Driving ahead: China and the connected auto industry

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The connected car and autonomous vehicles in general are poised to have a major impact on China: the country is forging ahead, with vehicles and digitized services, and the industry could have a big positive effect on the country’s economy as a whole.

China’s future very much appears to involve the connected car and autonomous vehicle industry: connected cars present new opportunities for services to entertain passengers, they can help keep both passengers and pedestrians safer, and they can reduce traffic accidents and congestion, among other benefits.

The country certainly seems to be committed to the connected car future, with Minister for Industry and Information Technology Miao Wei recently saying that he envisages China’s autonomous vehicle market being worth US$14 billion by 2020. This confidence backs up the forecast made by China’s National Development and Reform Commission in 2018 that by 2020, one in every two new cars sold in China will come fitted with smart capabilities and some autonomous functions.

What is the status quo in China?

Various companies are engaged in different connected vehicle projects in China, and priorities and approaches vary by organization. Search engine and technology giant Baidu has branched out into building autonomous vehicles, launching 100 self-driving buses in July 2018 to be deployed in major cities including Beijing, Xiongan and Shenzhen. The buses have already been tested to over 10,000 kilometers, with no accidents. Fellow tech giants Alibaba and Tencent are also engaged in self-driving car tests as well as Baidu.

Miao Wei also commented:

“Intelligent connected cars are set to become a vital means in reducing traffic casualty, road congestion and energy consumption,”

and the government’s optimism for the space has been evident in their encouragement of Chinese companies to take autonomous vehicle projects forward and inviting investment from foreign organizations.

Research from McKinsey has predicted that in China, autonomous vehicles will account for 13 percent of passenger kilometers traveled by 2030 and a massive 66 percent by 2040. The future of vehicles in China looks very much like being autonomous, but what else can we expect?

Money may be in services and passenger experience

While some observers see the autonomous vehicles and connected cars business as being primarily about how many vehicle units are simply sold and on the roads, there is another way of thinking: new revenues, and a transformation of the automotive sector in general, could come from the adoption of digital solutions in the car itself, rather than from the growth of technologies that affect vehicle sales numbers.

Some Chinese companies have already put their focus on evolving their connected car models into completely driverless systems that give drivers and passengers higher levels of personalization, safety and comfort. Tencent for example has identified the potential in user infotainment systems in cars that will transform the passenger experience. This could be a very smart move: Chinese consumers have stated that they are prepared to pay as much as 20 percent more to get hold of a connected car, while 65 percent of Chinese consumers say they are ready to adopt connected car solutions – far higher than Europe’s 40 percent and North America’s 32 percent. Chinese consumers are now expectant and demand added features in their cars, such as road safety monitoring, in-vehicle health monitoring and state-of-the-art connected entertainment solutions.

What specific technologies are likely to grow?

With the likes of Tencent, Baidu and Alibaba all getting involved in government-sponsored projects, it is likely that China will see connected vehicles become increasingly amalgamations of new digital technologies. 5G is set to revolutionize all kinds of areas of life in China, beginning with smart cities, enabling numerous new services – so it is easy to see the speed and low latency of 5G being used to enhance connected car services, too. According to Forrester research, 5G will account for 57 percent of China’s technology investment in 2019, underlining the country’s commitment to next generation mobile connectivity.

Some manufacturers are focusing on AI as the killer technology for their connected car offerings, creating fully intelligent mobility service platforms. The demand from consumers seems to be there, with Chinese car companies already committing to online software updates, remote problem diagnosis and voice control, all powered by AI.

What’s next for China?

China is one of the APAC region’s two biggest markets for connected and autonomous vehicles, so it will be interesting to see how it develops. What seems likely however is that China will continue to grow, focusing on more than “just” connected cars: the real future and real possibilities lie in intelligence-based cars and smart services that enhance the driver and passenger experience. According to Tencent Chairman Pony Ma Huateng,

“Smart connected cars are becoming the intersection of many innovative fields. The development of AI, the industrial Internet, 5G, smart manufacturing, use of new energy and intelligent transport and smart city management are all waiting for the car industry to become a breakthrough point and for smart, connected cars to be the common vehicle for these innovations.”

To read more about the connected vehicle and what might happen in China, read In the Driver’s Seat, our white paper produced in partnership with PwC. This white paper is also available in Chinese.

Jack Zhang
Jack Zhang
Jack Zhang is Country Manager, China for Orange Business Services, and is responsible for leading the business and managing operations country-wide. He supports the Orange digital transformation vision for enterprises by developing opportunities in key growth areas including hybrid networks, IT services and cloud.  Jack has over 15 years of experience in the dynamic IT and telecommunications market in China and has a deep understanding of the market and the communications industry.