Mercedes Is Ready For A Big Legal Gamble On Its First Level 3 Autonomous Car

Good morning! It’s Thursday, June 29, 2023 and this is The Morning Shift, your daily roundup of the top automotive headlines from around the world, in one place. Here are the important stories you need to know.

Nissan Finally Turns a Profit

1st Gear: Level 3’s Legal Quandary

There’s a reason why many automakers have been hesitant to sell Level 3 semi-autonomous cars to customers. At Level 3, the car can handle driving itself under some but not all conditions, and the person in the driver’s seat isn’t considered to actually be driving the car until an event compels human intervention. At that point, the human driver must take over. But who’s at fault if and when a collision happens in these scenarios? That’s the question Mercedes-Benz and legal experts now need to answer, before the German automaker launches its Drive Pilot system for the S-Class and EQS in the coming months, in the U.S. and Germany. From Automotive News:

Mercedes-Benz issued a response in late June that addresses one of the lingering questions: how the company views its liability for crashes or incidents that may occur when Drive Pilot is active.

In California, Nevada and Germany, the first three locations where Mercedes-Benz intends to launch Drive Pilot, “there are well-established legal systems for determining responsibility and liability of roads and highways,” the company told Automotive News in a written statement.

“While they might differ between jurisdictions, they still provide the legal foundation that is the basis of the respective tasks and duties,” the company said.

That’s both nebulous and inadequate, [University of Miami law professor William] Widen said.

Because the technology is new, the status quo does not necessarily delineate responsibility between computer and human. He cautioned motorists should not assume they have been legally absolved when Level 3 systems are active nor feel reassured by statements made by manufacturers.

Without legal clarity, “then the whole line about relaxing and taking your time back is nothing but air,” he said.

That’s the crux of the issue: until it’s reflected in regulations with certainty that humans aren’t culpable for any accidents that arise while Level 3 and 4 cars are in autonomous mode, the dream of “kick back and relax” motoring that automakers are selling is somewhat deceptive. You may remember that Honda introduced the first Level 3 car on Japanese roads two years ago, in the form of 100 specially-configured Legend sedans. To do that, Honda lobbied the Japanese government to modify its legal code so that the automaker — not anyone inside it — would be responsible in the event of any violations, as Nikkei explained in 2021:

“The [Japanese] automobile manufacturers first threw the ball into the government’s court, because regulations made it impossible for them to commercialize the technology,” said Kazuo Shimizu, a motor journalist and former race car driver who is now a member of a government working group for automated driving. “But it was Tokyo which threw back the ball to industry by changing its laws ahead of anyone else in the world. And the player that caught that was Honda.”

The main obstacle to level 3 is not technology — the top hurdles are legal and regulatory. Germany’s Audi, for example, was the first to unveil its A8 sedans with “Traffic Jam Pilot” technology in 2017. But Audi so far has been unable to equip its level 3 functionality, due to regulatory reasons. “Introduction of the Audi AI traffic jam pilot requires both clarity regarding the legal parameters for each country, and specific adaptation and testing of the system,” the company noted on its website the same year. In 2020, the company made it clear the feature will not be offered in its current generation of A8s.

Japan, on the other hand, changed its legal code in an effort to make the car, not the driver, responsible for the driving — a yearslong, massive multi-ministry effort, with the government finally bringing into force the revised laws in April 2020.

This is why we’ve been stuck, in a sense, at Level 2. Not because some automakers don’t believe they have better autonomy tech (whether they actually do and whether you’d want to use it is another question entirely), and not because they don’t want to test it on real roads with real people. Navigating the blame game is the real concern. It ultimately compelled Audi to put its Level 3 system on ice for now, but Mercedes appears ready and willing to take that chance.

2nd Gear: Automakers Beg EPA To Pump The Brakes

The Alliance of Automotive Innovation, a lobbying group of carmakers and suppliers that, far as anyone can tell, exists mostly to stand in the way of government regulations forcing them to actually do anything that might be challenging or expensive, has responded to the Environmental Protection Agency’s forthcoming emissions targets as too hard. Courtesy Automotive News:

The agency projects the standards will drive widespread use of gasoline particulate filters to reduce emissions and support using other carbon dioxide-reducing technologies.

However, the alliance argues the EPA’s proposed rules “cannot be met without substantially increasing the cost of all vehicles, reducing consumer choice and disadvantaging major portions of the U.S. population and territory.”

Additionally, the group said the EPA “unrealistically assumes … an over-abundance of battery critical mineral mines, critical mineral processing capacity and battery component, cell and pack production facilities lead to continued battery price reductions.”

It also argues the proposal underestimates the cost of EV batteries, overestimates the availability of consumer and manufacturing tax credits such as those in the Inflation Reduction Act and wrongly excludes plug-in hybrids and fuel cells from its projections.

In a blog post published Wednesday, Alliance CEO John Bozzella said the EPA proposal would require automakers to “eke out some incremental improvements by installing expensive new technology on all internal combustion engines,” while potentially taking capital away from investments in electrification.

It’s worth pointing out that Europe is further ahead of emissions controls than we are. As of 2021, the average new passenger car on European roads emitted 116.3 grams of CO2 per kilometer according to ACEA, which works out to about 187.1 grams per mile. Data for equivalent vehicles in the U.S. is somewhat contradictory; the Office of Energy Efficiency & Renewable Energy placed the figure at 348 grams per mile for the 2021 model year, while EPA itself figures the reality is more like 400 grams per mile.

The agency’s prospective 2032 limits that have given manufacturers all this agita would force a massive reduction more in line with what Europe is targeting with its Euro 7 criteria, but then that’s the whole point of this exercise. Automakers selling cars in the U.S. have had it pretty damn easy for a good while now, and EPA’s ultimate goal is obviously to migrate drivers toward electric cars, even in the absence of a full ICE ban. The Alliance’s members have repeatedly indicated they have no interest in getting there themselves, hence the government’s push.

3rd Gear: The Fog Is Lifting For Toyota

The world’s biggest automaker by volume had a solid May around the world, thanks to the supply chain uncoiling itself a bit. Courtesy Reuters:

Japanese automaker Toyota Motor on Thursday reported a 10% jump in global sales for May from a year earlier, benefiting from growth at home and other key markets on a recovery in the supply of chips and other parts.

The company sold 838,478 vehicles globally last month, including its luxury car brand Lexus, compared to 761,466 vehicles in May 2022, when sales took a heavy hit from the stuttering parts supply because of the pandemic.

In Japan, Toyota’s sales jumped 35.1% to 116,954 units in May, outpacing a 21.5% year-on-year rise in April.

Global sales of hybrids grew 25.8% year-on-year to 261,147 units, accounting for just under a third of the total number of vehicles sold worldwide last month.

Toyota added May marked the fourth consecutive month of year-over-year volume increase. The manufacturer is chasing record sales of 10.1 million by the end of the current fiscal year in March 2024, and this is how it gets there.

4th Gear: Nissan Drama Update

In yesterday’s Morning Shift we talked a little about Nissan ex-COO Ashwani Gupta’s strange departure and vote of no confidence from the executive board around him. We also discussed how some people within the company believe CEO Makoto Uchida was spying on him to mount a case to get him kicked out. On Thursday, Reuters reported that Nissan had cameras installed to monitor Gupta’s home:

Nissan directors were briefed on the preliminary findings of the investigation into the surveillance claim by U.S. law firm Davis Polk & Wardwell at a board meeting on June 20 at the company’s Yokohama headquarters, the two people said.

The preliminary report said Nissan had installed two sets of security cameras at the entrance to Gupta’s house in Tokyo’s Shibuya ward, the people said.

It said the first system was for use by a private security firm while the second system was set up for access by Nissan’s internal security team to monitor Gupta, the two people said.

The report from the U.S. law firm did not offer a finding on whether the use of cameras by Nissan to monitor Gupta was illegal, nor did it detail whether Gupta was made aware of the monitoring, the two people said.

Reuters was unable to determine when the cameras were installed or the name of the private security company.

Interestingly, this practice is not illegal in Japan:

Under Japanese law, a company can monitor communications on corporate phones and computers and investigate an employee’s conduct outside work in protecting its business interests, said Akira Takeuchi, a lawyer and certified fraud examiner in Tokyo, emphasising he was speaking in general and not about Nissan.

And Gupta had been facing allegations of harassment:

In his April letter, [senior advisor Hari] Nada said Nissan reviewed allegations about Gupta’s conduct in the week of April 10 and that he had been asked to resign. Three people with direct knowledge of the matter said this related to an allegation of harassment against Gupta from a female employee.

I have so many questions and I reckon you may, too. Let’s see what tomorrow brings!

Reverse: Enemies To Friends

On this day in 1995, 28 years ago…

Neutral: A Big Moment For Autonomous Driving

What happens after Mercedes goes through with this is going to inform other automakers whether they should as well. What will the legal fallout be in the accidents that will eventually happen? And how will people use Drive Pilot? Will they be even more emboldened to abuse it, since the manufacturer and potentially the law tells them they may? This is all going to be fascinating and also kind of a little horrifying to watch unfold.