TheEconomistOctober 12th 2019 651T
he self-driving cars that cruise
around South Ronghua Road look just
like their American counterparts: chunky
sedans with a rack of sensors bolted to the
roof and a supercomputer in the boot. Beij-
ing’s government has dubbed this south-
eastern patch of the city Beijing-e-Town. It
is one of a growing number of urban spaces
across China designated for testing auton-
omous vehicles (avs). Digital lane markers
can switch parts of the road to av-only on
demand. Signs announce “National Test
Roads”. Cars bear the decals of China’s lead-
ing av companies: Baidu, Pony.ai, WeRide.
For years Western carmakers have
promised a world awash with avs by now,
making roads safer and less congested (see
table on next page). That it is not shows just
how tough a computational and regulatory
nut self-driving is to crack. It increasingly
seems that if avs are to become wide-
spread, it may happen first not in the West
but in China. A fleet of Chinese firms hope
to profit handsomely in the process.
That may seem counterintuitive. Tech-
nologically, the West appears streets
ahead. “Everybody is behind Waymo and
Cruise,” concedes a senior Chinese av exec-
utive, referring, respectively, to a subsid-
iary of Alphabet (Google’s holding com-
pany), and of General Motors (gm), a giant
carmaker. Waymo’s cars alone have self-
driven more miles than all Chinese avs put
together. Cruise has attracted $6.2bn of in-
vestment since gm bought the startup for
$1bn in 2016. cb Insights, a research firm,
estimates that $11.9bn has been invested in
American av firms since 2014, compared
with $4.4bn in China.avs with Chinese characteristics
Yet in the absence of driving software
which can handle chaotic city streets,
some Chinese firms are adopting an alter-
native strategy. They are turning the streets
themselves into something that software
can handle. The approach involves install-
ing sensors to guide cars, writing and en-
forcing rules about how humans move
around, designing (or redesigning) urbanlandscapes to be av-friendly and, critically,
limiting av firms’ legal liability in the event
of inevitable accidents. All this is easier in
authoritarian China than in the West’s un-
ruly, litigious democracies.
It also requires input from companies
beyond dedicated av-makers. Mobile-net-
work operators, such as China Mobile, and
telecoms-equipment manufacturers, like
Huawei, are building technology into their
systems which may in time help cars along
the road. Huawei wants its zippy 5gmobile
antennas to take on a large part of the pro-
cessing required to run an av—and a chunk
of av profits. That leaves a smaller share of
the pie for avcompanies. But the pie itself
should grow more quickly. Lowering the
cost of infrastructure per av deployed
should accelerate its roll-out, notes Feng
Hao of Bosch, a German engineering con-
glomerate which supplies high-tech com-
ponents to Chinese carmakers.
In a recent speech China’s minister of
industry and information technology,
Miao Wei, said that the market for connect-
ed vehicles is projected to be worth 100bn
yuan ($14bn) by next year. And as with just
about anything, the potential demand for
avs among 1.4bn Chinese is huge—$2trn by
2040, reckon consultants at McKinsey.
Chinese firms may prosper well before
the eventual arrival of all-out avs. They al-
ready benefit from the leapfrog effect, says
Wei Zhou, boss of China Creation Ventures,
a venture-capital fund. Cowa Robot, one ofSelf-driving cars
Autonomous ways
BEIJING AND PALO ALTO
The path to driverless vehicles is long and winding. China is taking an alternative
route to the West’s
Business
66 Chinagetsa blackAI
67 Bartleby:Secondthoughts
68 Tariffsaidplanemaking’sduopoly
68 SaudiAramcostillwantsitsIPO
69 SpilloverfromGM’sstrike
70 Schumpeter: Airbnb and UberAlso in this section