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China autonomous driving
Moving into the smart EV era
Autonomous driving is set to take electric vehicles (EVs) to the next level in China. In our view, the latest developments could do for China’s EV industry what the Apple iPhone 4 did for smartphones back in 2010; loaded with a range of firsts in camera, flash and retina technology, it proved to be a gamechanger.
A new generation of EVs incorporates high-level autonomous driving capabilities. These include systems that navigate cars through selected routes in major cities such as Beijing and Shanghai, with new routes to become available in further cities over time. We think advanced autonomous capabilities could become standard features in new EVs sold in China as soon as 2025.
Policy support is key. Authorities are introducing new rules and standards with the potential to support the commercialisation of increasingly sophisticated forms of autonomous driving. This include so-called “level 3” functions, where the driver can safely take their hands off the wheel and effectively sit back for parts of the drive. On 21 June 2023, the Ministry of Industry and Information Technology announced it would support the application of level 3 and higher-level autonomous driving functions. And on 26 July 2023, the guideline policies on industry standards of intelligent connected vehicles were published.
Globally competitive. China has long been the leader in EV production and sales, and – as we have written before – as many as 90% of new vehicles sold in China could be EVs by 2030. It is perhaps no surprise that the country’s autonomous driving capabilities are also globally competitive. Over recent months, we have seen a number of announcements from international brands which are working with leading Chinese manufacturers to improve their EV products, especially in terms of software.
A bigger role for software. We see differentiated software becoming a competitive advantage as EVs become increasingly commoditised. For automotive companies, this raises the possibility of a different way of thinking about revenues. Some charge a one-off payment for lifetime use of autonomous driving features, while others use subscription models.
Not just what we drive, but how we drive? If we do see the widespread take-up of autonomous driving, then this could change the experience of driving altogether. Controlling the vehicle will take up much less time, allowing consumers to focus even more on entertainment, content, and connectivity.
Catalysts and risks. Enthusiastic consumer take-up and continued policy support would help China accelerate towards a future where autonomous driving is the norm. By contrast, if technological progress is slower, consumer acceptance is weaker, and the costs of autonomous driving are higher than expected, then this could impede its roll-out. One thing is for sure: other markets and companies around the world will be watching China’s journey with interest.
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