The digital transformation of the world’s largest automotive market

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Issue #1
  • The ambitious plan
  • Five reports you must read
  • The pit stop
Dear readers,

Welcome to Drive I/O. In the coming months, we will guide you through the digital transformation of the world’s largest automotive market. From China’s self-driving cars to electric vehicles, you can find it all here. We invite you to join us in exploring the developments that are shaping the future of mobility in China.

In the inaugural issue, we take a look at China’s drive to take the lead in autonomous vehicles. We cover the measures Beijing has put in place to drive its ambitions and discuss its readiness for self-driving cars. We’ll also guide you through what the different levels of autonomy mean, as well as where and by whom these vehicles are being tested to keep you informed of the opportunities and challenges in China’s driverless future.

We hope you enjoy the ride.

Jill and Chris

The ambitious plan
China loves self-driving cars. So much so that the government has made their development a top priority through increasing specific legislative and regulatory frameworks. As a result, autonomous vehicles (AVs) can now be seen on public streets in major Chinese cities, with companies seizing the opportunity to gather valuable driving data and create bespoke solutions for the country’s roads.

In China, “smart connected vehicle,” the jargon-rich term describing cars that are both autonomous and networked, was first referenced by the central government in its “Made in China 2025” initiative. The policy plan was spearheaded and issued by Chinese Premier Li Keqiang and his cabinet in May 2015, seeking to move China up the global industrial value chain by developing and implementing innovative technologies.

Predicating this push is an ambitious goal of becoming a global pathfinder in artificial intelligence—the technology that underpins almost all the functionality AVs provide.

China accelerating its AV development is not happenstance. The auto industry as a whole has long been important for the country, making AVs—and also electric vehicles (EVs)—a strategic move. The government has highlighted the sector as an area of possible explosive growth in the future. Meanwhile, the county’s auto market has shrunk amid concerns over the slowing economy, as well as increased regulation and subsidy cuts for consumers. Nonetheless, companies like BYD, the world’s largest EV maker and soon-to-be Tesla rival, as well as smaller autonomous driving startups, are looking to renew interest through new forms of automation.

“The second industrial revolution, represented by the boom of the automobile industry, has lasted for more than a hundred years,” the State Council, China’s cabinet, said in its plan. The country is betting on this trend continuing, though it is looking to lead in AV and electric vehicle adoption.

The country’s highest executive body said in its 2015 plan that China should “completely master” driverless technologies in 10 years. Not only are these vehicles expected to line China’s roads, but homegrown AVs should be able to reach a top speed of 120 kilometers per hour (75 mph) in just a few years, according to policymakers. The government expects the market to reach RMB 100 billion ($15 billion) by the end of 2020.

Smart connected vehicles will be one of the key pillars in China’s manufacturing upgrade, said Miao Wei, head of the Ministry of Industry and Information Technology (MIIT), at the first World Intelligent Connected Vehicles Conference last October in Beijing. The MIIT oversees technological developments in the country.

But it’s not only about bragging rights. China is also looking to automated transport for very practical reasons. In a country with nearly as many cars as there are people in the United States, traffic congestion, safety, energy consumption, and air pollution are signficant issues. In 2015, there were more than 100 road fatalities for every 100,000 vehicles in China, according to the World Health Organization. By comparison, this number was 14 in the US; in Europe, it was 19.

Both private companies and the government are looking to remedy this safety issue through automation. Proponents argue that AVs could outperform humans in most aspects of driving and that private ownership of cars could possibly become a thing of the past, reducing the number of vehicles on the road.

At the heart of China’s race for AVs lies a technology that has become fundamental to the country’s tech-focused image abroad: artificial intelligence. The nation released its first national-level guidelines for AI in 2017, and hopes to become a world leader by 2030. Computing architecture for autonomous driving, robotaxi service models, and smart infrastructure technologies are some of the key focus areas in the central government's plan.

In the past 18 months, AV targets have been adjusted even further. The National Development and Reform Commission, China’s state planner, called for massive deployment of “high-level” AVs (those with more than just rudimentary driver assistance capabilities) by 2025. Moreover, more than 50% of all new vehicles sold are expected to be intelligent.

Nor is it just about making smarter cars. Infrastructure will also need a drastic rethink. In an era when everything is connected, roads too will form part of the internet of things—the vast network of online devices that “talk” to each other. China plans to have 90% of all its highways be “connected” by 2020, allowing infrastructure to communicate with vehicles, according to government goals, a move which is dependent on next-generation communication technologies, including 5G.
Like China’s government, the country’s AV planners and regulators don’t form a monolithic entity. In 2018, the MIIT laid out somewhat more conservative goals.

The ministry said that China should reach large-scale deployment of high-level autonomous vehicles only "in specific scenarios," and develop the technology necessary to put Level 3 autonomous vehicles on the road by 2020.

Previously, the MIIT had identified AVs as one of the 17 key areas pegged for development. Others include neural networking chips—those specialized for AI applications, as well as medical imaging.

The ministry expects that 30% of new vehicles will be equipped with Level 2 functions by 2020, typically those that assist drivers rather than replacing them entirely. Road infrastructure should also be enhanced, the government body said, offering applications and services based on high-precision positioning and low latency, but also providing necessary conditions for autonomous vehicles

Beijing is now working with fervor to meet its goals ahead of the country’s tech rivals. It aims to provide greater policy and institutional clarity this year, judging from conversations TechNode has had with industry insiders. In an annual work plan released by the MIIT in May, the regulator pledged to speed up the design and introduction of technical standards.

Looking forward, the government is putting specifications for driver assistance systems, information security, and communication networks for connected vehicles high on the agenda.
Five reports you must read to understand China’s driverless future
China ranks 20th in AV readiness, according to a report by professional services from KPMG. The country fell from 16th place last year. Seven factors were used to determine how ready a country is for adopting AVs, including effective legislation and data sharing, in which China ranked the lowest out of 25 countries surveyed.

Chinese consumers are the most willing of any other nation to give up on car ownership in favor of robotaxis, according to figures from PwC. The company said that original equipment manufacturers (OEMs) need to shift gears to deal with these challenges, as mobility services could help them offset declining sales.

Chinese people are less concerned about safety issues when it comes to driverless cars than their international counterparts, says Deloitte. According to a consumer survey, 25% of Chinese respondents raised serious concerns about the safety of AVs, compared to 50% in the US.

While developing and deploying L4 and L5 vehicles will take time, ADAS and L2 features could help OEMs and suppliers capture market opportunities before fully self-driving vehicles hit the road.

China will most likely become the world’s biggest market for AVs, accounting for up to 66% of passenger kilometers traveled in 2040, according to McKinsey. Driverless cars will require more traffic data and road testing to tackle issues caused by nonstandard road signage and habitual traffic rule-breakers. Despite the hype, the immediate outlook is not as positive. Analysts believe China lags in the global AV race. In terms of computing platforms and system integration, Chinese companies are “more than 10 years behind.”

The pit stop 
What's in the news
The quest for safer vehicles

  • TechNode: “Baidu and a coalition from the automotive industry have released a set of guiding principles for autonomous vehicles, promoting a system of “safety by design” as conversations about self-driving cars go mainstream.”

Proponents of AVs claim that they could be far safer than cars driven by humans. But this may only be true under certain conditions. According to the coalition, AV safety will only peak when operations are optimized but restricted to certain driving conditions. Interestingly, if these restrictions are too high, safety goals will not be reached due to limits on the availability of these vehicles. 

Chinese robotaxis in California

  • TechCrunch: “AutoX and just became the first Chinese companies allowed to offer robotaxis in the state of California.”

More than 60 companies are allowed to test self-driving cars in California, but only a fraction of that number have been permitted to transport passengers—and those companies are bound by certain constraints. They are not allowed to charge passengers for rides in their robotaxis during the testing stages. Also, a safety driver is required during every ride. 

The battle for maps 

  • TechNode: “Huawei obtained a permit last Friday allowing the tech giant to draw up high-definition navigation maps in China, a move that will aid the development of simulation software for autonomous vehicles.”

Securing a mapping license is extremely important for self-driving companies that want to collect geodata for training driverless cars. But getting a permit like this is particularly difficult in China. The company prohibits firms from collecting map and survey data without permission. The majority of the companies with these licenses are state-owned enterprises. 

Baidu taps automakers 

  • Reuters: “China’s top search engine operator Baidu Inc. has joined hands with Zhejiang Geely Holding Group and Japan’s Toyota Motor Corp to cooperate on areas related to artificial intelligence amid a push for self-driving cars.”

Baidu has been tasked with spearheading China’s AV push. As part of the partnership, Geely and Toyota will join the tech company’s Apollo program, an autonomous driving platform. Baidu will cooperate with Geely on AI applications that include intelligent connectivity and smart mobility. The company will also provide a software product for self-driving buses to Toyota for use in the future. 
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