Government Support and Emerging Technologies Drive China’s Intelligent and Connected Vehicle (ICV) Market — Frost & Sullivan
China focuses on four key megatrends transforming the mobility space – connected, autonomous, shared, and electric (C.A.S.E).
Rapid growth for China’s ICV market has been spurred by policy support, subsidies, new business models, and advances in enabling technologies like artificial intelligence and autonomous driving.
Connectivity technologies are set to lend further impetus to market development while allowing automakers to offer an array of cost-effective, customer-pleasing in-vehicle infotainment features ranging from AR and VR to video calls and HD video surveillance.
Chan Ming Lih is an Industry Principal with Frost & Sullivan's Mobility Practice
This year’s Shanghai Auto Show demonstrated the rising technological capabilities of Chinese automakers. Driven by forward looking regulation and breakthrough technologies, China has focused on four key megatrends that are transforming the mobility space – connected, autonomous, shared, and electric (C.A.S.E). Rapid growth for China’s intelligent and connected vehicle (ICV) market has been spurred by policy support, subsides, new business models, and advances in enabling technologies like artificial intelligence and autonomous driving. Connectivity technologies like cellular vehicle-to-everything (C-V2X) and 5G/5G+ are set to lend further impetus to market development, while allowing automakers to offer an array of cost-effective, customer pleasing in-vehicle infotainment features ranging from augmented reality (AR) and virtual reality (VR) to video calls and high-definition (HD) video surveillance.
Progressive Regulations Provide a Boost
A host of positive regulations has created a conducive environment for China’s ICV market. These include government approvals for self-driving tests and pilot operations in about thirty cities, commercial robotaxi use without a safety driver in cities like Chongqing and Wuhan. China’s “taxonomy of driving automation for vehicles,” has laid the foundation for an ICV standards system in the country, and mandates related to autonomous driving.
These regulations align with the Chinese government’s long-term goals for the ICV market. These include plans for ICVs with partial and conditional automation features to account for more than 70% of new vehicle sales, highly automated ICVs to account for more than 50% of new sales, and almost all new vehicles to be equipped with C-V2X capabilities by 2030.
The thrust on ICVs will invariably be accompanied by data privacy and protection issues. Accordingly, the Chinese government has released multiple policy drafts and national guidelines related to data collection and management. Besides establishing safeguards to protect personal data, new data privacy regulations restrict companies from collecting data in geographic areas deemed important for national security. In 2021, the Cyberspace Administration of China (CAC) issued a draft of the Provisions on Management of Automotive Data Security for public comment. The CAC is also set to control the activities of market stakeholders, including automakers, ICV providers, and autonomous driving solution providers.
To learn more, please access Connected and Autonomous Mobility in China, 2022, Voice of the Customer: Health Wellness and Wellbeing Services in Cars, China Automotive Growth Outlook, or contact sathyanarayanak@frost.com for information on a private briefing.
Competition Intensifies
The Chinese connected and autonomous mobility market has a wide range of participants, from tech companies and start-ups to Tier I and II automotive suppliers. Among those fighting for a slice of the pie include Pony.AI, Baidu, Alibaba, Haomo.AI, NavInfo, Desay SV, Deeproute.AI, WeRide. Neusoft, and Hirain, among others.
Despite the Chinese government’s proactive actions, data privacy and protection – much like in other markets – remains an overwhelming concern. Autonomous technology itself is still in the early stages of development. Significant advances notwithstanding, therefore, driver and road safety are still not guaranteed. High R&D, manufacturing and operating costs means that the burn rate is very high.
Supply chains represent another roadblock. Autonomous vehicles require significantly more chips and semiconductors than regular vehicles, requiring the industry to order surplus chips and semiconductors to ensure sufficient inventory. However, the global chip shortage continues to worsen, influenced by the US banning the export of high-end chips, tools, and components to China.
Baidu has emerged as a leading connected and autonomous mobility player in terms of its growth and innovation trajectory. The company’s autonomous ride-hailing service, Apollo Go, is publicly available in 10 Chinese cities, with plans to expand operations to 65 cities across China by 2025 and to 100 cities by 2030. NavInfo and Alibaba are well regarded for their R&D capabilities, customer-oriented approach and comprehensive strategy to commercializing L4 technology. Start-ups WeRide and DeepRoute.AI are feeling the heat and are looking to step up commercialization and generate sustainable revenue growth.
F&S Perspective
Beyond developing sustainable business models and autonomous driving solutions solely for the passenger vehicle (PV) segment, stakeholders need to delve into the enormous potential for autonomous vehicle applications in mining and ports. Here, despite the level of complexity achieved by autonomous driving solutions, there is still a need for solutions providers to enhance enabling technologies, such as sensors. At the same time, expanded coverage into cities which allow autonomous driving solutions, and the resultant accumulation of data generated by real-world operations will be crucial to technological advancement.
The threat of chip shortages means that supply chain integration will be vital, highlighting the need to partner with local chip manufacturers. Simultaneously, players like Baidu and NavInfo who manufacture high-end chips, will need to strengthen investments in product development initiatives. Supply chain integration and robust R&D capabilities will be key elements to establishing a position in this nascent market.
While time consuming, regulatory compliance will need to be prioritized. The emergence of voice command technology in smart cockpits, for instance, will be governed by stringent regulation on audio and visual data collection. Evolving legislation will require solution providers and manufacturers to anticipate and incorporate regulations into the smart cockpit development process.
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