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German investors preparing for future challenges in automotive industry

Hungary is positioning itself to be a key proving ground of autonomous vehicles by attracting the investments of German companies. By creating tax breaks, subsidies and investing in infrastructure, the government has taken leaps be a key player in the development of the autonomous vehicle. However, there will still be several challenges faced by the auto industry in the coming years. Some of the key factors that will determine success in the industry will be the infrastructure available, data protection/cyber security, liability and protecting technology.

Martin Wodraschke, Co-Head of CMSAuto-Tech Group, Head of German Desk, CMS Budapest

The government of Hungary has developed special incentives for employers by creating a social tax allowance and vocational training contribution allowance. R&D is being encouraged through VIP cash subsidies and R&D&I tax allowances. They have also introduced a new 250 hectare proving ground in Zalaegerszeg, which will be available to automotive companies who wish to test conventional or autonomous vehicles. These investments have not gone unnoticed, as German companies have increased investment in Hungary. Bosch announced plans to increase the size of its development center in Budapest by 90.000 sqm for roughly HUF 37 billion. Daimler also confirmed the start of construction of a second plant in Kecskemet. Finally, Deutsche Telekom has also announced plans to increase the development of 5G in Hungary, which is a welcome sign as experts state 5G will be vital to autonomous vehicles.

Infrastructure (5G): The commitment made by Deutsche Telekom is important to ensuring Hungary has the proper 5G infrastructure to be a proving ground of autonomous cars. The first step being instituted by Deutsche Telekom is introducing Narrow Band-IoT. This precursor to what will eventually become a fully functioning 5G network will make the transition to 5G easier. As the technology develops companies will be able to build on and utilize the Narrow Band-IoT that has been put in place.

Data Protection/Cyber Security: With more fluid ownership and use, cars will begin collecting more data on more people, in a larger area. As this data is saved by companies to be used by AI, it also has the potential to attract attention from nefarious actors. Hackers theoretically could collect the movement patterns of whole cities, or specific individuals, and sell it to the highest bidder. Auto companies will have to ensure appropriate security or risk data breaches that could alienate users.

Liability: Deciding liability will benefit from the increased data, from the autonomous car involved in an accident and possibly surrounding autonomous vehicles also collecting data. This may not be enough though, as the parties involved will have increased to include manufacturers, AI developers, data providers and more. Automation levels will be heavy factor in these cases. For vehicles with low-level autonomy, the existing liability regime can be applied.  But if vehicles reach level 5 Autonomy, with AI making most driving decisions, liability becomes a complex question. Parties with potential liability may be at the mercy of their properly drafted contractual liability clauses.

Protecting technology in the field of automated vehicles: All auto companies are trying to achieve the same outcome. Sensory collecting information is being developed by many different companies at a very rapid pace. Some are investing in SONAR, others LIDAR, almost all are using cameras. Furthermore, once the data is collected, the AI interpretation is done in its own unique way. This has led to some AI handling certain conditions better than others. This makes the technology invaluable, as is shown by the various attempts by individuals to steal plans and create their own start-ups as seen in the Levandowski, Waymo, and Uber case. The industry will be a battlefield for years to come as companies compete to get a competitive edge.

The recent investments in R&D projects and flexible production lines show there is a massive change going on in the automotive industry with regard to eMobilty and autonomous driving technology. The German OEMs and the major suppliers with their investments give Hungary the chance to develop as a new hot spot for these new technologies. The government has played its part through investments and grant incentives. Let us see whether Hungary can compete with other countries and establish itself as the place to invest in these innovative areas.