While the technology is used to detect larger beasts like moose in its homeland of Sweden, the company is struggling with kangaroos, according to a new report.
Speaking with ABC News, David Pickett, Volvo Australia's technical manager, said the unusual way kangaroos move completely throws off the system.
"We've noticed with the kangaroo being in mid-flight ... when it's in the air it actually looks like it's further away, then it lands and it looks closer,' he said.
The main cause of the issue is that the vehicle uses the ground as a reference point, and once the animal is off the ground, the sensor cannot determine how far away it is.
However, it goes a little deeper than that, Pickett says.
"First we have to start identifying the 'roo," he said, "we identify what a human looks like by how a human walks, because it's not only the one type of human — you've got short people, tall people, people wearing coats. The same applies to a 'roo."
It's been nearly two years since a team of the company's safety engineers arrived in the Australian Capital Territory (ACT) to study kangaroos for Volvo's animal detection and avoidance system, and they're still trying to iron out the problems.
The National Roads and Motorists Association (NRMA) says there are more than 16,000 collisions with roos a year, with nearly 1,000 of those in Canberra - the number one hotspot for kangaroo collisions in the country.
With regards to the rollout of autonomous vehicles in Australia, Pickett told ABC News it was vital that the kangaroo problem is solved before driverless cars are introduced.
Additionally, Rita Excell, executive director of the Driverless Vehicle Initiative, told the publication numerous other factors, such as the country's numerous unsealed roads, unmarked highways and huge road trains also stand in the way.
However, Excell noted that despite the developments required, Australia could well be one of the first markets for autonomous vehicles globally.