China is taking bold steps by accelerating the introduction of autonomous driving commercial services and not only securing global technological superiority, but also providing financial and institutional support and large-scale investment to become the number one market player.

Hana Financial Investment predicted that China will narrow the gap with advanced countries in autonomous driving technology through strong policy drives and large-scale investments and grow into the world's No. 1 autonomous driving market by 2025.

▲China announced a goal to increase the penetration rate of level 2-3 autonomous vehicles to 70% by 2030. (Source: Hana Financial Investment)

It is expected that sales of Level 2 and 3 autonomous vehicles in China will increase three-fold and six-fold in 2025 and 2030, respectively, compared to the current level, and Chinese automakers are also considering commercializing Level 3 in 2022 and Level 4 and 5 after 2025.

In the United States, there are individual state laws, but no federal bill has yet been passed due to safety and security concerns.

In contrast, China quickly enacted legislation to provide guidelines for autonomous driving across the board, including road testing, infrastructure, and standardization efforts.

▲China’s autonomous driving industry related policies (Source: Hana Financial Investment)

The policy on 'Establishing a National Autonomous Driving Industry Standard System' announced in 2017 included the plan to complete the draft of the autonomous driving standard system by 2020, secure more than 30 standards, and secure more than 100 standards by 2025. In addition, according to the 'New Energy Automobile Industry Development Plan (2021-2035)' policy in 2020, commercialization of autonomous vehicle restricted areas will be promoted by 2025, and large-scale mass production is expected to begin.

Behind the rapid institutionalization is active financial support and investment. Between 2016 and 2019, the central government-supported sovereign wealth fund is expected to reach more than $200 billion, and the amount is expected to be even higher when including local government special purpose bonds. Additionally, 10 trillion yuan (about 1,887 trillion won) will be invested in 5G base stations, data centers, AI, etc. by 2025.

In terms of road tests, China is conducting tests at about 70 autonomous driving demonstration bases. Robo-taxi companies began testing in late 2018 and began commercial services in 2021. Since 2020, major companies such as Baidu, AutoX, and Pony have also been conducting Level 5 unmanned driving tests.

In particular, Baidu is far ahead of startups in terms of the scale of driving tests, technology, and financial resources. It is securing technological superiority through large-scale investment and is also expanding partnerships. It is currently in the early stages of monetization, but full-scale monetization is expected through an increase in partners, mass production of autonomous vehicles, and commercialization of robotaxis.

Baidu received permission to operate self-driving taxis with one assistant driver last year and conducted a pilot operation in Beijing, and in 2022, it received permission to operate taxis without an assistant driver and with only a supervisor on board.

One of the reasons supporting the prediction that China will take the lead in the autonomous driving market is the domestic production of AI chips and sensors. It is assessed that companies with competitiveness and technological prowess have already established themselves in the autonomous driving sensor and AI chip markets.

With the technological prowess and low prices of Chinese lidar companies, they began adopting domestic products after 2020, and even when they enter the mass production stage, they are likely to install local lidar to secure a stable supply chain.

The growth of startups such as Xiaopeng and Nio is also noteworthy. Xiaopeng has developed its own “perception-judgment-control” driving algorithm based on NVIDIA’s autonomous driving computing platform, and Nio and Lioto plan to complete the development of “perception” algorithms by 2022.

Pony.ai is the first Chinese autonomous driving company to obtain a business license to operate 100 autonomous vehicles as taxis in Guangzhou. During the 24-month, 1 million-kilometer test and 200,000-kilometer test in the Guangzhou test area, there were no traffic accidents, meeting the requirements and standards of Chinese inspection agencies.