AUTONOMOUS DRIVING & THE NEXT GENERATION OF TRANSPORT IN CHINA

INTRODUCTION TO AUTONOMOUS DRIVING IN CHINA

China has become the biggest vehicle manufacturer and market in the world since 2009. With decades of effort, China has built up a full system of production and supply of vehicles. As with the country itself, the growth of China’s auto industry has been remarkable. But its growth is expected to slow down under the context of “New Normal”. There is still a long way for China to go to become a leading country in the automobile industry as China still falls behind in many aspects such as R&D and standards. However, the autonomous driving has given China a chance to stand out from the race. With connected cars, the core technology shifts from the engine and gear box to artificial intelligence and which is an area where China is among the world leaders, giving China a chance to catch up and seize the leadership. The country’s automakers and suppliers already seem to have a distinct advantage over their foreign competitors. Thanks to a large group of connected consumers who are eager to enter the connected car era, a supportive government and advanced technologies, China may take the lead in the worldwide race to build connected cars and future transport system. Much depends on its pace of innovation: its companies’ ability to move faster than their Japanese, U.S., and European counterparts and own the future of the connected car. In 2015, the State Council announced its latest 10-year plan, called “Made in China 2025”, with the goal of transforming the country into an innovation hub in a variety of sectors, including the automotive industry. The government plans to support domestic companies working on connectivity and renewable energy technologies, in hopes of making them industry leaders, both locally and globally. In one statement, the Ministry of Industry and Information Technology (MIIT) announced these goals for intelligent and connected vehicles by 2025: reducing traffic accidents by more than 30 percent, setting safe autonomous driving speeds of 120 kilometers per hour, lowering energy consumption by 10 percent, and reducing emissions by more than 20 percent. A more detailed roadmap with 450 pages for autonomous vehicles backed by the MIIT was released by Society of Automotive Engineers in China in October this year. The plan is expected to call for deploying self-driving cars within three to five years on highways and for urban driving by 2025. The roadmap also outlined technology framework, development milestones and prioritized tasks, which forges a consensus within China's auto industry so that the country rapidly can move towards producing and selling self-driving cars. As a result of its efforts, by 2030, Chinese companies are expected to control 80 percent of the domestic market for vehicle entertainment modules and approxmately100 percent of the market for satellite navigation systems., the Chinese government protects its home market from foreign competition through trade and regulatory barriers; Google Maps, for instance, is not accessible in 2/8 the country, and the new 10-year plan may further increase entry barriers for Western competitors like Google, Apple, and Amazon. Key take-away: China’s combination of customer interest, government support, and technological innovation provides it with several natural advantages in building the connected car. But, as promising as the Chinese market is, and certainly will be, challenges remain, not just for Chinese companies but for every global automaker and supplier that wants a share of this huge market.

AUTONOMOUS DRIVING MARKET TO GROW RAPIDLY

The market size for intelligent and connected car technologies in China expects that by 2035 there will be around 8,6 million autonomous vehicles on the road, with about 3,4 million likely to be fully autonomous, while5,2 million are semi-autonomous. ADAS, as the primary stage products of self-driving vehicles, is expected to be the first to become popularized and commercialized. With the fast adoption of ADAS system, China's ADAS market size is expected to reach 200 billion yuan in 2020. Pre-installed market penetration rate reached 30% by 2020, while the annual penetration rate of after-market is expected to reach 5%. Market size for ADAS in China 2014-2020 (forecast) ADAS Module Unit Price (CNY) 2015 Penetration Rate 2020 Penetration Rate 2015 Market Size (bn CNY) 2020 Market Size (bn CNY) PDS 1,500 3% 30% 10 135 BSM 1,500 4% 30% 14 135 LDW 1,500 2% 30% 6 135 ACC 2,000 1% 30% 7 180 FCW 1,000 1% 30% 3 90 NVS 2,500 1% 5% 6 38 AEB 1,200 5% 50% 15 180 TSR 1,200 1% 15% 3 54 AP 1,200 3% 30% 8 108 SVC 4,000 1% 30% 10 360 AFL 1,000 1% 30% 3 90 DMS 1,200 0% 10% 0 36 After-installed ADAS system 2,500 0% 5% 10 375 Total 94 1916 Source: China Industry Information: www.chyxx.com Key take-away: The market for automated driving systems is likely to grow rapidly in coming years. China is predicted to be the largest market and grow fast in the technology development. DRIVERS BEHIND AUTONOMOUS DRIVING IN CHINA The main drivers behind the development of autonomous driving in China are: a) Improve traffic safety Autonomous driving has the potential to improve traffic safety. 90% of all accidents are said to be caused by human error. The most obvious reason for China to go driverless is to make its hazardous roads safer. According to the World Health Organization (WTO), more than 250,000 people die on China’s roads annually. Pedestrians, cyclists and people on motorcycles comprise 60% of the deaths. The WTO estimates there are 18,8 traffic-related deaths in China per 100,000 people per year, about average for middle-income nations but 3/8 more than double the rate in developed countries. The Chinese government is promoting ICT and telematics in cars. Automated braking, spatial indications and the opportunity to use other car’s information to prevent accidents are prioritized. b) Reduce energy consumption and emissions The public is increasingly aware of air pollution. According to Chinese Ministry of Environmental Protection, vehicles have become the major source of air pollution in China. With the application of intelligent technology, the fuel/power efficiency will be remarkably improved, and the emissions will also be reduced. c) Increase traffic efficiency Mainly three societal costs are expected to be significantly lowered by extensively introducing automated driving systems. Firstly, fatalities and damages as a result of increased traffic safety. Secondly, environmental pollution by improving fuel efficiency. And third, less time loss due to traffic congestion by driving efficiently, reducing inter-vehicle space and being able to choose the most appropriate driving route d) Stimulating the economy China wishes to shift away from an investment-intensive, export-heavy model to a more sustainable model driven by consumption and innovation to revitalize its economy. An effort has been made to stimulate the economy by aspiring to become world-leading within automated driving, strengthening the national automotive industry’s competitiveness and increasing high-value added exports. e) Improve the living quality of citizens A survey conducted by World Economic Forum in 2015 found Chinese consumers were enthusiastic about self-driving cars: 75% were willing to ride in one. The rate of acceptance in China is among the highest comparing to the United States, Germany, Japan and Korea. Consumer attitudes, % of respondents likely/unlikely to try a self-driving car Source: World Economic Forum 2015 Key take-away: The main drivers for automated driving development in China are to improve traffic safety, tackle the serious air pollutions and promote industry transformation. China opens test zones in its biggest metropolitan areas, namely Beijing, Shanghai and Chongqing, aiming to facilitate R&D, standard studies and policy formulation, and test and certify connected technology.

DEFINITION OF AUTONOMOUS DRIVING IN CHINA

The Chinese definition of autonomous driving is basically the same as the international definitions, but with its own explanation. In China, autonomous vehicle is defined as intelligent and connected vehicle (ICV), which emphasize on its connectivity with other vehicles and infrastructure as well as the ability to recognize the surrounding environments and take appropriate actions.

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