On the afternoon of January 16, the China EV 100 Summit High-level Forum in 2021 opened in Beijing. Miao Wei, Vice Chairman of the Economic Committee of the National Committee of the Chinese People’s Political Consultative Conference, delivered a speech online.
General Secretary Xi Jinping pointed out that “the world is experiencing a major change unseen in a century. China has shifted to a stage of high-quality development. We must adhere to the new development concept, adopt dialectical thinking to view the new opportunities and challenges in the new development stage, maintain strategic focus, understand and grasp the laws of development, promote the formation of a new development pattern with the domestic circulation as the mainstay and the domestic and international dual circulation mutually promoting , seize opportunities in crises, and create a new situation in changing times.”
Miao Wei stated that “the automobile industry is an important force driving the new round of technological revolution and industrial transformation, an important support for building a manufacturing power and a network power, and a pillar industry of the national economy.”
Currently, China’s new energy vehicle (NEV) industry is continuously growing, and the development of intelligent connected vehicles is in the pre-commercialization stage of rapid technological evolution and industrial acceleration. Today, I want to focus on some new trends and changes in the development of electric, intelligent, and connected vehicles, and share my personal feelings from four aspects.
New Trends in Automotive Industry Development
1. The development of NEVs has a good trend, injecting new energies into China and the world’s economic development.
As we all know, China’s NEV development is at the forefront of the world. Since the State Council issued the “Plan for the Development of the Energy-Saving and New Energy Automobile Industry” in 2012, China has adhered to the strategic direction of pure electric drive, and has maintained the world’s first place in production, sales, and ownership for five consecutive years from 2015 to 2019.
In 2020, China’s auto sales reached 25.31 million units, a year-on-year decrease of 1.9%, while the sales of NEVs reached 1.367 million, a year-on-year increase of 10.9%. Since July 2020, the sales of China’s NEVs have shown a growing trend, and the monthly production and sales have refreshed the historical records of the corresponding months. Overall, China’s NEV production, sales, and ownership are expected to continue to rank among the top in the world in 2020.
However, while we recognize the achievements, we should also pay attention to the fact that the sales of traditional cars in the EU are declining at a faster rate than in China, but the growth rate of NEVs is faster than in China. From the first three quarters of 2020, the penetration rate of NEVs in the EU was 9.9% of the total car sales, while in China, it was only 5.4%, indicating that their adjustment speed is faster than ours.
2. The importance of intelligent connected vehicles (ICVs) is becoming more prominent, becoming a strategic direction for the development of the industry in the new era.
ICVs are the products of the deep integration of the automotive industry with new-generation information and communication technologies such as artificial intelligence, big data, and the Internet of Things. They are the main direction for the intelligent and interconnected development of the automotive and transportation sectors and an important means to effectively solve problems such as traffic safety, road congestion, energy consumption, and environmental pollution.From a global perspective, models equipped with L2 level autonomous driving features have started to be commercially applied on a large scale, and some car companies are also accelerating the testing, verification, and mass production of L3 and above in specific scenarios.
In 2020, China’s market penetration rate of L2 level intelligent connected cars reached 15%, a very gratifying achievement.
To speed up the process of industrialization, major developed countries and regions in the world actively promote the development of laws, regulations, and technical standards.
For instance, the United Nations World Forum for Harmonization of Vehicle Regulations (WP.29) continues to promote the regulation of autonomous driving technology, and in July 2020, passed three technical regulations on information security, software upgrades, and automated lane-keeping systems.
The United States has released four policy guidance documents for smart connected vehicles, and recently published the “Automated Driving Systems: Comprehensive Plan” guide. The EU and Japan have also respectively released the “Guidelines for Exemption Procedures for Automated Driving Vehicles” and “Autonomous Driving Safety Technology Guidelines”.
The continuous evolution of automotive electronic and electrical architectures will make the onboard intelligent computing platform a focal point of competition.
As smart connected cars continue to develop, vehicles need to provide more powerful computing, storage, and communication capabilities, and software also needs to meet the characteristics of portability, iteration, and scalability. As for new energy vehicles, people are more concerned with their mileage, but for smart connected cars, the focus in the future may be on computing power, that is, the number of TOPS achieved.
Some experts predict that if L4 level is reached, the onboard computing power needs to reach more than 4000 TOPS, which the world has not achieved yet.
Based on this development trend, vehicles will continue to increase in electronic and electrical functions, leading to more and more ECUs. Currently, a car can have dozens or even hundreds of ECUs, mainly using decentralized control methods. However, with the development of smart connected cars, some leading companies have begun to shift from decentralized to centralized control, and domain controllers have gradually become a trend in automotive development.
Domain controllers becoming a trend of development, the onboard intelligent computing platform has attracted high attention from related domestic and foreign enterprises and research institutions, and has become a new focal point of future industrial competition. The so-called onboard intelligent computing platform is a complex system that integrates heterogeneous distributed hardware platforms and intelligent driving operating systems. It is the core of the intelligent driving field.
By breaking through common technologies and basic modules, the onboard intelligent computing platform will break the vertical and closed industrial supporting chain and horizontally penetrate and integrate cross-border fields, promoting the formation of a new industrial ecological system.
New trends bring new changes
- The shape of the automotive industry is changing.
Traditionally, car companies used to rely on changing the appearance every two years and changing models every four years to attract customer attention through changes in interior and exterior styling, but this practice is gradually losing its appeal, and car companies spend huge sums of money to bring about aesthetics fatigue.Using increasingly upgraded software that relies on powerful hardware and machine learning systems, the automotive industry is better able to cater to user habits, increase user loyalty and satisfy individualized needs. This leads to a “thousand faces, thousand trends” approach to products and services. In the future, cars may have a similar appearance, but their practical functions will vary, marking a shift towards customizable and innovative vehicle features.
As products evolve, cars, infrastructure and operating platforms will become intelligent and interconnected, creating a mobile space that can support the construction of intelligent transportation and smart cities. Cars will become data centers on wheels and not just vehicles for transportation and consumption of traditional energy, but also as important carriers for storing and absorbing renewable energy.
Recently, media has reported that Baidu is establishing an intelligent network vehicle company and Apple is starting to manufacture electric vehicles, highlighting the cross-border integration of the automotive industry. Experts suggest that the automotive sector is entering a new phase of software-defined functionality and data-driven design, which requires thorough research and analysis from companies and research institutions.
- Business models in the industry must be adjusted.
The new generation of information technology and the automobile industry are accelerating their integration, creating new business models and having a significant impact on the automotive industry and how companies provide services for users, with a continued focus on delivering solutions for users.
First, hardware revenue and profits for vehicles are expected to decrease, while software revenue and profits are expected to significantly increase. According to McKinsey’s predictions, more than 80% of the future transformation of cars will come from software and electrical architecture, with software costs accounting for over 60% of the total cost of vehicle systems.
Although hardware costs may decrease as we scale up, IT software costs are almost zero and remain low even with more users. Therefore, companies that hold the advantage in software services will have more say and initiative in the future.
Second, by using data, software and services, relationships between car companies and customers can evolve from a simple transactional relationship to a sustainable cooperative one.
Third, car companies can move from just selling products to selling products and services. The business model of original equipment manufacturers can change from “manufacturing” to “manufacturing + service,” realizing value through OTA upgrades, pay-per-use models and other means.
Over the past few years, car companies with high research investment and innovative business models have seen their market values rise quickly. This growth, as demonstrated by Mr. Wan Gang, Chairman of the National Committee of the Chinese People’s Political Consultative Conference, has surpassed traditional car companies and generated a lot of industry discussion.I personally believe that, excluding short-term factors, the main reason for the higher market value of intelligent connected vehicles and new energy vehicles compared to traditional vehicles is the classification of the former as high-tech enterprises, while the latter is not. It is well-known that the market value of high-tech enterprises has always been much higher than that of traditional enterprises in terms of IPO evaluation. Therefore, by increasing the technological content and adding value, more emphasis should be placed on software and services.
In this major trend, we should go with the flow. If companies can accurately grasp the trend of development, seize this opportunity, and have a clear differentiation strategy, their future development will be even broader. Otherwise, they may fall into a passive position in the rapidly changing industry and fierce market competition, becoming low-value-added product suppliers in the value chain, or even facing the risk of elimination.
Thirdly, the deep integration of industries will become inevitable.
First, cross-border integration and innovation will become a trend. With the transformation of the automotive industry and changes in consumer patterns, information and communication technology and the Internet have been closely integrated with automotive enterprises. Traditional enterprises and emerging enterprises are also accelerating their integration and development. The boundaries between the automotive, transportation, and information and communication industries are becoming increasingly blurred. Enabling and synergistic development between them has become an internal requirement for the growth and expansion of market entities. Cross-industry and cross-disciplinary integration and innovation will become new characteristics of industry development.
Second, the consensus on the coordinated development of vehicle-road systems is gaining ground. In the past, we relied on the automotive industry to solve all the problems, so we called it Intelligent Vehicles. However, now we still need to adhere to Intelligent Connected Vehicles. In addition to the need for automotive intelligence, we also need to construct smart roads and smart infrastructure so that coordinated interaction between vehicles and roads can promote integration and development. For example, some signs and traffic lights are still interpreted by humans. As we develop intelligent vehicles, in addition to human interpretation, we can also use sensors. However, when encountering weather conditions such as wind and rain or other changes in climate, the sensors might not be effective. In such cases, I think we need to accelerate the digital transformation of road infrastructure, turning it into an intelligent double-sided interactive system. Even if the driver does not notice the traffic lights, the car can still recognize them, greatly reducing the occurrence of traffic accidents.
For example, some current road sections are easily entered by mistake, and drivers will be fined. However, if a software is installed in the car in the future, with an annual cost of a few tens to avoid fines of several hundred dollars, the calculation is still reasonable. These are all changes.
Finally, we must open up new ground in the face of changes.To achieve the popularization and scale development of intelligent connected vehicles, multi-dimensional integration of resources is necessary, and the construction of industrial ecology needs to be accelerated. China has comparative advantages in this area, which can seize the initiative for industrial innovation and create more opportunities. Of course, we also face challenges, including the bottleneck problem, especially when we mention the EU and Japan. As we note, another automotive power is the United States, which is not leading in new energy vehicle development and intelligent connected vehicle development. However, the United States will certainly take action to contain the countries and enterprises that are leading the way in a certain period of time. Therefore, what happened to Huawei and ZTE deserves our attention. We must be prepared early, at least to be a spare tire.
1. Opportunities
First, the advantages of the system are obvious. We have unified understanding, concentrate on doing big things, work together, and cooperate with each other, which is our advantage. In recent years, relevant departments of the State Council have continuously strengthened the formulation and issuance of relevant policies and plans.
For example, in 2020, the State Council released the Smart Car Innovation Development Strategy and the New Energy Vehicle Industry Development Plan. The Ministry of Transport issued guidance on promoting the development and application of road traffic automatic driving technology. Relevant ministries and local governments are also continuously strengthening the coordination of cross-domain management issues. The Intelligent Connected Vehicle Road Test and Demonstration Application Management Standards, developed by the Ministry of Industry and Information Technology, the Ministry of Public Security, and the Ministry of Transport, are currently open to public opinions. The Ministry of Public Security, together with the Ministry of Industry and Information Technology and other departments, is pushing for the revision of the Road Traffic Law.
The Ministry of Natural Resources, the Ministry of Industry and Information Technology, and Beijing have launched a pilot project for the application of high-precision maps for automatic driving. The Ministry of Housing and Urban-Rural Development and the Ministry of Industry and Information Technology have jointly organized a pilot project for the coordinated development of smart city infrastructure and intelligent connected vehicles. Many provinces, cities, and regions across China have also introduced industry plans and policy measures to promote the development of intelligent connected vehicles. The promotion of the above-mentioned work has played an important guiding role in promoting the development of the industry.
Second, there is a broad market space. China has a huge advantage in the automotive market, coupled with a complete industrial system, which is conducive to the rapid large-scale application and combination optimization of new technologies, and accelerates the transformation of scientific and technological achievements into real industrial productivity.
In addition, because of our large number of vehicles and complicated road conditions, the rich application scenarios are just conducive to promoting the development of intelligent connected vehicle technology and industry.
According to statistics, since 2015, more than 60 intelligent connected vehicle testing and demonstration areas have been announced in China. Intelligent connected vehicles are actively being demonstrated in specific areas such as parks, ports, mines, and specific scenes such as connections, sanitation, and logistics distribution.
National-level vehicle networking pilot zones as carriers and city-level large-scale demonstration applications promote each other, and this system is constantly advancing. In terms of highway pilots, the Ministry of Transport has decided to use the Beijing-Shanghai Expressway as a pilot and is actively promoting it.In terms of urbanization pilot projects, with the support of the Ministry of Public Security, Wuxi has been at the forefront of the development of vehicle networking as a pilot area, having digitized a majority of its traffic signal facilities. Beijing has also initiated the construction of a high-level autonomous driving demonstration zone in Yizhuang, consolidating elements such as vehicles, roads, clouds, networks, and maps, and deploying communication networks, roadside perception, and traffic infrastructure to support L4 autonomous driving taxis, intelligent connected public transport, self-driving valet parking, and other high-level application scenarios.
Thirdly, the technical advantages are constantly strengthened. Firstly, after years of hard work, China’s new energy automotive industry has significantly improved its technology level, and its industrial system is becoming increasingly more perfect, greatly enhancing its competitiveness. In the development of intelligent connected vehicles, we are generally synchronized with international advanced levels.
Secondly, China has also made certain achievements in exploring the intelligent connected vehicle concept in China, taking the lead in proposing hierarchical networking, highlighting the coupling of intelligence and networking, and continuous research on system architecture, and the development of industrial infrastructure platforms.
Thirdly, in fields such as internet information and communication, China has nurtured a group of well-known companies with strong capabilities in information technology, network communication, and is at the international leading level in terms of network scale, 5G communications, Beidou satellite positioning, and other technologies. Taking communication as an example, during the 4G era, we issued licenses 3-4 years later than Europe, America, Japan, and Korea, but in terms of 5G construction, we are one of the first countries to deploy commercial networks. Out of the 700,000+ 5G base stations we have built, over 80% are standalone networks or compatible with standalone and non-standalone networks, laying a solid foundation for our future development.
2. Of course, while discussing opportunities, we are also constantly faced with challenges, mainly in three aspects.
Firstly, the chip issue. While everyone is paying attention to information and communication equipment and mobile phone chips, we should also pay attention to automotive chips, including general chips and vehicle-grade specialized chips, and balance their deployment.
Secondly, the issue of operating systems. As we all know, since hardware must be accompanied by software, and since there are platforms, there must be a basic software, which is the so-called operating system. How should this operating system be developed? In PC era, Windows surpassed all its competitors; now, we are playing catch-up. In the smartphone era, apart from Apple’s iOS, there is only Android, and with the US imposing sanctions on Huawei and recently, Xiaomi, the operating system will be a major issue in the future. As I mentioned earlier, when automobiles reach a certain stage, the US may intervene, so we must be prepared early and create a self-controlled, open-source, and open automotive operating system, which is essential.### Three is about safety issues. With the development of intelligent connected vehicles, a series of security issues have emerged. We should plan ahead for these issues.
Fourth, three recommendations for responding to new changes.
In December last year, the Central Economic Work Conference proposed to form a high-level dynamic balance of demand-driven supply and supply-led demand, and to enhance the overall efficiency of the national economic system.
At the same time, deployment was also made for work related to carbon peaking and carbon emissions.
Based on these major decisions and deployments of the central government, I would like to put forward three recommendations here:
First, raise awareness, coalesce forces, and strengthen organizational coordination. The development of intelligent connected vehicles is the result of cross-disciplinary and cross-industry integration, so there should be greater coordination between the relevant departments of the government, so that everyone can work together to promote the development of the industry.
Second, support cross-industry integration of enterprises, accelerate the landing of key products and the improvement of quality. We must adhere to the direction of supply-side structural reform, seize the basic point of expanding domestic demand, improve the adaptability of the supply system to domestic demand, fully give play to enterprises’ leading role in innovation, and adopt the form of competitive bidding. We also need to encourage cross-industry cooperation among automakers, internet companies, and software companies. We should focus on software and security, establish a testing, verification, and certification system that is adapted to the development of new energy vehicles and intelligent connected vehicles, and improve our technological capabilities.
Third, build 5G network moderately in advance and vigorously promote co-construction and sharing. We are already at the forefront of global 5G network infrastructure construction. The next step is application scenarios. In this regard, we must fully consider the development of intelligent connected vehicles and the development of the automotive networking industry that the 5G provides opportunities for. I have said in the past that 20% of 5G may be used for C-to-C, while 80% may be used for B-to-B. If the data flow between people is limited, the data flow between people and cars, cars and cars, cars and roads, and cars and people will increase exponentially.
Ladies and gentlemen, the development of electrification, intelligentization, and networking of automobiles is the general trend. The fields of automobiles, electronic information communication, transportation, and energy are accelerating convergence. The automobile industry is in a strategic opportunity period for transformation and upgrading from being a large industry to becoming a strong one. Our country has obvious advantages in institutional mechanisms, market capacity, and other aspects, but there are also bottlenecks and shortcomings that restrict development. Therefore, we hope that everyone can coalesce forces, strengthen coordination, turn crises into opportunities, create new situations in changing conditions, and make new and greater contributions to the construction of a manufacturing strong country, a network strong country, a transportation strong country, a digital China, and the high-quality development of the automobile industry.
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.