Race to the Top

Smart Ve­hi­cles:

NewsChina - - CONTENTS - By Xu Ming and Liu Shan­shan

The mar­ket for au­to­mated and con­nected ve­hi­cles in China looks set to reach more than 100 bil­lion yuan (US$14.4 bil­lion) by 2020, Miao Wei, Min­is­ter of the Min­istry of In­dus­try and In­for­ma­tion Tech­nol­ogy of China (MIIT), re­vealed at the an­nual 2018 World In­tel­li­gent Con­nected Ve­hi­cles Con­fer­ence, which took place from Oc­to­ber 18-21 in Bei­jing. “A new era for au­to­mo­biles is com­ing,” Miao said.

Ex­pec­ta­tions have been rid­ing high for self­driv­ing and smart ve­hi­cles, known as in­tel­li­gent con­nected ve­hi­cles (ICVS) in China, in the last two or three years. These are ve­hi­cles equipped with ad­vanced sen­sors (radar and cam­eras), which al­low ve­hi­cles, road­side in­fras­truc­ture and in­for­ma­tion ter­mi­nals to com­mu­ni­cate with each other via apps and the in­ter­net, en­abling fully au­to­mated driv­ing and a con­nected sys­tem of driv­ers and other de­vices that driv­ers want to con­nect to. It is ex­pected to make per­sonal mo­bil­ity more ef­fi­cient and safer.

These bright prospects are in stark con­trast with the over­all gloomy auto mar­ket in re­cent months. In Septem­ber, 2.39 mil­lion ve­hi­cles were sold in China, an 11.55 per­cent de­crease from the same pe­riod of last year, the big­gest fall since Jan­uary 2012, data from the China As­so­ci­a­tion of Au­to­mo­bile Man­u­fac­tur­ers shows.

But it is also re­garded as a good chance for Chi­nese au­tomak­ers to de­ploy new tech­nolo­gies to em­brace new trends as cap­i­tal con­tin­ues to swarm into the largest au­to­mo­bile mar­ket in the world.

Tra­di­tional au­tomak­ers and tech­nol­ogy com­pa­nies hope to co­op­er­ate to steal a march on their com­peti­tors.

Gold Rush

In Bei­jing alone, the mar­ket value for ICVS and as­so­ci­ated in­dus­tries is set to reach 100 bil­lion yuan (US$14.4 bil­lion) by 2022, ac­cord­ing to a white pa­per is­sued by the Bei­jing Mu­nic­i­pal Bureau of Econ­omy and In­for­ma­tion Tech­nol­ogy and pub­lished at the Oc­to­ber ICV con­fer­ence. The city is up­ping mea­sures to de­velop ICVS, al­low­ing these ve­hi­cles to be tested on 44 roads in the cap­i­tal, with a to­tal length of 123 kilo­me­ters, by Oc­to­ber. Thirty-five types of self-driv­ing ve­hi­cles from eight en­ter­prises pos­sess­ing ICV test li­censes have al­to­gether been road­tested over dis­tances of 63,000 kilo­me­ters with­out mishap. Now Bei­jing is home to over 200 com­pa­nies re­lated to ICVS, al­most cov­er­ing the full sup­ply chain. The city plans to es­tab­lish a 50,000-hectare pi­lot zone for ICV test­ing and ear­mark more than 2,000 kilo­me­ters of roads for test­ing ICVS by 2022.

What is hap­pen­ing in Bei­jing is just one ex­am­ple of the na­tional com­mit­ment to­ward de­vel­op­ing ICVS in China. This de­vel­op­ment is re­garded as be­ing of strate­gic im­por­tance in terms of im­prov­ing trans­porta­tion safety, ef­fi­ciency and re­liev­ing en­vi­ron­men­tal pol­lu­tion. There is con­sen­sus in the in­dus­try that the shift to elec­tric and smart au­tos is the way for­ward for tra­di­tional au­tomak­ers to up­grade and adapt to fu­ture mar­ket de­mand and com­pe­ti­tion. Since 2015, more than 16 pi­lot zones for ICVS have been built, in­clud­ing in Shang­hai, Chongqing, Wuhan in Hubei Prov­ince and Hangzhou, cap­i­tal of Zhe­jiang Prov­ince.

Be­fore be­ing de­ployed in the real world, many im­por­tant ap­pli­ca­tion sce­nar­ios, such as au­to­mated driv­ing, in­tel­li­gent park­ing, re­source shar­ing, in­tel­li­gent traf­fic net­works and emer­gency sim­u­la­tion are be­ing tested and eval­u­ated in the pi­lot zones.

Ra­dio fre­quen­cies are needed to con­nect a mov­ing car to the in­ter­net, so at the ICV con­fer­ence, the MIIT an­nounced spe­cial band­widths would be ded­i­cated for this pur­pose. The min­istry also plans to de­velop

a more suit­able band­width fre­quency for the long-term de­mand for ICVS.

“Cur­rently, com­pli­cated elec­tronic in­for­ma­tion prod­ucts and auto elec­tronic sys­tems ac­count for 30-60 per­cent of the cost of pro­duc­ing a car, which is also the main source of profit,” said Wu He­quan, pres­i­dent of the In­ter­net So­ci­ety of China and an aca­demi­cian at the Chi­nese Academy of En­gi­neer­ing, at the con­fer­ence.

Wu says the global mar­ket value for au­to­mo­tive elec­tronic sys­tems is about US$168 bil­lion a year and ICVS will add an­other US$130 bil­lion, and that 80 per­cent of au­to­mo­bile in­no­va­tion will be in elec­tronic and in­ter­net connection sys­tems in the fu­ture.

More­over, as China re­laxes for­eign own­er­ship in the coun­try's au­tomak­ing in­dus­try and brings more com­pet­i­tive pres­sure to do­mes­tic brands, de­vel­op­ing ICVS is re­garded as a chance for Chi­nese brands to level the play­ing field with in­ter­na­tional auto giants.

Open Co­op­er­a­tion

The po­ten­tial for ICVS is gen­er­at­ing in­creas­ingly close co­op­er­a­tion be­tween Chi­nese au­tomak­ers and in­ter­net tech­nol­ogy com­pa­nies, mak­ing China's au­to­mo­bile man­u­fac­tur­ing un­prece­dent­edly open, though to­day's part­ners could well end up as to­mor­row's fierce com­peti­tors.

On Oc­to­ber 31, Ten­cent, a Chi­nese in­ter­net gi­ant, and Chang'an Au­to­mo­bile, a Chi­nese au­to­mo­bile man­u­fac­turer, launched a new car equipped with Ten­cent's in­tel­li­gent ecosys­tem, the first since the two com­pa­nies signed a co­op­er­a­tion con­tract in April 2018.

Chang'an plans to in­vest 20 bil­lion yuan ($2.9b) in de­vel­op­ing in­tel­li­gent tech­nolo­gies by 2020. The com­pany's part­ners in de­vel­op­ing ICVS in­clude car-re­lated com­pa­nies like Bosch from Ger­many and Chi­nese new en­ergy car pro­ducer Nio and in­ter­net and in­for­ma­tion tech­nol­ogy en­ter­prises such as Ten­cent, Ifly­tek, Baidu, JD and In­tel.

BAIC Group, a Bei­jing-based auto brand, has re­cently signed con­tracts with 12 com­pa­nies in dif­fer­ent fields, in­clud­ing parts firms and hi-tech com­pa­nies, to de­velop ICV tech­nol­ogy.

Chi­nese tech com­pany and search en­gine gi­ant Baidu started re­search­ing self­driv­ing ve­hi­cles in 2013. This Oc­to­ber, its driver­less minibus co-de­vel­oped with King Long, a Chi­nese ve­hi­cle maker, started tri­als with pas­sen­gers in­side a park in the city of Wuhan, Hubei Prov­ince. Ten­cent is shar­ing its own in­tel­li­gent sys­tem with five au­to­mo­bile mak­ers, in­clud­ing Chang'an and Chi­nese au­tomaker BYD, to build an in­tel­li­gent ecosys­tem.

“ICVS in the fu­ture will be a plat­form for open co­op­er­a­tion, be­cause no one can do the job alone. It in­volves the in­ter­net, soft­ware and chips, which the tra­di­tional au­to­mo­bile in­dus­try can't han­dle,” Kong Fanzhong, vice di­rec­tor of BAIC Group's re­search cen­ter,

said at the 2018 World In­tel­li­gent Con­nected Ve­hi­cles Con­fer­ence.

Many new car­mak­ers are pil­ing into the sec­tor, at­tracted by the po­ten­tial prof­its. Fo­cus­ing pri­mar­ily on elec­tric smart au­tos, these star­tups are known as the “new force in au­tomak­ing,” which refers to their rich in­ter­net tech­nol­ogy back­ground but low ex­pe­ri­ence of man­u­fac­tur­ing. They typ­i­cally out­source their pro­duc­tion to con­ven­tional au­tomak­ers, though some of them have be­gun to build their own pro­duc­tion bases.

Wang Chuanfu, chair­man of BYD, said at the con­fer­ence that he re­gards open­ness as the key to de­vel­op­ing ICVS. At present, the ma­jor­ity of the smart tech­nolo­gies can be shared among com­pa­nies, so they can share re­sources and work to­gether on in­no­va­tion as long as en­ter­prises are pre­pared to open their plat­forms.

He Xiaopeng, CEO of Xiaopeng Motors, one of the new en­tries to the auto mar­ket, said dur­ing the ICV con­fer­ence that de­vel­op­ing smart cars will pose a big chal­lenge for any ICV man­u­fac­turer as a “smart car is the only prod­uct that needs tens of thou­sands of parts [as hard­ware] and mil­lions of lines of code [as soft­ware].”

Hard Road

How­ever smart they are, the core of an ICV re­mains auto man­u­fac­tur­ing, and in this area, China still has some way to go to de­velop its own in­de­pen­dent tech­nol­ogy, ob­servers point out.

Wu noted that Chi­nese firms have re­lied on im­ported elec­tronic sys­tems for years. “Now it's time to up­date the au­to­mo­bile in­dus­try, a chance China should not miss,” Wu said at the ICV con­fer­ence. “If China doesn't de­velop its own au­to­mo­tive elec­tronic sys­tems, it will be hard to mas­ter the core tech­nol­ogy for ICVS, and it won't be able to com­pletely achieve in­tel­li­gent trans­porta­tion.”

“Big global com­pa­nies be­gan study­ing ICV tech­nol­ogy 20 years ago… we have just started,” said Dong Yang, vice di­rec­tor of the China As­so­ci­a­tion of Au­to­mo­bile Man­u­fac­tur­ers, at the con­fer­ence.

Waymo, Google's self-driv­ing car project which started in 2009, has al­ready be­come the first com­pany in the world al­lowed to test fully driver­less cars on pub­lic roads in Cal­i­for­nia. As its next step, Waymo will open a com­mer­cial ride-hail­ing ser­vice that al­lows the pub­lic to hail the com­pany's au­ton­o­mous ve­hi­cles.

In the rush to de­velop Chi­nese ICVS, some Chi­nese in­ter­net or tech­nol­ogy com­pa­nies have as­sumed car man­u­fac­tur­ing is a sim­ple thing, which might hin­der them from

putting due ef­forts into the field, in­sid­ers have pointed out.

Li Shufu, founder and chair­man of Geely Group, a Chi­nese car man­u­fac­turer, has re­peat­edly warned that de­vel­op­ing a smart ve­hi­cle is not just a mat­ter of equip­ping ve­hi­cles with smart­phone-like func­tions. “Some com­pa­nies think they're Ap­ple and only need to make con­tracts with fac­to­ries like Fox­conn [the world's largest con­tract maker of elec­tron­ics] to man­u­fac­ture ve­hi­cles. They think au­ton­o­mous driv­ing is very easy,” Li said at an in­no­va­tion fo­rum in Bei­jing in 2015.

Man­u­fac­tur­ing cars, which re­quires huge in­vest­ment, cut­ting-edge tech­nol­ogy and a com­plete in­dus­trial chain, is not easy. Even Tesla, the pioneer in elec­tric in­tel­li­gent cars, has been come up against re­peated hur­dles since it started 15 years ago.

Ex­perts have stressed the im­por­tance of tech­nol­ogy ac­cu­mu­la­tion in tra­di­tional auto man­u­fac­tur­ing in de­vel­op­ing ICVS, par­tic­u­larly when the role of the in­ter­net and in­tel­li­gent tech­nol­ogy is un­prece­dent­edly em­pha­sized. They point out that both in­ter­net giants and tra­di­tional au­tomak­ers should be al­lowed to ex­plore their own ad­van­tages in any fu­ture co­op­er­a­tion.

Dong pro­posed there should be con­sen­sus that ICVS are pri­mar­ily the busi­ness of the au­to­mo­bile in­dus­try and other in­dus­tries should work to sup­ple­ment this lead­ing role. In­ter­net com­pa­nies should un­der­stand and re­spect the rule of tech­nol­ogy de­vel­op­ment and the long pro­duc­tion cy­cle in the auto in­dus­try to pro­duce cars of solid qual­ity.

The rapid de­vel­op­ment of ICVS also raises higher re­quire­ments for the coun­try's poli­cies and laws that now lag be­hind. A na­tional stan­dard for ICVS is needed to en­sure mar­ket reg­u­la­tion.

ICVS pro­vide an op­por­tu­nity for Chi­nese au­tomak­ers to catch up with in­ter­na­tional brands. Right now, there is un­prece­dented co­op­er­a­tion among in­dus­try play­ers – be­fore they start com­pet­ing against each other.

Visi­tors at the 2018 World In­tel­li­gent Con­nected Ve­hi­cles Con­fer­ence in Bei­jing, Novem­ber 11, 2018

Visi­tors ride in an ICV near the con­fer­ence venue, Bei­jing Oc­to­ber 20, 2018

A dis­play at the 2018 World In­tel­li­gent Con­nected Ve­hi­cles Con­fer­ence, Bei­jing, Novem­ber 11, 2018

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