTRODUCTION

For the last 50 years the automobile industry has seen strong competition among original

equipment manufacturers (OEMs), with changes driven largely by traditional demand and

supply forces.i

These economic forces still exist of course, but changes are upon us, many with

implications for the nature and extent of regulations and thus for OEM strategy. In the next ten

years the automobile industry will undergo a major transformation with respect to the cars it

builds, the companies that build them, and the users who buy them will look significantly

different.

Technology will lead the change. Once found only in science fiction, fully self-driving cars, also

known as autonomous vehicles, will a reality in the foreseeable future. Excitement over

autonomous vehicles stemmed from a host of advantages they offer over human driven cars.

They can help reduce road accidents, clear up traffic congestion, provide mobility to more

people – especially for the elderly and the disabled – increase productivity, and are more

convenient that human driven privately owned vehicles. At least five parallel changes are

occurring:

New technology has begun to change the nature of cars (and trucks). Some self-driving features

(automatic brakes, lane tracking, etc.) are already common in most new cars. While developers

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Archives of Business Research (ABR) Vol. 10, Issue 8, August-2022

Services for Science and Education – United Kingdom

of autonomous cars and trucks have missed every one of their promised deadlines, significant

deployment is likely to begin during this decade with serious implications for safety regulations

and how people and firms will use these vehicles.

New technology has generated a change in the nature of regulations, with an increased role for

state and local agencies – encouraged in part by the lack of federal action. The Biden

administration is likely to implement a more active federal role, with changes beyond the usual

shift from one administration to another. The general public is increasingly suspicious of large

corporations, particularly those built on technology.

Public policy has begun to move from a focus on safety, and perhaps business concentration, to

an interest in climate change and the environment – the recent electric vehicle mandates and

increased fuel economy standards are clear signs of this shift. This changes the traditional

public-sector focus on safety and anti-trust regulations. I am good with leaving the comment

as is since we are just making an observation.

Senior Biden administration officials have proposed a new approach to anti-trust regulation.ii

The belief now seems to be that large firms have inherent negative economic and social

consequences. Other observers share this suspicion of technology firms. These changes create

implications for OEMs as they partner with large technology firms (Amazon and Google, for

example) or as future partnerships occur (Ford and VW are already partners regarding

autonomous vehicles).

The push for automated technology and electric vehicles has generated a host of new firms and

stimulated changes within traditional OEMs. One change has been an increased role for states

and some local governments. A more important implication is the pressure for traditional

OEMs to develop new partnerships (with Silicon Valley firms, for example) and to develop new

business models (use automated vehicles as a way to sell shared rides by the mile rather than

sell vehicles to individuals).

In sum, it will be difficult to separate the traditional economic pressure caused by new

regulations from changes brought about by the host of new firms in the automobile industry

and new types of vehicles. These changes create a new mix of political forces that go beyond

the changes brought about by elections. This paper will summarize these changes and

speculate about implications for changes in the strategy for current OEM leaders and possible

new federal regulatory actions.

REGULATORY BASELINE: THE YEAR 2000

The modern automobile regulatory era began with the founding of NHTSA (National Highway

Traffic Safety Administration) in 1970, during the Nixon administration -- stimulated in part by

the reaction to Ralph Nader’s book Unsafe at Any Speed: The Designed-In Dangers of the

American Automobile.

Prior to 1970, safety regulation was largely self-enforced by auto OEMs, driven in part by

competitive pressures, press reports, and by the belief that no manufacturer or seller of any

consumer product wishes their product to be unsafe. Car manufacturers are no different.

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Chieppo, C., & Giglio, J. M. (2022). A Working Paper on the Regulatory Environment for Autonomous Vehicles. Archives of Business Research, 10(8).

1-13.

URL: http://dx.doi.org/10.14738/abr.108.12815

Today, NHTSA tracks failures based on reports from users and OEMs, as well as results from

private testing organizations and reports from independent agencies.

OEMs continue to be largely self-reporting when it comes to NHTSA regulations. Reports from

users (also known as voters) do have a significant impact on NHTSA regulations. The National

Transportation Safety Board (NTSB) was formed in 1967, with the primary goal of investigating

airplane crashes. Today their role is much broader and NTSB also investigates major vehicle

crashes.

There was no significant state or local role in vehicle regulations until 2002, when the California

Air Resources Board began to set its own fuel economy standards. The size of California’s

market and support from other states with strong environmental concerns means that similar

rules have often been generated by other states and, in time, by federal agencies. Individual

states do regulate private auto insurance, a secret (but largely unused) weapon regarding ways

to improve safety (see the later section on new insurance programs from Tesla and General

Motors). More recently, states (California stands out again) regulate testing and deployment of

different types of automated vehicles.

In contrast to NHTSA, individual bus model and passenger train vehicle models are regulated

and inspected by the FTA (Federal Transit Administration) and by the FRA (Federal Railroad

Administration). The FTA uses a test facility in Altoona, Pennsylvania and the FRA uses a test

facility in Colorado Springs, Colorado (operated by the American Association of Railroads). The

FTA and FRA do monitor ongoing vehicle safety. For example, following a series of transit

vehicle mishaps, the FTA provided detailed oversight of Washington Metropolitan Area

Transportation Authority’s transit operations for several yearsiii. A series of accidents on the

Boston area’s Massachusetts Bay Transportation Authority have brought similar oversight.

The inspection of bus models is similar to the approach taken by European regulators. They

focus on evaluating new types of technology and safety devices for cars and trucks prior to

widespread deployment. The approach in Europe uses “type approval” from regulating

authorities prior to a feature’s/product’s release into the marketplace rather than “self- approval’ by the manufacturer, as exists in North America.

In Europe, regulations require that the system not only perform as designed, but also require

assurance that the driver is doing what is required: that is, stay attentive and remain in the

driver’s seat.iv In sum, the European approach places the responsibility (and liability) on the

manufacturer to ensure that these automated driving features are used as designed. This

approach requires proper driver behavior to avert possible degradation of safety. These rules

recognize that new technology is not meant to be used in all conditions, but rather only in

specific operating conditions.v The European process results in slower deployment of some

new technologies, but also ensures that they are deployed more consistently.

Federal economic regulations are largely limited to mergers and acquisitions (M&A) – but with

limited historical activity in the automobile world. The Federal Trade Commission can oversee

business practices other than M&A (although they have a role there as well). The Biden

administration promises a more aggressive strategy regarding mergers and acquisitions and

anti-trust in general. While technology firms are a likely focus, in part due to their size,