BREAKINGVIEWS-Trump and Tesla will turbocharge self-driving race

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Katrina Hamlin

HONG KONG, Dec 23 (Reuters Breakingviews) - In 2025, a competition to master assisted and autonomous driving will begin in earnest. Carmakers like Tesla TSLA.O are chasing a market that McKinsey reckons could be worth $400 billion by 2035. But the benefits may prove elusive.

Cars that don’t require hands on the wheel are arriving. The industry grades capabilities on Levels 0 to 5, ranging from no support to vehicles handling any scenario without a human pilot. Alphabet’s GOOGL.O Waymo, Pony AI PONY.O and Baidu 9888.HK already operate Level 4 rentable cars, dubbed robotaxis, which can operate without drivers in test zones. Only 5.5% of cars sold in 2024 include simpler Level 2+ assistance like cruise control and automated lane changes, estimates Canalys.

Incoming U.S. President Donald Trump may be a catalyst. He wants to shrink regulations on artificial intelligence development, the Washington Post reported, and appointed Tesla CEO and Cybercab creator Elon Musk to reduce bureaucracy. Even small steps like expanding pilots would allow carmakers to gather data and commercialise advances sooner.

For what happens next, look to China, where at least 19 companies are trialling fully autonomous vehicles. Goldman Sachs reckons the People’s Republic could see 90% of sales boast Level 3 or above by 2040, versus 65% in the United States. If Trump accelerates adoption, U.S. highways will look more Chinese. Countries in Europe and elsewhere will face pressure to follow suit.

Progress brings risks. Carmakers use both incentives and features to lure customers. In China, autonomous technology has become a deflationary weapon in a price war. A Bernstein survey showed around half of consumers there now expect self-driving gizmos at no extra cost when buying electric cars. Citi research suggests that, in 2025, models below 200,000 yuan (about $28,000) will include those features, and they’ll be key in purchase decisions.

That means the $400 billion prize will be hard to grasp, as autonomous tech increases costs without necessarily enabling higher prices. Yet products without these features will be less competitive, forcing laggards to pay to catch up. BYD 002594.SZ, whose founder once dismissed the concept, has pledged $14 billion towards developing self-driving rides. Toyota earmarked 1.7 trillion yen ($11.3 billion) for software and more earlier this year. Buying innovation is an option: Volkswagen VOWG_p.DE invested $700 million in China’s Xpeng 9868.HK to access expertise. Other pioneers that could prove attractive partners include Li Auto 2015.HK or smartphone maker Xiaomi 1810.HK. In 2025, carmakers will work hard to stay in the autonomous driving race.

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This is a Reuters Breakingviews prediction for 2025. To read more of our predictions, click here.

(Editing by Neil Unmack and Oliver Taslic)

((For previous columns by the author, Reuters customers can click on HAMLIN/katrina.hamlin@thomsonreuters.com; Reuters Messaging: katrina.hamlin.thomsonreuters.com@reuters.net))