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Autonomous Vehicles (AV) are rapidly changing the mobility market. The concept of driverless vehicles has been growing increasingly popular over the past years, with many technology giants investing in this market such as Google, Tesla, Audi etc. According to McKinsey&Company, It is projected that by 2040, AV could account for as much as 66% of passenger-kilometers travelled, generating a market revenue of $1.1 trillion from mobility services and $0.9 trillion from sale of AVs. The growth of AVs can be attributed to the following drivers:
● Presence of 5G: 5G’s low latency and high bandwidth characteristic provides a more comprehensive guarantee for the V2X communication network of the Internet of Vehicles, improving the functions of intelligent driving
● Favourable national policies: China’s “Smart Car Innovation Development Strategy” projects that by 2025, the technological innovation, industrial ecology, infrastructure, regulations and standards, product supervision and network security system of China's standard smart cars will be formed. AV will achieve mass production and automotive wireless communication networks (LTE-V2X, etc.) will achieve regional coverage. Additionally, intelligent transportation systems and smart city related facilities will be constructed. With the new generation of automotive wireless communication networks being applied in cities and highways, this will allow high-precision time-space reference service networks to achieve full coverage.
● Potential to solve China’s major traffic congestion problem: By reducing the time spent and number of vehicles on the road
● Potential to solve China’s major pollution problem: By increasing usage of clean energy such as hydrogen and electricity, and help reducing local vehicle emissions
With the growing AV market, it brings about growth potential in the following areas too.
● Advanced Driving Assistant System (ADAS): According to Marketstand’s forecast, from 2019 to 2027, the average annual growth rate of the global ADAS market will reach 20.7%. In the global passenger car market, there exists a large number of ADAS system integrators, with the top 5 occupying more than 65% of the global market share. Whereas the commercial vehicle ASAD system integrators are more concentrated, with the top 3 companies (WABCO, Continental and Bosch Group) accounting for more than 60% of the global share. Therefore, given that at present, the annual sales volume of passenger cars in China is more than 20 million, and the penetration rate of intelligent driving functions of L2 and above is at a low level, there exists large market potential.
● Sensing Devices: Intelligent driving requires 9-19 sensors in L2 (including ultrasonic radar, long-range and short-range radar, and surround view cameras) and 19-27 sensors in L3 (including lidar, high-prevision navigation, positioning etc). Beyond the practical L3 level, the car’s use of sensors will increase fatally. Therefore, with the growth of the AV market, it is no doubt that the sensor market will grow rapidly too. The existing level of automatic driving on the market does not exceed L3, while the L3 level is the ceiling of the core of automatic driving: sensor components. But if a company achieves technological breakthroughs and can manufacture sensors that meet the requirements of L4 or even L5 level autonomous driving, then the income will be unlimited. Form 2014 to 2018, China’s automotive radar market grew from 1.47 billion yuan to 4.14 billion yuna, with a compound annual growth rate of 29.5%. Currently, the millimeter wave radar is monopolized by traditional parts giants such as Continental, Bosch, and Hella while the radar products of local companies are only on a small scale. However, given the mandatory AEB system requirements on vehicles, local enterprises are expected to increase its production volume of millimeter-wave radar systems to meet the requirement.
● GPS: Intelligent Driving with L3 function requires centimeter-level positioning therefore as popularization of intelligent driving increases, demand for high-precision positioning also increases. The IMU market is projected to reach approximately US$1 billion by 2022 and US$4.7 billion by 2027. However, due to China’s policy barriers, it is expected for local high-precision positioning enterprises to grow rapidly.
● LCD dashboard: With the penetration of new energy and high-level intelligent driving cars, the installation of LCD instrument panels will continue to rise. According to Marklines's forecast, the full LCD instrument panel will increase from 15% in 2019 to 40% in 2025. China's LCD instrument market is expected to reach 11.9 billion yuan in 2025, an increase of 147%. Looking up, the HUD market size is about 2.24 billion yuan in 2019 and will reach 9.7 billion yuan in 2025. Increased penetration of LCD instrument panels and HUD will be growth opportunities in the field of smart cockpits.
In conclusion, the Chinese AV market presents a huge opportunity for foreign companies looking to expand their operations into China in terms of hardware such as sensors, cameras, lidar and the computing platform since these will benefit greatly from the scale impact of global solutions. Whereas for mapping, LBS and data-cloud solutions which require heavy localisations and have limitations on foreign-company involvement, foreign companies are at a disadvantage in comparison to local players who have access to location-based services. Therefore, companies looking to expand into China should focus on the following components of the technology stack:
● Mobility services interface
● Motion planning algorithm
● Connectivity functions
● Central processing and graphic processing units
● Sensors
Summer Atlantic Capital is composed of a growing core team that can that can assist your company in penetrating the Chinese AV’s market, be it through a joint venture, distribution deals, or any other structures.If you or your company have a new technology in the AV industry and want to enter the Chinese market, please don't hesitate to contact us at info@summeratlantic.com for a free evaluation. Based on our technical evaluation of your technology and our initial market evaluation process, we can provide your company with optimal partnership requirements to ensure a smooth expansion into the Chinese market. For more information, you can also
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