Driverless Vehicles Driving the Future of ESG

THIS MATERIAL IS A MARKETING COMMUNICATION.

Driverless Vehicles Driving the Future of ESG

Investors are lining up for ESG-friendly investments in the transportation sector

In this article, we will examine the advantages and weaknesses of another potential investment option that is increasingly attractive to environment, social, and governance (ESG) investors: the autonomous vehicle (AV) industry in China. This sector has huge implications for the ESG community worldwide as may come to define the very nature of driving safely and economically in the next few decades.

We also will look at the strategies and progress of leading Chinese solution providers, mindful that behind each one is an extensive chain of software, semiconductor, hardware, and vehicle companies working together to support AV driving solutions. It is rare for companies to develop all technologies in-house in this sector.

Advantages of the Autonomous Vehicle Industry in China

  • Policy – The government provides both a strong policy support and a framework to facilitate the development of the AV industry in China. The National Development and Reform Commission published a report on smart vehicle development strategy in February 2020, in which it targeted mass production of L3 autonomous vehicles by 2025. In addition, the Ministry of Industry and Information Technology (MIIT) published standards and technical requirements for different levels of autonomous driving in March 2020.
  • Infrastructure – China has the longest expressway network in the world, with 149,600km as of 2019, followed by the US with 95,932km.1 We believe that in the initial stage, autonomous driving will be limited to specific areas, and further, that the extensive highway network in China offers a stable environment to roll out autonomous driving.
    China had 5G network coverage in almost every major city by the end of 2020, with more than 792,000 5G base stations as of Feb 2021.2 5G has low latency and high bandwidth, which are crucial for building the internet of vehicles network to improve the safety of autonomous driving. The government also has also set a target to build infrastructure for vehicle communication in key highways by 2025.
  • Funding – The venture capital/private equity market can provide strong support to leading companies in autonomous driving. According to Qingke Research, total private equity investment in autonomous driving was RMB 594Bn in 2019 (see chart 1).3 By contrast, only nine autonomous driving companies received investments in China in 2014, compared to 35 ones in 2018. We believe China has passed the bubble stage of investment in autonomous driving, and investors are now focusing on high-quality companies.

Weaknesses of the Autonomous Vehicle Industry in China

China still relies on oversea suppliers for core semiconductor components in autonomous driving. Companies such as Nvidia not only provide hardware like the Graphics Processing Unit (GPU) and an in-vehicle artificial intelligence (AI) computer, they also develop the training platforms and software development kits that surround it. The barrier is high in this area, and it can take significant time to develop reliable hardware and a mature development framework.

Key Autonomous Driving Full Stack Solution Providers in China

  • Baidu – Apollo platform
    There are two parts to Baidu’s positioning in autonomous driving. First, the company aims to provide an open platform for autonomous driving companies, which include 1) a cloud service platform for training and housing data; 2) a software platform; and 3) a hardware/vehicle platform. Second, Baidu also develops its full-stack autonomous driving solutions to launch other services, including robotaxis.
  • AutoX – XCU, xFusion, xUrban, xMap, xCloud
    AutoX uses an integrated approach to build full-stack technology for autonomous driving. The company also works with auto manufacturers to launch robotaxi and robotruck services.
  • Pony.ai
    Pony AI develops autonomous vehicle platforms. Toyota invested US$400m in the company in 2020 to accelerate product development. (Bloomberg 2020).
  • Tusimple
    Tusimple focuses on the development of autonomous trucks. The company partners with Navistar, a US truck company, targeting the launch of an L4 autonomous truck by 2024.
  • WeRide – WeRide Go
    The company develops full autonomous driving solutions. WeRide test-launched its Roboaxi service (with a safety driver present) in Guangzhou in November 2019. WeRide Go has served 80,000 passengers with a total running distance of 2.6 million km.

Metrics to Gauge Progress in Autonomous Driving Development

The California Department of Motor Vehicles (CDMV) publishes data on companies with permits to conduct autonomous driving testing in that state (chart 3). As most of the top Chinese autonomous vehicle companies also participate in this testing scheme, these data may offer some indication of the progress by different companies. A ‘disengagement’ occurs when the human safety driver interferes. In simple terms, companies with more miles reached per disengagement, and a higher total testing mileage overall, should have a more reliable system. As of [date], Baidu, AutoX, and Pony.ai were among the top five in terms of miles per disengagement. Waymo, which was ranked second, had more than 13 times more testing mileage than Baidu, while AutoX had limited testing mileage.

According to the CDMV, as of February 26, 2020, a total of 64 companies had California autonomous driving test licenses, including full solution providers, component suppliers, technology companies, autonomous driving startups and others. Among these, five companies are allowed to use autonomous vehicles to transport passengers, including Aurora, AutoX, Pony.ai, Waymo, and Zoox, two of which are Chinese firms. Waymo is the only company so far to hold a driverless road test license (with no safety driver required).

60 of these companies conducted testing in 2020. The accumulated mileage of test vehicles of those that achieved road testing in automatic driving mode exceeded 2.9 million miles, an increase of 800,000 miles over the previous year. Six companies tested less than 100 miles, namely Valeo, Box Bot, Telenav, BMW, Tesla, and Ridecell. Two companies had their autopilot road test licenses revoked for failing to submit a disengagement report on time. These were Roadstar.ai and Xmotors.ai of Xpeng Motors North America.

ESG Adoption in AV Sector

The adoption of AVs by ESG investors is still nascent, although interest is clearly trending upward. Still, comparatively few ESG portfolios have substantial AV investments, although this is due largely to safety concerns that have yet to be definitively addressed by the vehicle manufacturers. Otherwise, the AV sector holds many of the same attributes that attract ESG investments that are found in the EV sector.

AUTHORED BY
Mirae Asset Global Investments

Date: May 18, 2021
Category: Electric Vehicle

Driverless Vehicles Driving the Future of ESG

Investors are lining up for ESG-friendly investments in the transportation sector

In this article, we will examine the advantages and weaknesses of another potential investment option that is increasingly attractive to environment, social, and governance (ESG) investors: the autonomous vehicle (AV) industry in China. This sector has huge implications for the ESG community worldwide as may come to define the very nature of driving safely and economically in the next few decades.

We also will look at the strategies and progress of leading Chinese solution providers, mindful that behind each one is an extensive chain of software, semiconductor, hardware, and vehicle companies working together to support AV driving solutions. It is rare for companies to develop all technologies in-house in this sector.

Advantages of the Autonomous Vehicle Industry in China

  • Policy – The government provides both a strong policy support and a framework to facilitate the development of the AV industry in China. The National Development and Reform Commission published a report on smart vehicle development strategy in February 2020, in which it targeted mass production of L3 autonomous vehicles by 2025. In addition, the Ministry of Industry and Information Technology (MIIT) published standards and technical requirements for different levels of autonomous driving in March 2020.
  • Infrastructure – China has the longest expressway network in the world, with 149,600km as of 2019, followed by the US with 95,932km.1 We believe that in the initial stage, autonomous driving will be limited to specific areas, and further, that the extensive highway network in China offers a stable environment to roll out autonomous driving.
    China had 5G network coverage in almost every major city by the end of 2020, with more than 792,000 5G base stations as of Feb 2021.2 5G has low latency and high bandwidth, which are crucial for building the internet of vehicles network to improve the safety of autonomous driving. The government also has also set a target to build infrastructure for vehicle communication in key highways by 2025.
  • Funding – The venture capital/private equity market can provide strong support to leading companies in autonomous driving. According to Qingke Research, total private equity investment in autonomous driving was RMB 594Bn in 2019 (see chart 1).3 By contrast, only nine autonomous driving companies received investments in China in 2014, compared to 35 ones in 2018. We believe China has passed the bubble stage of investment in autonomous driving, and investors are now focusing on high-quality companies.

Weaknesses of the Autonomous Vehicle Industry in China

China still relies on oversea suppliers for core semiconductor components in autonomous driving. Companies such as Nvidia not only provide hardware like the Graphics Processing Unit (GPU) and an in-vehicle artificial intelligence (AI) computer, they also develop the training platforms and software development kits that surround it. The barrier is high in this area, and it can take significant time to develop reliable hardware and a mature development framework.

Key Autonomous Driving Full Stack Solution Providers in China

  • Baidu – Apollo platform
    There are two parts to Baidu’s positioning in autonomous driving. First, the company aims to provide an open platform for autonomous driving companies, which include 1) a cloud service platform for training and housing data; 2) a software platform; and 3) a hardware/vehicle platform. Second, Baidu also develops its full-stack autonomous driving solutions to launch other services, including robotaxis.
  • AutoX – XCU, xFusion, xUrban, xMap, xCloud
    AutoX uses an integrated approach to build full-stack technology for autonomous driving. The company also works with auto manufacturers to launch robotaxi and robotruck services.
  • Pony.ai
    Pony AI develops autonomous vehicle platforms. Toyota invested US$400m in the company in 2020 to accelerate product development. (Bloomberg 2020).
  • Tusimple
    Tusimple focuses on the development of autonomous trucks. The company partners with Navistar, a US truck company, targeting the launch of an L4 autonomous truck by 2024.
  • WeRide – WeRide Go
    The company develops full autonomous driving solutions. WeRide test-launched its Roboaxi service (with a safety driver present) in Guangzhou in November 2019. WeRide Go has served 80,000 passengers with a total running distance of 2.6 million km.

Metrics to Gauge Progress in Autonomous Driving Development

The California Department of Motor Vehicles (CDMV) publishes data on companies with permits to conduct autonomous driving testing in that state (chart 3). As most of the top Chinese autonomous vehicle companies also participate in this testing scheme, these data may offer some indication of the progress by different companies. A ‘disengagement’ occurs when the human safety driver interferes. In simple terms, companies with more miles reached per disengagement, and a higher total testing mileage overall, should have a more reliable system. As of [date], Baidu, AutoX, and Pony.ai were among the top five in terms of miles per disengagement. Waymo, which was ranked second, had more than 13 times more testing mileage than Baidu, while AutoX had limited testing mileage.

According to the CDMV, as of February 26, 2020, a total of 64 companies had California autonomous driving test licenses, including full solution providers, component suppliers, technology companies, autonomous driving startups and others. Among these, five companies are allowed to use autonomous vehicles to transport passengers, including Aurora, AutoX, Pony.ai, Waymo, and Zoox, two of which are Chinese firms. Waymo is the only company so far to hold a driverless road test license (with no safety driver required).

60 of these companies conducted testing in 2020. The accumulated mileage of test vehicles of those that achieved road testing in automatic driving mode exceeded 2.9 million miles, an increase of 800,000 miles over the previous year. Six companies tested less than 100 miles, namely Valeo, Box Bot, Telenav, BMW, Tesla, and Ridecell. Two companies had their autopilot road test licenses revoked for failing to submit a disengagement report on time. These were Roadstar.ai and Xmotors.ai of Xpeng Motors North America.

ESG Adoption in AV Sector

The adoption of AVs by ESG investors is still nascent, although interest is clearly trending upward. Still, comparatively few ESG portfolios have substantial AV investments, although this is due largely to safety concerns that have yet to be definitively addressed by the vehicle manufacturers. Otherwise, the AV sector holds many of the same attributes that attract ESG investments that are found in the EV sector.

AUTHORED BY
Mirae Asset Global Investments

Date: May 18, 2021
Category:

1 Ministry of Transport of the PRC 2020, US Department of Transportation 2020.
2 Ministry of Industry and Information Technology of the PRC, 2021.
3 This needs a citation.

This document has been prepared for presentation; illustration and discussion purpose only and is not legally binding. Whilst complied from sources Mirae Asset Global Investments believes to be accurate, no representation, warranty, assurance or implication to the accuracy, completeness or adequacy from defect of any kind is made. Unless indicated to the contrary, all figures are unaudited. The division, group, subsidiary or affiliate of Mirae Asset Global Investments which produced this document shall not be liable to the recipient or controlling shareholders of the recipient resulting from its use. The views and information discussed or referred in this report are as of the date of publication, are subject to change and may not reflect the current views of the writer(s). the views expressed represent an assessment of market conditions at a specific point in time, are to be treated as opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. In addition, the opinions expressed are those of the writer(s) and may differ from those of other Mirae Asset Global Investments’ investment professionals.

The provision of this document shall not be deemed as constituting any offer, acceptance, or promise of any further contract or amendment to any contract which may exist between the parties. The issuer of this article is Mirae Asset Global Investments (HK) Limited (“we”) which the individual, or we or our managed funds may hold the mentioned securities. It should not be distributed to any other party except with the written consent of Mirae Asset Global Investments. Nothing herein contained shall be construed as granting the recipient whether directly or indirectly or by implication, any license or right, under any copy right or intellectual property rights to use the information herein. This document may include reference data from third-party sources and Mirae Asset Global Investments has not conducted any audit, validation, or verification of such data. Mirae Asset Global Investments accepts no liability for any loss or damage of any kind resulting out of the unauthorized use of this document. Investment involves risk. Past performance figures are not indicative of future performance. Forward-looking statements are not guarantees of performance. The information presented is not intended to provide specific investment advice. Please carefully read through the offering documents and seek independent professional advice before you make any investment decision. Products, services, and information may not be available in your jurisdiction and may be offered by affiliates, subsidiaries, and/or distributors of Mirae Asset Global Investments as stipulated by local laws and regulations. Please consult with your professional adviser for further information on the availability of products and services within your jurisdiction.

Australia: The information contained on this document is provided by Mirae Asset Global Investments (HK) Limited (“MAGIHK”), which is exempt from the requirement to hold an Australian financial services license under the Corporations Act 2001 (Cth) (Corporations Act) pursuant to ASIC Class Order 03/1103 (Class Order) in respect of the financial services it provides to wholesale clients (as defined in the Corporations Act) in Australia. MAGIHK is regulated by the Securities and Futures Commission of Hong Kong under Hong Kong laws, which differ from Australian laws. Pursuant to the Class Order, this document and any information regarding MAGIHK and its products is strictly provided to and intended for Australian wholesale clients only. The content of this document is prepared by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Australian Investments & Securities Commission.

Hong Kong: Before making any investment decision to invest in the Fund, investors should read the Fund’s Prospectus and the Information for Hong Kong Investors of the Fund for details and the risk factors. Investors should ensure they fully understand the risks associated with the Fund and should also consider their own investment objective and risk tolerance level. Investors are also advised to seek independent professional advice before making any investment. This document is issued by Mirae Asset Global Investments and has not been reviewed by the Hong Kong Securities and Futures Commission.

Singapore: It is not intended for general public distribution. The investment is designed for Accredited Investors as defined under the Securities and Futures Act of Singapore. Please consult with your professional adviser for further information on the availability of products and services within your jurisdiction.