Level 3 Autonomous Vehicle Market

According to a research report "Level 3 Autonomous Vehicle Market - Technology Trends and Strategic Recommendations by Region (North America, Europe and Asia Pacific)" published by MarketsandMarkets, 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%.

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The global automotive industry is steadily transitioning from traditional driver-assist technologies to more advanced autonomy levels. Level 2 autonomous vehicles have become mainstream across mid- and premium-segment passenger vehicles. Most major OEMs now offer hands-free Level 2 functionality, primarily focused on highway use cases, such as adaptive cruise control, lane centering, and automatic lane changes.

Meanwhile, the Level 3 automation rollout (although it is technologically viable) remains limited in terms of deployment. Rollouts are currently restricted to tightly geofenced domains (e.g., controlled-access highways) and often are based on subscription-based service models. Level 3 systems require regulatory approval, robust sensor redundancy, and enhanced map and localization support. As mentioned in previous chapters, these factors have led to a slower adoption pace than Level 2 vehicles. However, momentum is gradually building, particularly in regions such as the US, Japan, and Germany, where regulatory frameworks are evolving to support conditional automation in conjunction with OEM advancement.

Most major global automakers are now offering advanced Level�2 (hands-off) autonomy on most of their flagship models, with some of the OEMs (Mercedes-Benz and BMW) already offering Level�3 systems in select domains. Currently, the available level 3 models are as follows:

• Mercedes Benz: S-class, EQS
• BMW: 7 series (including i7)
• Honda: Legend (only 100 models produced in Japan)

“Chinese OEMs to drive the rapid growth of level 3 autonomous vehicles in Asia Pacific”

The Chinese EV industry is emerging as the primary pillar in transitioning from Level 2+ to Level 3 autonomous driving. Most new EVs launched by major Chinese OEMs are already equipped with advanced Level 2 features, such as highway pilot features, lane centering, adaptive cruise control, and memory parking functions.

Unlike the more cautious rollouts observed in Western markets, Chinese OEMs rapidly scale hardware and software capabilities to enable conditional autonomy. Major leading players have invested heavily in developing full-stack ADASs, including proprietary chips, HD maps, and software-defined architecture. LiDAR, multiple radar units, and high-resolution cameras are increasingly being used even in mid-range models—positioning these platforms for level 3 upgrades shortly.

By 2025, a range of Chinese EV brands are expected to introduce commercially available level 3 systems, subject to regulatory approvals. These vehicles will likely be equipped with features like “Navigate-on-Autopilot” (NoA) functions for highway and urban driving, leveraging real-time HD maps, sophisticated perception, and redundant E/E architectures. In-house development of autonomous driving chips, V2X connectivity, and HD mapping ecosystems has been the focus of Chinese OEMs. This gives them a substantial degree of vertical integration and has been the most prominent factor in helping the Chinese OEMs accelerate time-to-market compared to traditional automakers in Europe, Japan, and North America. Chinese OEMs are focused on gaining mass market share by offering ADAS features across the lineup at no additional subscription costs. BYD and Xpeng are among the leading examples of this strategy.

“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.

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