The biggest challenge facing the development of autonomous cars is not money or technology, but legal and ethical concerns, Morgan Stanley analyst Adam Jonas told CNBC on Tuesday.
Autonomous vehicles stand to deliver trillions of dollars in value over time, Jonas said on "Squawk Alley." It is an increasingly common view that such vehicles could considerably reduce vehicle accidents and deaths, if perfected.
But investors enamored with the idea of self-driving cars need to think about the implications of what it will take to bring them to market, he said.
"You have to test autonomous vehicles on public roads with real cyclists, real pedestrians, innocent people that didn't sign up for this stuff, and that is where we are in uncharted legal territory, and it is a factor that needs to be considered by investors," Jonas said.
Weighing those ethical implications will not be easy, especially when innocent lives are at stake.
If autonomous testing continues on public roads as it has, the likelihood that bystanders are hurt or killed by autonomous vehicles increases, as happened in a tragic accident in Tempe, Arizona, on Sunday, when a woman was hit and killed by an Uber self-driving car. It is likely the first pedestrian fatality caused by an autonomous vehicle.
"Our hearts go out to the victim's family. We are fully cooperating with local authorities in their investigation of this incident," Uber said in a statement. The ride-hailing company is temporarily halting self-driving car tests in all locations after the accident.
On Tuesday, Toyota followed Uber's decision to pause all autonomous testing on public roads.
Over the last several years, several major tech firms as well as legacy automakers and suppliers have begun investing in autonomous driving technology, including Waymo, GM, Ford, Tesla, Aptiv, Uber and Lyft. An entire web of smaller start-ups and companies has grown around them.