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China Autonomous Driving Industry Review

China Autonomous Driving Industry Review

China’s autonomous driving industry saw unprecedented growth in 2021, with over $8.5 billion invested in Robotaxi start-ups, self-driving truck developers, LIDAR (Light Detection and Ranging) makers, smart electric car manufacturers, and chipmakers focused on vehicle automation.1 We see three camps of players, including electric vehicle (EV) start-ups, autonomous driving start-ups with an algorithm approach, and tech companies like Huawei and Baidu, competing head to head. This article provides an update on the development progress of these companies.

Auto OEM –EV Start-ups determined to develop autonomous driving capabilities in-house

EV start-ups are the most aggressive among domestic auto original equipment manufacturers (OEMs) to build up self-driving capabilities. We see a clear product roadmap with L4-ready hardware to be launched over the next two years.2 The advantage of this aggressive roadmap is the ability to collect and label more data with well-equipped vehicles on the road. EV start-ups are currently working with 2-3 self-driving chip providers in parallel and meanwhile hiring software engineers to develop in-house algorithms. XPeng, Nio and Li Auto are all moving away from the Intel Mobileye platform as the closed ecosystem leave auto OEM with little room to develop in-house software capabilities.

It is difficult to pick a winner at present due to the lack of quantitative data on autonomous driving software performance, homogeneity in core hardware supply and no deployment of L4/L5 autonomous driving software.

XPeng: The Company is committed to full-stack in-house autonomous driving capabilities. Currently, it adopts NVIDIA Xavier to power its XPilot 3.0/3.5, while XPilot 4.0 (XPeng G9 model) will carry Nvidia Drive Orin platform. 3

Nio: Its ET7 will be the first model from an EV start-up carrying Nvidia Orin.4

Li Auto: The Company launched the 2021 Li ONE with Horizon Robotics J3 chips. Its next platform will be powered by NVIDIA Orin on the flagship SUV X01 to be launched in 2H22. 5

Autonomous Driving Start-ups

Compared to EV companies like Tesla and its Chinese peers, pure autonomous driving start-ups might see themselves in a less advantageous position for data collection as they do not have that many cars running on the road which can constantly provide data points to enhance autonomous driving algorithms. As a result, autonomous driving companies rely heavily on road testing and Robotaxi service, in which case they generally collaborate with OEMs. However, with a corporate culture of entrepreneurship and autonomy, autonomous driving start-ups attract a large talent pool of software developers with strong academic backgrounds which is accelerating technology enhancement at an unprecedented speed.

Coupled with support from private-round investors and the Chinese government, autonomous driving start-ups have been expanding quickly. In February 2021,'s first Robotaxi with the latest system rolled off its standard production line, followed by an upgrade to PonyPliot+ Robotaxi service in all aspects two months later. In May, the Robotaxi service landed in Yizhuang District, Beijing.6

Although the whole autonomous driving industry still faces a range of challenges such as immature supply chain, high costs for perception tools like LIDAR, unsound laws and regulations, as well as persisting concerns on safety issues and boundaries for individual party’s responsibility, L4 autonomous driving technology is quickly evolving while the overall cost is dropping, making the commercial use in designated scenarios an expectation in the medium-term.

Tech Companies

Huawei has shifted to focus on smart car development due to stagnant growth of its consumer business. We believe it can become a formidable competitor because 1) ICT (information and communications technology) infrastructure sets the groundwork for connectivity; 2) self-developed Harmony Operating System can strike a balance between stability, security, and ecosystem; 3) Huawei owns full-stack, all-scenario AI portfolio that gains increasing attraction from developers; and 4) Huawei can offer a wide range of sensors given its engineering power.

Currently, Huawei collaborates with several OEMs in smart cars. The cooperation model between Huawei and OEMs has evolved from supplies of LTE V2X (Long-Term Evolution vehicle to everything) solution, TBOX, and other existing products to provisions of underlying platforms/solutions and co-development of smart cars.

With its well-rounded capabilities, we will not be surprised if Huawei launches its autonomous cars in the future, similar to Apple which is reportedly to mass-produce electric vehicles with its own self-driving technology as early as 2025.7

For Baidu, the company introduced Apollo Moon in June, 2021, which is the 5th generation of Apollo Go Robotaxi vehicles with another 60% drop in cost per mile compared to an average decrease of 62% in the first four generations of Apollo Robotaxi vehicles.8 According to management, the overall cost of Apollo Moon, including vehicle assembly and autonomous driving kits, is RMB480k, or RMB8k monthly amortized costs if assuming five years' amortization, which is already within the operating cost range for ride-hailing.9 The company expects to have a full-scale autonomous ride-hailing operation by 2025.10

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1. TechCrunch, February, 2022

2. Mirae Asset, 2022

3. XPeng, 2021

4. Nio, 2022

5. Li Auto, 2021

6. Pony AI, 2021

7. Bloomberg, 2021

8. 2021 Baidu World Event, August 2021

9. 2021 Baidu World Event, August 2021

10. 2021 Baidu World Event, August 2021

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