Two External Factors Affecting the Car Industry
In the review of events affecting the car industry in 2021, “carbon neutrality”and “chip shortage”will stay on the list.
To counter climate change, China has set goals to achieve carbon peaking by 2030 and carbon neutrality by 2060. Meanwhile, carbon neutrality is not only part of the Five-year Plans on National Economic and Social Development in China but also a hot topic in people's common life that will have a significant impact on the future of numerous industries. Driven both by policies and the market, the car industry has been moving towards being green, intelligent and internet-like which will expedite new transformation.
In addition, technologies related to autonomous vehicles are more mature with chips and operating systems on cars being realized, which will join the transformation to a transport environment with cooperative vehicle infrastructure systems to dramtically reduce traffic accidents and congestion, improve the efficiency of energy and transport, and trim down carbon emission in all respects. These have been proved by a Chinese self-driving service supplier Mogu Chelian, which created the first open 5G commercial pilot road in Shunyi District, Beijing with cooperative vehicle infrastructure system in 2019.
As the statistics shown by the government of BeiXiaoYing Town in Shunyi District in June 2020, the safety rate and the traffic efficiency at the crossing has increased by 60% and 20% respectively, which means that two lanes achieve the efficiency of three to four lanes. In March 2021, the People's Government of Hengyang signed a strategic cooperation agreement with Mogu Chelian to cooperate in the fields of intelligent terminals, cooperative vehicle infrastructure systems, autonomous driving and intelligent transportation, so as to build a model city for intelligent transportation innovation.
For the self-driving industry, carbon neutrality policies probably work as a positive contributor to its development, while the chip shortage seem to be the contrast.
The chip shortage was caused by a range of factors simultaneously, such as the spread of COVID-19, strikes in the chip factories, and the mismatch between the automotive industry demand and the chip production cycle. According to the latest data from AutoForecast Solutions, the global automotive market has cut production by 10.2 million cars due to the chip shortage, with China decreasing by 1.98 million in 2021.
The insufficient capacity will directly impact the selling of car companies, especially SMEs, which will face more stressful situations with the production and operations being halted. Struggling with the "chip shortage", many car companies have realized that they should not only rely on imports on the supply chain but also find appropriate domestic chip suppliers and even produce their own chips if conditions allow. It is foreseeable that chip controllability will play an important role in the market for intelligent cars.
More car companies have stepped up to make plans in the chip sector in 2021. ECARX, the Geely-owned automotive intelligence company announced cooperation with ARM China to co-found the SiEngine Technology, which focuses on the long-term R&D and mass production plans in chips for autonomous driving, microcontrollers and smart cockpits, and had launched the first 7nm auto chip in China at the end of 2021. Besides, automobile manufacturers such as Great Wall Motor, BYD and Dongfeng Motor Corporation also entered the industry by strategically investing in the chip company Horizon Robotics. It is believed that in the future, whether for safety reasons or technical considerations, more and more car companies will choose to independently develop chips.
Development and Challenges: The Self-Driving Race in 2021
As a range of well-known tech companies have joined the game, more accessible business patterns have been discovered in the exploration process. The self-driving industry appeared to host a highly competitive race, where three characteristics have been observed in the game.
1.Uncertainties increased as cross-border players join
As the car industry becomes more digitized, intelligent and cooperative, we have seen more tech enterprises enter the game to compete with those conventional manufacturers. In China, a number of tech giants have navigated the course. Some of them chose to cooperate with the long-lasting car producers (Huawei), others may prefer to produce their own cars (Xiaomi), or build a comprehensive business ecosystem(Baidu). Globally, the trend is as strong as it is in China, rumors like Apple had plans to build vehicles are not new to people.
Huawei: “We won’t build cars, but enable car brands to produce better ones”
In April 2021, Huawei’s rotating chairman Eric Xu announced at the company's Global Analyst Summit that the leading telecommunication supplier would not build cars but enable car brands to produce better ones. The various cooperation includes BAIC Group, which launched the Huawei inside HI edition ARCFOX αS. Meanwhile, Huawei has also developed the Avatar E11 electric car in collaboration with CATL and Changan Automobiles. The AITO M5 model, produced by Seres in partnership with Huawei, was the first PHEV equipped with a HarmonyOS system.
Xiaomi: Mass produce its own cars
On March 30, 2021, Xiaomi announced plans to establish a wholly-owned subsidiary to offer quality smart electric vehicles. Xiaomi's Chief Executive Lei Jun said the smart phone maker would invest $10 billion over the next 10 years in the electric vehicle business and “would stake his personal reputation on the Xiaomi vehicles”. Building own cars means enormous difficulty but would own more independence.
On the one hand, Xiaomi would enhance its investments in batteries, chips, smart components, and self-driving technologies, so as to improve its car industry chain. On the other hand, Lei Jun would take the lead to establish Xiaomi's own car company in September with initial funding of RMB 10 billion. It is estimated that the mobile brand's smart EV would be mass-produced by the first half of 2024.
Baidu: Investing in multiple sectors
Looking back to 2021, it seems that Baidu had made various attempts to build an ecosystem concerning self-driving.
In this field, Baidu's smart transportation solution Apollo has launched AVP, ANP and IOV OS, showing the company's strength in smart driving and smart cabin technologies. Meanwhile, the custom model Apollo Moon, cooperated with Arcfox, keeps the cost of each robotaxi at RMB 480,000, which is within the cost range of manned cabs, demonstrating the possibility of robotaxi's large-scale application.
In terms of cutting-edge ideas, JiDU, a joint venture of Baidu and Geely, has proposed a concept of "car robot" that would combine Baidu's comprehensive technological strengths in AI and intelligent driving. The first concept car will be unveiled at the Auto China 2022, with mass production planned for 2023.
Overall, the entry of cross-border players has undoubtedly added more variables to the self-driving competition. Based on the individual prognosis of business prospects and technological routes, their joining patterns vary distinctly.
2. Joy and sorrow at the same time: mass production has shown delights
When both new and old players are competing severely on the same field, whoever can explore a faster path to stable commercialization will gain the initiative.
In 2021, with the promotion of strategies such as new infrastructure and smart travel, many cities in China began to accelerate the process of 5G, edge computing and cooperative vehicle infrastructure which would improve essential hardware and software systems on which the self-driving industry relies. Meanwhile, under the backdrop of the COVID-19 pandemic, the need for "contactless" is more imperative as the social distance order requires, so autonomous vehicles as mobile transportation tools have started to enter the public life, so did the concept of self-driving.
Under this context, mass production has been enforced by many car manufacturers and tech enterprises. With L2 to L4 autonomous vehicles coming out of the testing grounds, mass production seems to play an important role as a trial and error approach in commercialization, which has brought a series of chain reactions.
L2: The penetration rate and advanced driver-assistance systems (ADAS) are increasing
As the penetration rate of L2 driving automation continues to rise, market competition is becoming increasingly fierce. According to the Ministry of Industry and Information Technology, as of the third quarter of 2021, the market penetration rate of new L2 cars in China has reached 20%. In addition, the equipment rate of fundamental ADAS and sensor hardwares such as cruise control and parking sensors have exceeded the 20% as well. Moreover, the proportion of L2 models in the new energy vehicles with mandatory insurance is also on the rise. According to the calculation of Cyber Car, there were 216,821 L2 ICVs have been implemented with mandatory insurance in December 2021. The rate was up 42.94% month on month and accounted for 45.07% of the new energy vehicles which is much higher than the 33.05% in October.
L3: Implementation policy becomes the key
L3 driving automation requires driving the vehicle by robots and humans together, regardless of standards. However, the ethical controversy over the human-machine takeover issue has been ongoing, and most countries have not issued clear regulations on the safety responsibilities, which has led many nations not to risk betting on L3 mass production. This situation has changed a little bit in 2021, when two multinational automakers, Mercedes-Benz and Honda, announced mass production of L3 autonomous driving systems as they meet the requirements of regulations in Germany and Japan. At the end of 2021, the South Korean government announced a "roadmap for the development of autonomous driving regulation and innovation", planning to launch L3 self-driving cars in 2022.
L4: mass production is mainly for commercial vehicles, with pilot commercialization in Robotaxis
The highly advanced L4 driving automation is easier to realize commercial vehicles as they are suitable for simple road conditions with lower accident rates. Controlled by Great Wall Motor, the autonomous driving startup Haomo.AI has achieved mass production and delivery of the L4 unmanned delivery vehicle "Xiaomanlv" in cooperation with Alibaba DAMO Academy, and received Series A funding of nearly 1 billion RMB led by Meituan at the end of the year.
In addition, there is a breakthrough in the passenger car sector in 2021. On November 25, the city of Beijing officially opened the first Robotaxi commercialization pilot with policy permission, meaning that Robotaxi operators can initiate services and charge passengers through a market-based pricing mechanism. Baidu’s robotaxi app Luobo Kuaipao and Pony.ai became the first enterprises to charge fees to customers.
L5 : Still far from realization
Elon Musk, who once said the L5 vehicles would be fully launched in 2021, seemed to break his words again. Looking around the globe, L5 is still a zone full of unknowns, and immeasurable costs of technology and funding once again push back a large group of participants who might have plans to join the game. After Uber had sold its self-driving division, Lyft, another leading ride-hailing platform, announced in April 2021 that it would aslo sell its self-driving department that was exactly under the name of 'Level 5' to Toyota's subsidiary Woven Planet.
The development of autonomous driving can be divided into two routes at the present. The first one is to develop into high-level autonomous driving gradually. By doing so, companies can realize mass production and sales faster than others, and take the advantage of market scale to exchange for growth space of technologies. The other route is more like a 'leapfrog', and enterprises would target L4 driving automation from the very beginning without considering other lower levels. Manufacturers of this kind would have more mature technologies to produce safe and reliable vehicles, and they could also choose to descend to L2 or L2+ driving automation while realizing mass production.
But no matter which route to take, most self-driving brands aim to accelerate mass production delivery and achieve commercial operation. The sooner mass production and commercialization are made, the more obvious the accumulation of data and algorithm advantages will be. It's safe to say that the "Matthew effect" in the self-driving industry will emerge, and the industry working patterns will be revealed.
3. Safety, safety and always safety
Under mass production, the safety of self-driving is of paramount importance for both passenger and commercial vehicles to develop, and the public is bound to have higher expectations of that issue.
Neglecting the safety element in the development and design will make all in vain no matter how "smart" the cars are planned to be. As a result, self-driving passenger vehicles are generally subjected to long periods of closed and public road testing before they are officially delivered. Even though, the safety controversy surrounding self-driving has been ongoing, and what happened on a NIO car in 2021 has put the safety issue in the firing line.
On 12 Aug 2021, Lin Wenqin, founder of FrontSea Asset Management, Yitong TianXia Catering Management Company, and MeiYiHao Branding Company died at the age of 31 after a traffic accident on the highway while driving a NIO ES8 self-driving car.
After the accident, Lin's family had a big argument with NIO. The driver's family stressed that it was on autopilot mode while the accident happened, so the responsibility should not be fully attributed to the victim. While NIO pointed out that the "pilot mode" on the car only had the function of assisted driving and the driver still had to pay attention to the surrounding environment. The core of the case is whether the car company had adequately informed the driver of the risks and limitations of the L2 autopilot system.
To determine the ascriptive responsibility of an accident where the vehicle is with autonomous driving functions would be tricky. According to the Taxonomy of driving automation for vehicles issued by the Ministry of Industry and Information Technology, the operation of cars is fully controlled by drivers while the driving automation system only plays an auxiliary role in the L0 to L2 models. It is generally believed that drivers should take care of the road condition as same as they did in a conventional car, and bears the total liability and criminal risks themselves.
However, as long as an accident involves a vehicle that has driving automation features, a crisis of confidence would emerge easily. Therefore, car brands must take caution when promoting their products and have a clearer definition of how far the automation feature would go. For higher-level vehicles, it is more than necessary to make improvements to laws and regulations, set clear responsibilities and obligations for each participant, and reduce ethical controversies and moral dilemmas, so as to promote the overall industrial development.
Conclusion
In general, the market for self-driving vehicles is becoming more pragmatic and prudent than before that car companies would prefer to follow a step-by-step approach to explore commercialization. The make progress, it requires the concerted efforts of OEMs and technology companies, as well as the upstream and downstream of the industry chain to generate large-scale market demand and development space. It is not yet known who would take the throne in the unprecedented changing market, but when the reshuffle is nearing its end, resources are more likely to flow to the names on the top list.
