The level 3 autonomous vehicle market is projected to grow from 291 thousand units in 2025 to 8.7 million units by 2035 at a CAGR of 40.5%. Level 3 autonomy is a crucial step toward true autonomous vehicles as it requires balancing regulatory norms and advanced sensing technologies for reliable advanced features. Industry experts say the sensing, computing, and software technologies available today can achieve autonomous driving. However, regulatory approvals are a significant concern as they deal with liability ownership. This is where OEMs emphasize developing highly redundant autonomy technologies, thereby slowing the roadmap toward autonomous vehicles. Subsequently, continued efforts from OEMs and Tier I & tech companies are focused on improving sensing technologies and developing redundant E/E architectures, which can feasibly get regulatory approval for vehicle operation.
Driver: Need for improving sensing technologies aimed toward level 3 autonomy
Sensor technology has advanced rapidly in recent years, laying the groundwork for scalable level 3 autonomy. For level 3 autonomous vehicles, LiDAR systems have significantly improved cost efficiency and resolution. For instance, Valeo’s latest SCALA 3 unit delivers up to 12 million points per second. It can detect objects at ranges of up to 300 meters—enabling high-speed, “eyes-off” functionality in traffic jam scenarios at speeds up to 130 km/h.
Radar technologies, too, have improved from a cost and performance standpoint. Leading tier 1 suppliers, such as Valeo and Bosch, now offer imaging radars capable of supporting high-speed highway scenarios. Bosch recently introduced an in-house radar sensor integrated with a custom SoC to offer high compute density within a compact form factor. Meanwhile, camera systems and sensor fusion technologies are becoming more intelligent and robust. Bosch is investing in multi-purpose camera-inertial sensing units for enhanced localization accuracy. Similarly, companies like Mobileye are deploying 4D imaging radar that can digitally interpret elevation and distance, irrespective of adverse conditions such as fog and rain.
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Opportunity: Strong potential from subscription packages
OEMs increasingly monetize ADAS/automated driving through software subscriptions and feature unlocks. Since Level 3 systems require powerful computing and up-to-date mapping/software, vendors see recurring fees as viable. Surveys also support this. For example, AlixPartners found that ~60% of consumers are open to subscribing to ADAS features. In practice, Mercedes-Benz became the first to offer a certified level 3 system (Drive Pilot) as a paid service. In the US (California/Nevada), it is provided via the Mercedes-Me store at about USD 2,500/year (2023) for qualified S-Class/EQS owners. BMW is offering its level 3 Personal Pilot in the 7-Series in Europe as a one-time upgrade (approx. Eur 6,000) rather than a subscription. Chinese OEMs have similarly begun software monetization. For example, NIO charges a subscription for its Navigate-on-Pilot (NOP+) highway assist (~¥380/month from 7/2023 for NIO ET7 and ES7). XPeng notably includes its Navigation-Guided Pilot (NGP) system at no extra fee (Wired notes “Xpeng’s system does not cost extra”). BYD now supplies its “DiPilot” (God’s Eye) ADAS suite as standard equipment on most models (even base models) with no additional cost. These strategies contrast Tesla’s North American approach (FSD at ~USD 15,000 or USD 199/month) but signal that OEMs see recurring revenue in advanced ADAS services.
“North America is projected to account for the largest share of the level 3 autonomous vehicle during the forecast period.”
North America (California & Nevada) and Europe (particularly Germany) are leading the level 3 autonomous vehicles market as these are the only markets with level 3 driving deployment and approval. Germany is known to have a comprehensive legal framework for autonomous driving (level 3 as of now) and vehicle connectivity. This is also complemented by OEMs like Mercedes-Benz, BMW, and Volkswagen, who aggressively pursue higher levels of autonomous driving. While Mercedes-Benz and BMW have already received the approval to launch their level 3 vehicles, Volkswagen has recently partnered with Bosch and Mobileye, wherein Bosch will support Volkswagen with automated driving software, and Mobileye will support driver assistance technologies.
List of Top Level 3 Autonomous Vehicle Market Companies
The Level 3 Autonomous Vehicle Market is dominated by a few major players that have a wide regional presence. The major players in the Level 3 Autonomous Vehicle Market are
- Mercedes-Benz
- BMW
- Honda
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