Everybody wants autonomous vehicles now: It is the auto industry’s way forward and Silicon Valley’s latest preoccupation. China is no different.
Alibaba Group Holding Ltd (阿里巴巴) is testing self-driving cars in China and Baidu Inc (百度) last year started trials of autonomous technology.
BMW AG early last month became the first foreign automaker to get a license to test its offering in China.
Photo: Southern Metropolis Daily via Reuters
In the middle of last month, Shenzhen-based Roadstar.Ai LLC raised a record amount from Chinese investors.
Meanwhile, Tencent Holdings Ltd (騰訊) and ride-hailing provider Didi Chuxing (滴滴出行) in the past couple of weeks said that they are testing autonomous cars in California.
They join a host of niche Chinese tech companies that account for about one-fifth of those with permits for self-driving trials in the US, alongside automakers and start-ups.
A lot of the developments follows a Beijing-mandated push. In April, the government laid out national road-testing guidelines for autonomous vehicles, adding to rules in place in Shanghai and Beijing.
That would make it possible for China to collect vast amounts of data on autonomous-vehicle testing on public roads, the way Alphabet Inc, Google’s parent, did with its sibling, Waymo.
If automakers see a future in China, the world’s largest car market, they will need to have data collected and created in China. Californian data will not fly.
China’s official entry into the race could address the biggest barrier to mass production of autonomous cars — cost — as it did with batteries for electric cars over the past year.
Getting rid of drivers cuts costs. Take a US electric car that runs 24 hours a day, seven days a week as part of a ride-sharing network. According to Nissan Motor Co chairman Carlos Ghosn, charging the car costs about US$250 a month and the lease takes US$300 to US$400 a month. Because the cars run around the clock, there are three drivers — together they draw US$15,000 a month. Eliminate that expense, and this is a very different proposition.
As much commercial sense as that makes for ride-hailers, such as Uber Technologies Inc and Didi, and automakers, such as Nissan, supplying fleets to these companies, the cost of the technology itself (and the associated safety testing) is still far too high — indeed, it is the biggest hurdle to the widespread use of autonomous vehicles.
Take one example: Laser-based sensors made by Velodyne Lidar Inc, the key element in a driverless car, cost between US$8,000 and US$80,000, and weigh anywhere from just under 1kg to as much as 13kg.
If these light-emitting radars were mass-produced, they might cost as little as US$1,000. Cheaper workarounds do not quite cut it yet, although Tesla Inc chief executive Elon Musk seems to believe they do.
This is where China can help. Look at Quanergy Systems Inc, a low-key Silicon Valley maker of lidars, which use light to create three-dimensional images from a 360-degree field of view.
Quanergy has already teamed up with the likes of Daimler AG’s Mercedes-Benz, Delphi Technologies PLC and Nissan, and is probably closest to making the ideal sensor.
The Californian firm also has a strategic partnership with Sensata Technologies PLC, a technology developer that says its content per vehicle in China is growing rapidly.
Quanergy’s lidars, which are solid-state and tiny, already cost less than the magic US$1,000. Gross margins are somewhere above 50 percent, while research and development costs are almost 70 percent of revenue.
However, getting to that point took more than three decades.
Chinese investors are likely to become significant shareholders in the company after the next funding round, according to people familiar with the company.
Investors should keep an eye on the cash China is plowing into the industry, whether through state subsidies, its tech giants, or pools of capital chasing the next big thing.
The money will bridge a chasm that low-margin, high-cost automakers cannot, despite talk of their mobility ambitions. The sheer amount of capital needed to fund the infrastructure for autonomous vehicles will be far more than many — or any — government is willing to commit just yet, other than China.
Silicon Valley never quite made it in China, and this time will not be different. The same cannot be said of Chinese capital: It has roots in Sunnyvale and Shanghai, and blessings from Beijing.
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