The emerging intelligent and connected vehicle industry in China

Publication Type:

Conference Paper

Source:

Gerpisa colloquium, Bordeaux (2024)

Keywords:

autonomous driving, Business Model, China, Industrial Policy, intelligent and connected vehicle, regulation, value chain

Abstract:

Benefiting from digitalisation which allows vehicles to be connected with their surroundings and the drivers, intelligent and connected vehicles (ICVs) have the potential to solve congestion, decrease the number of road accidents and improve access to mobility. The ICV industry involves a whole new ecosystem of services, operations and infrastructures formed by a wide variety of actors and stakeholders, which not only generates transformation in the industries but also has direct impact on the social security and sustainability (ENISA, 2021).

Meanwhile, ICV systems are very complex, which require the integration and interaction of multiple elements such as people, vehicles, roads and clouds, and more importantly the elaboration of dedicated industrial norms and regulations. As many related functions are still in a stage of rapid development and continuous iteration, ICVs also faces risks and challenges such as network safety and data security. Currently, some countries and regions have adopted methods such as ‘exceptions and exemptions’ and case-by-case handling to impose restrictive conditions on the access of ICV products and services while continuing to explore innovative safety supervision methods.

China has become the global leader in new energy vehicle (NEV) production and consumption since 2015, and is so far the only country that has developed a vertically integrated full value chain of mass production of electric vehicles. With its EV industry becoming increasingly mature and competitive, China has reoriented its industrial policy to forge the emergence of the next-generation ICV industry. According to data from the Ministry of Industry and Information Technology (MIIT), as of the end of 2023, more than 20,000 km of ICV test roads have been opened in China, and a total of 17 national-level test demonstration areas, 7 Internet of Vehicles (IoV) pilot areas, and 16 smart cities have been selected for developing ICV industry.

Regarding the supply chain development: assisted driving systems have been mass-produced - 55.3% of the NEVs sold in 2023 have installed L2 and above assisted driving functions (CPCA, 2024); Lidar and vision chips used in intelligent driving have been mass-produced domestically; a variety of self-developed autonomous driving computing platforms and chips have been installed; high-precision maps have been commercialised and have reached international advanced levels; ICVs have been demonstrated and applied in closed and semi-closed scenes such as parks, airports and mines. No surprise: now about 43% of the world’s autonomous driving invention patents come from China.

Our paper will investigate the national and industrial strategies that have allowed the recent fast development of the new industry of ICV in China, as well as the innovation of business models related to ICVs applied in new competitive niche markets. By documenting key policies and announcements by relating Chinese authorities, we analyse the crucial role of industrial policies in sustaining the difficult take-off of ICV industry. China has been learning from the success of its NEV industrial policy, gradually putting into place different guidelines and management directives for the future ICV industry. In 2017, the MIIT issued the ‘Guidelines for the Construction of the National Intelligent Connected Vehicles Industry Standard System’, which established China’s new objective to develop intelligent vehicles with network connectivity. Since then, the Chinese government has issued a series of key national policies relating to ICV, including ‘Intelligent Connected Vehicles Industry Development Plan’ (2018), ‘Intelligent Vehicle Innovation and Development Strategy’ (2020), ‘Intelligent Connected Vehicle Manufacturing Enterprises and Product Access Management Guide’ (2021) and ‘Carry out pilot projects for access and on-road access of intelligent connected vehicles’ (2023). As our study indicates, these national policies, together with other closely related industrial strategies (NEVs, chips, AI), form a comprehensive and structured framework for local governments and firms, and all stakeholders, to carry out innovations and applications. They also facilitate the allocation of financial resources which are much needed for the technology-intensive ICV products and services.

Under the guidance of relevant national policies, all major provinces and cities in China have been actively promoting the implementation of ICVs for transporting people and goods. Our study underlines the indispensable role played by local governments in encouraging innovative projects and coordinating demonstrative applications, by providing close supervision and follow-up. These governments are highly motivated also because the industrial chain of ICV is long and involves a lot of actors, and ICV can become an important driver of transformation and upgrading of local industries and economies. Many new business models have been developed for both public and private applications, from traffic management to commercial cargo to city services. Specific scenarios such as ports and mining areas have taken the lead in launching pilot operations; and in some limited areas in cities, self-driving taxis, unmanned logistics and unmanned sanitation have also started road demonstration.

After detailed policy analysis and business model study of the emerging ICV industry in China, our conclusions will be more of an open discussion about whether the ICV is bringing real disruption to the traditional automotive industry and to what extent it will refigure the whole value chain.

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