China will back firms in the intelligent vehicle supply chain to form groups dedicated to spreading innovation, state media said on Monday, as it races to hammer out standards for assisted and autonomous driving functions. The world’s largest auto market, which set the target for such standards in July, has made so-called intelligent connected vehicles (ICVs) a long-term strategic focus in its bid to become the leading global player in the still nascent industry.
The country aims to complete the formulation of a framework for driving-assist functions and low-level autonomous driving by the end of 2020, the Ministry of Industry and Information Technology said this month. The move is part of a series of tasks the ministry plans to focus on this year, including strengthening research and development in advanced automotive systems, improving data protection standards for intelligent vehicles, and conducting pilot programs to test ICVs in actual traffic conditions.
Chinese automakers are rushing to bring driverless cars to market as they seek to capture a slice of the burgeoning global demand for ICVs, but their efforts face several challenges. Many have invested heavily in building a complete industrial chain supporting autonomous driving, but many still need to develop their software capabilities. Then, there are the geopolitical headwinds caused by the United States’ export curbs on specific technologies and stiff competition from Western rivals.
Despite these headwinds, Chinese developers are advancing in the race to master core technologies in advanced autonomous driving and push driverless cars onto roads worldwide. They have the advantage of a massive consumer market that is enthusiastic about ICVs, eager to try autonomous functionalities, and willing to pay for them. A McKinsey Center for Future Mobility survey conducted in 2021 found that consumers in China are more likely than their counterparts elsewhere to embrace driverless cars and show strong interest in Level 4 autonomy, which can operate independently but can revert to manual mode under any circumstance.
This has encouraged many local tech companies to pursue autonomous driving, with a few becoming severe contenders in the field. Baidu Apollo, which is leading the drive for Level 3 autonomy — where the car can take over under some conditions but requires the driver to remain ready to intervene — is one example.
Moreover, many automakers and suppliers invest in developing autonomous driving platforms. This will help them better understand the complex requirements for different levels of autonomy and ensure that they are well-positioned to adapt their solutions based on legal, regulatory, infrastructure, consumer habits, road conditions, and other factors. This will create new opportunities for foreign firms to leverage their presence in the local market and engender global competitiveness in autonomous driving. Johannes Deichmann is a partner in McKinsey’s Stuttgart office, Martin Kellner is an associate partner in the Munich office, Bill Peng is a partner in the Hong Kong office, Sijia Wang is a consultant in the Shanghai office, and Ting Wu is a consultant in the Shenzhen office.