China sees rubber hit the road on its autonomous driving ambitions, finds KPMG special report

Autonomous driving systems are reaching an increasingly high level of sophistication in China.

Autonomous driving systems are reaching an increasingly high level of sophistication...

Autonomous driving (AD) systems are reaching an increasingly high level of sophistication in China, with Level 1 (Driver Assistance) and Level 2 (Partial Automation) scenarios being deployed on an increasingly large scale, finds KPMG China’s special report on Autonomous Driving: Levelling Up – China’s race to an autonomous future.

Part of KPMG China’s Leading Autotech 50 program, the report showcases China’s leading innovators in autonomous driving and analyses key challenges, opportunities and development trends for the industry.

Robotaxis, line haul trucking, ports, mining, and last-mile delivery identified as likely application scenarios for autonomous driving vehicles

The report explores multiple scenarios ripe for AD commercialisation. Firstly, it predicts that Robotaxis will realise mass commercialisation near 2030.

By the end of 2020, there were 365 million users of ride-hailing services, representing nearly 40 percent of total internet users. According to IHS Markit projections, China's driverless Robotaxi market is expected to reach RMB 1.3 trillion by 2030. This will be a new market and a major disruption as taxis and ride sharing vehicles can be replaced by Robotaxis. KPMG expects that Robotaxis will cannibalise some of the private vehicle market, particularly in urban centres.

Another major application scenario is autonomous line haul trucking, as highways are a relatively stable environment with fewer traffic dynamics, steady speeds and fewer adjustments per kilometre than city driving. Technology companies are currently making headway with Level 4 (High Automation) road testing, the report notes.  Other automated scenarios, including ports, mining, and last mile delivery have seen significant advancements with numerous pilots across the country.  

Norbert Meyring

Norbert Meyring, Automotive Sector Head, KPMG China, says:

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Autonomous driving is considered the crown jewel of automotive intelligence, an intricate melding of artificial intelligence, user-centric design, and sophisticated manufacturing. Full autonomous driving will transform the automobile from a purely mechanical product to what is frequently referred to in China as the ‘mobile third space’. This ongoing transformation is already changing the value chain of the automotive industry and will create a broadened transportation ecosystem. Once realised, true autonomous driving will transform our concepts of mobility, logistics, and other areas of our personal and professional lives.

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Charting a path for autonomous vehicle commercialisation

As detailed in the report, different types of autonomous vehicles have different commercialisation pathways and timelines. Full autonomous ride hailing services are at the high end of the complexity spectrum, requiring high levels of security, well-defined policies, and heavy cross-sector investment. On the lower end of complexity, cargo-carrying vehicles in closed operating environments are easier to commercialise since safety requirements are not as complex and regulations already exist or are more readily revised.

Digital infrastructure required to realise fully autonomous driving, including mobile data networks, smart roads and cloud computing, will require continuous upgrading. China is entering a new phase of ‘smart traffic’ development, the report says, which will require significant capital investment and deployment time to realise.

There is no consensus on a ‘correct’ model of AD development – whether ambitiously disruptive or conservatively incremental. Companies, even those outside of the automotive industry, have set goals to develop and commercialise autonomous-capable vehicles within several years, less than half the time of development of a conventional mass market vehicle.

Customer acceptance is another important consideration. The report predicts that China’s domestic market will incrementally accept AD vehicles as the technology becomes increasingly affordable.

Oliver Xu

Oliver Xu, Head of Audit – Automotive Sector, KPMG China, says,

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The acceptance of intelligent connected vehicles by society is still evolving, in part due to price concerns. According to previous KPMG Global Automotive Executive surveys, early customer acceptance of autonomous driving functionality is higher in China than in most other countries. However, these technologies are expensive compared to other premium features, resulting in a higher vehicle price. As component costs fall, and more AD systems are embedded into vehicles, the pace of customer acceptance will accelerate.

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ADAS technology is an important stepping stone for the commercialisation of AD

As an important first step towards autonomous driving, the ADAS (Advanced Driving Assistant System) is a gateway technology to educate and build trust with drivers, passengers, and regulators, according to the report. The penetration rate of ADAS systems has increased rapidly in recent years with significant future growth potential.

Andrew Ji

Andrew Ji, Head of Advisory – Automotive Sector, KPMG China, says,

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There are two main types of perception systems for autonomous driving – cameras with millimetre wave radar and lidar supported by cameras and radars. Both configurations are already used in mass production. Most automotive manufacturers are using the second approach to realise ADAS features, as they consider accuracy to be the paramount concern. Since algorithms cannot fully offset the quality of collected data from standard sensors, lidar has an irreplaceable advantage in advanced autonomous driving systems.

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Moreover, as lidar technology is maturing, not only has its cost decreased but it can also deliver better performance from smaller sensors. Therefore, it is expected that lidar integration will be the future trend for ADAS systems.

William Zhang

William Zhang, Head of Tax – Automotive Sector, KPMG China, says,

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Before 2019, vehicles with L2 ADAS systems only appeared in vehicles with a price range above RMB 350 thousand. However, since 2020, L2 ADAS systems started to be installed in mid-range vehicles, and even in less expensive vehicles with a price range between RMB 100 to 150 thousand. Customers will only accept autonomous driving in the future if ADAS can firstly be proven safe and convenient. For OEMs to reach a broad market, they must adopt intelligent technologies to attract consumers in the midrange and lower-end vehicle markets to prepare users for higher levels of autonomous driving.

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Supportive ecosystem

China currently provides a favourable environment for the development and commercialisation of autonomous driving technology, with supportive policies that facilitate access to capital.

In 2021, autonomous driving was mentioned in China’s 14th Five-Year Plan for the first time. Since then, government authorities across the country have been releasing favourable policies and as a result, the sector is thriving and local champions are emerging. 

Domestic companies have made considerable progress on AD system integration into vehicles.  The report finds that some key technologies, such as sensors and governing algorithms, need to be improved.  The largest AD solution providers by market share are global companies based outside of China.  However, at a component level, China is a major supplier of key technologies to these companies, demonstrating the global nature of AD development.  Overall, the capabilities gap is narrowing as China maintains dominance in complementary technologies such as 5G and artificial intelligence. 

Further, China remains committed to the development of autonomous driving, and policies will demonstrate this support. With the current stage of technological development, record levels of funding, and a strong talent pipeline, a majority of executives polled in the KPMG 2021 Global Automotive Executive Survey believe that fully autonomous vehicles will be operating on roads in China by 2030.

While risks remain on the path to autonomous driving maturity, China is seeing the rubber hit the road on its autonomous driving ambitions.



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