China Seeks ADAS Leadership

China sees the value in building consortia to develop the smart-vehicle supply chain with the aim of spreading innovation.

The country is hammering out standards for assisted and autonomous driving functions and plans by 2025 to achieve its objective of becoming the leader of intelligent connected vehicles in what is otherwise a nascent industry. Xinhua news agency says the development of innovation consortia will enable companies working on connected and autonomous vehicles to learn from each other’s strengths and to find technological breakthroughs.

Factors driving innovation

Tu T. Le, founder and managing director of Sino Auto Insights says there are a few factors that help to drive innovation. One of them is the regulatory environment, which has to be flexible and quick acting. There is also a need for a culture of entrepreneurship as well as governmental and non-governmental organizations that support them and a well-established venture capital community.

He adds: “Specifically to connected vehicles and autonomous vehicles, there is a need for an open mind about evolving vehicle technology inside and outside the vehicle and a bias toward encouraging, piloting and helping create more awareness about said technologies. This goes a long way toward commercialization and consumer acceptance, encouraging them to embrace and use of the new technologies.”

Beyond Level 2 autonomy

At present, 42% of the country's new passenger vehicles have Level 2 of autonomy. Level 2 can handle some driving functions but is far from being fully autonomous. The driver must be prepared to be in control of his vehicle. At Level 3, Baidu’s Apollo Go is taking the lead and it can drive itself under certain conditions. Reuters says the firm won a license to “run its driverless ride-hailing service commercially in parts of the city of Shenzhen."

Shenzhen is the fourth Chinese city to offer such a service and it is seen as China’s tech hub. This follows the development of a similar service in the city of Wuhan, south-western Chongqing and the capital, Beijing. However, China’s ambitions don’t stop here. The country wants to advance autonomous driving to put driverless vehicles on its roads, to become the technology’s global leader.

However, the path to achieving its ambitions isn’t so clear. The likes of Baidu and other Chinese developers face some geopolitical resistance. For example, the U.S. has put export curbs on technology and there is still competition from China’s Western counterparts, such as Tesla.

Government policies

Varun Krishna Murthy, growth expert and industry analyst at Frost and Sullivan, says every country has a role to play in improving connected and autonomous vehicle technology. China is leading because of the policies its government has put in place and the Chinese have been at the forefront of manufacturing electronic goods. This has extended the country’s foundation for connected and autonomous driving. “They have fantastic talent, and the Chinese government encourages innovation in technologies,” he remarks.

He points out that many of the European automakers have their subsidiaries in China through a local collaboration to manufacture, operate and sell in China. He says this makes them self-sufficient. So, they naturally want to see China’s automotive industry manufacturers to flourish.

Yet, there is more to be done as he calls for the country to bring in policies to enable infrastructure that would permit smarter driving on Chinese roads, while revealing that Shenzhen has passed a regulation where Level 4 autonomous vehicles are allowed on the road. He, nevertheless, wants to see China opening up a to “allow other companies to operate there to embrace the autonomous driving trend.” In doing so they would play to their strength of boosting local innovation and manufacturing.

Good at innovation

Another country that he thinks is doing well is Israel, with lidar, radar and AI-based software development. He also describes Germany as being a country of adoption because it is quick to identify startups and helps them to grow by collaborating with them at an early stage with the aim of achieving long-term results. For example, Bosch collaborated with Five AI in the U.K. and, over time, the technology matured to the point that Bosch acquired it.  Another reason why Germany is excelling comes down to the fact that Germans adopt new technologies well. Nevertheless, China and Japan are particularly good at innovation, and India is proficient at software innovation.

He adds: “There are start-ups that are trying to solve problems to make connected and autonomous vehicles need to be safe. Cost is also an important factor in the automotive industry. Solutions have to be safe and cost-effective. LiDAR can create redundancy for safety – sensor prices are coming down and so it’s more accepted. It’s required to reach higher levels of autonomy despite having a high price tag.”

The next evolution

Speaking about China, Tu T. Le says smart driving is the next evolution in the connected vehicle that will eventually lead to autonomous vehicles. China wants to be the leader in smart driving, which includes being a leader in ADAS and eventually Level 5 autonomous vehicles such as robo-taxis. One reason for this is that manufacturing offers very low margins, making the high margins of value-added services very attractive – especially robo-taxis, because there is no need to pay a driver. “This in turn strengthens their companies and sectors even more,” he suggests.

Consortia can also help to advance innovation, the development of new technologies and value-added services. They often work towards the same goal too, which can be achieved in accelerated time. Krishna Murthy explains that many of the companies involved in consortia want to standardize the technology they develop, so that it’s available at an affordable price.

He explains: “Autosar is one of the best examples. It’s a software that’s being used in most electronic control units. Through the Autosar consortia, the industry created a standardized software that’s now used across companies and vehicles. Autosar makes it possible to add new functionality without developing function-specific software. This is important because within consortia, the learning is higher and the output is a standard technology that can be used by them all. This makes it a fruitful affair. Bosch, BMW, Continental, Ford, General Motors and other automakers are part of the Autosar consortia.”

Tu T. Le says they can also connect providers and startups to customers, as well as to revenue-generating opportunities. In addition to these activities, consortia can work collaboratively to help to educate the market with the aim of making adoption more frictionless. He adds: “Consortia can also ideate and generate ideas for new use cases for technology and problems that technology and new startups can solve.”

Lowering costs

Consortia can enable development costs to drop significantly, and larger companies gain from the standardization of technology. As groups of companies and interested parties, consortia can access government funds more easily than perhaps an individual startup could. Without this support, they would be reliant on CAPEX to fund their activities. Startups often join consortia to access finance as they need to fund their product development in order to be able to sell their products commercially.

Startups also need access to the much larger automakers and Tier 1 suppliers who Krishna Murthy says have usually taken a pyramid approach. By gaining access to automakers and top suppliers, startups can develop their products and solutions much faster.

Tu T. Le says other countries can encourage entrepreneurship, develop and maintain a strong high tech, software development, digital culture and ecosystem. To do this he advises them to develop their regulations to accept new technologies faster. They also need to eliminate barriers to adoption and to create supportive structures and entities to permit easy investment, piloting, access to suppliers and to customers. Essentially, there is also a need to make the development of new technologies easier.

Learning from failure

Surprisingly, he also suggests that countries need to embrace failure because many startups fail. The logic is that without failure, companies and entrepreneurs can’t learn from their mistakes. It’s important for them to be able to embrace business risks because technology is only an enabler. Countries such as China need to provide the right environment for entrepreneurs, startups and investors and there is a need to allow failure as the key to having successful technology companies.

He concludes by proclaiming that software development and AI are the future: “If there isn't a culture, universities, NGOs, and so on that educate, advocate and/or nurture these two important sectors then it's going to be extremely difficult to be successful in boosting innovation domestically and natively.” It is, therefore, no wonder that China wants to establish an environment that encourages entrepreneurship and the creation of consortia – particularly, as Krishna Murthy says, policymaking can encourage tech incubation and make a huge difference.

Differences in focus

Krishna Murthy thinks Chinese technology can be very advanced. China's key advantage is the ability to make products and solutions at a low price compared to its competitors in other countries. This may be down to, for example, European countries focusing on safety more than anything else. While safety will still be of important to Chinese automakers and technology providers, their core focus is on creating competition with advanced technologies and lower pricing. China’s smart-driving initiative could certainly bear fruit locally and internationally and it help attract Western automakers and investment, with the consortia leading to more innovation.