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That seems like one of the easiest problems, much easier than actually navigating a well-organized road system like in the USA. If the car can follow a lane then it can certainly know when it detects no discernible lane. If the car can avoid obstacles like a pedestrian or a car crossing its lane, then it can certainly know when there is a chaotic mess of obstacles crossing its lane.

By writing code that makes sure it can identify and understand the road ahead? If not, then stop and give an error to the user.

Secondary to this, it can be handled by GPS and history imaging. I think GM is doing this to handle snow conditions if I am not mistaken.

You're making the mistake of assuming people designing self-driving cars are idiots. Being able to detect scenarios where overwhelming signage makes driving impossible would be a basic problem. Even I could do it today.