The pioneering technology could put an end to pothole damage that sets motorists in the U.S. back nearly $6.4 billion, according to AAA Mid-Atlantic.
Hitting a pothole can damage tires, wheels, shocks and struts. Repair costs can range from $50 to $500, according to AAA.
Jaguar Land Rover is using a special Range Rover Evoque research vehicle that can identify the location and severity of potholes and broken manhole covers and adjust the suspension in milliseconds.
The technology could be shared with other cars via the cloud so drivers get a warning about poor road conditions ahead.
Road crews could also be alerted to the problem and better prioritize repairs.
Jaguar Land Rover said the pothole-alert research is a key building block on the road to a self-driving car.
The automaker said the next stage of the project is to install new road-surface sensing technology in the Evoque research vehicle, including an advanced forward-facing stereo digital camera.
"In the future, we are looking to develop systems that could automatically guide a car around potholes without the car leaving its lane and causing a danger to other drivers," said Dr. Mike Bell, Jaguar Land Rover global connected car director, in a statement on Wednesday.
No word yet on when the technology will debut in production cars or how much it will cost.
Edmunds says: This promising technology has huge potential and could make pothole damage a thing of the past.