Our “Start-Up Nation” is known for its focus on technological innovation, and indeed Israelis and Israeli companies have made significant advances toward creating autonomous vehicles (AVs).
AV has been one of the most celebrated technological fields of recent years and the destination of considerable investment of funds and resources.
Israel is home to dozens if not hundreds of companies developing software and hardware to support AV capabilities, including sensors, chips, dedicated algorithms and cybersecurity. Israel is a powerhouse in a range of AV technologies, many of which are used worldwide and implemented in the cars we drive today.
Over the years, the Israeli government-backed the development of the local AV industry through numerous initiatives and resolutions. As such, it is surprising that more AV testing does not occur on Israeli roads. But recent legislation may be a pivotal point for the Israeli AV ecosystem.
There are several reasons why Israel is not a world leader in the on-road testing of AVs.
First, even with all that AV start-up breeze in our hair (and a few large companies setting up shop here as well), Israel lacks proximity to the car manufacturers and other major companies in the race toward fully autonomous driving. As such, Israel does not immediately come to mind to many industry players.
Second, burdensome Israeli regulation, especially in the field of transportation and road safety, has deterred interested parties in the automotive field from performing their AV testing locally. Closely related is that until recently, Israel lacked a clear regulatory scheme for AV testing.
Third, AV technology has proven to be difficult to test across markets: An AV trained and tested in San Francisco or London will be challenged by the aggressive Israeli driver and the demanding local infrastructure, and it may find it difficult to complete rides safely and efficiently. Countries all over the world compete to be leading locations for AV trials, including by setting up tailored regulatory frameworks to allow such testing. States believe that by bringing in AV testing, they can also attract the hi-tech industry, investment in infrastructure and economic growth.
In contrast to the decentralized approach in the US, Israel has allowed local AV testing since 2018 under a system that centralized all authority to grant permits in several committees of the Transportation Ministry. Those committees had the power to approve AV trials, safety plans and hardware and software validation methods, and they could exempt small-scale testing from certain regulations, such as the requirement that all driving occurs with a human holding the steering wheel.
The Israeli system of concentrating appropriate authority in a single regulator has advantages, especially if the regulatory body is efficient, clear about its demands and makes efforts to accommodate the industry’s efforts to move the technology forward.
On the other hand, until recent legislation, the authority of the Transportation Ministry was limited, and it could not approve all attempts to move AV testing beyond the constraints of existing regulations structured for human driving. As a result, less than a handful of companies are currently testing autonomous-driving capabilities on Israeli roads.
On March 15, the Knesset passed legislation aimed at encouraging AV testing in Israel. The legislation continues on the path of centralizing authority in the Transportation Ministry. At the same time, it grants substantial new authority to the ministry, including the discretion to allow fully autonomous driving that does not hew to standard automotive regulations.
For example, the new legislation gives the ministry the flexibility to exempt specific AV trials from standard regulatory constraints that may apply to an automobile, the automobile owner or the driver. The legislation also grants the ministry the discretion to set associated requirements for AV testing, such as for communication, remote controls, data sharing and cybersecurity.
The legislation has the benefit of granting substantial flexibility to the Transportation Ministry. The ministry can tailor its requirements for individual technologies; it can impose specific conditions for one AV system to ensure public safety, even as it loosens those conditions for other technologies that may not require such constraints.
On the other hand, what the legislation grants in the flexibility it takes away in certainty. AV testing requires a substantial investment of funds and resources, and companies may shy away from a significant investment in the Israeli ecosystem if they do not have clarity as to what the Transportation Ministry’s demands will be – demands that, as per the legislation, can shift depending on the technology or applicant.
The latest AV legislation update is an important move forward for Israel and a much-needed step in the right direction for the Israeli ecosystem and for the acceptance of AVs by the Israeli public.
At the same time, the success of the new regulatory framework is far from assured. Israel will only reap the benefits of the new legislation if the regulators can demonstrate their professionalism and efficiency on an ongoing basis – professionalism in the sense that they understand the costs and benefits of the technology and can impose appropriate constraints in individual circumstances and efficiency in laying down those lines in a manner that provides the needed certainty for companies that want to invest in the Israeli ecosystem.
Eli Greenbaum is a partner at Yigal Arnon & Co. who specializes in the commercialization of innovative technologies, including autonomous driving. Tani Sterman is an associate at Yigal Arnon & Co. who specializes in corporate transactions, including in the automotive field.