From the Vehicle to the Cloud China: Connected Driving is an Expensive Vision

About a month after the start of large pilot projects for connected driving in China, the problems with the project are becoming apparent. While the government promotes the technology and invests heavily, car manufacturers have so far shown little enthusiasm. The high initial costs deter many companies, several Chinese trade media report unanimously.

In 20 Chinese megacities, government-funded pilot projects have been underway for a month, where cars and buses equipped with appropriate communication units communicate with sensors on the roadside and in traffic lights, and are coordinated via the cloud. However, the car companies whose cooperation is needed are currently still in the "wait and see" stage, writes the economic newspaper Jingji Guancha Bao. "At present, car companies are not very active in vehicle-road-cloud collaboration."

Navigate on Autopilot

As in Europe and the USA, it is easier for automakers to develop autonomous driving and its precursor, ADAS (Advanced Driver-Assistance Systems), within the car itself. NOA, or Navigate on Autopilot, as Tesla-like driving assistance functions are called in China, is gradually conquering city by city and is being offered in one car model after another.

The second technological route towards autonomous driving, connected driving, is still in its early stages. Although China is already a global leader in this area, the metropolises of Beijing, Shanghai, and Chongqing, along with 17 other million-plus cities such as Shenyang, Changchun, and Nanjing, have established initial test zones.

Unfortunately, due to the overall poor state of the Chinese economy following the extreme COVID-19 measures, the escalation of the economic war with the USA, and other issues, many local governments now lack the funds for the substantial initial investments in hardware and the necessary cloud platforms.

High Costs

Many experts consider connected driving to be the superior and safer variant of automated driving because cars that are networked with other road users and roadside control systems are better "informed" than those relying solely on their own sensors or maps. However, this is very expensive. The economic magazine Caixin has recently calculated the costs that each individual city or municipality will incur before the vision of widespread connectivity can become a reality.

To equip a pilot project in the Yizhuang district of Beijing, covering an area of 60 km² with the necessary infrastructure, which includes 5G antennas, roadside sensors, or smart traffic lights, the city of Beijing has so far invested "more than two billion Yuan," equivalent to about 250 million Euros, reports Caixin.

Although the expansion of the zone by an additional 100 km² (38.6 square miles) is already underway, and a plan to cover all roads in Beijing is under discussion, the initial investment alone would require "ten billion yuan" (approximately €1.3 billion or $1.44 billion), according to estimates. Caixin highlights the scale of this challenge, noting that replicating Yizhuang’s advancements throughout Beijing would be a significant financial burden. "Equipping thousands of intersections across the city would demand billions more in yuan for necessary upgrades."

No business model available

For the four to eight cameras, four millimeter-wave radar devices, and one LiDAR required per intersection, the hardware alone costs about 500,000 Yuan, which is nearly 64,000 Euros (approx. 71,000 USD). Financially robust metropolises like Beijing or Shanghai might be able to afford this, but in the Chinese provinces, many local governments are already heavily indebted.

What currently motivates automakers to wait is also the lack of a realistic business model for the long-term operation of the networks. The electricity costs and fees of network operators like China Mobile and cloud providers are high. It is not yet clear how the installation of receivers in cars is supposed to pay off for automakers.

As long as the scaling beyond the twenty pilot zones progresses slowly, the technology remains unattractive for car buyers. "If one part of a city achieves autonomous driving at level L4, but another part only reaches L3 or L2, it is meaningless for the automakers," Jingji Guancha Bao quotes an expert. This cannot be explained to customers—and thus, they cannot be charged for it.

Despite these issues, the Beijing central government is still committed to its vision, which is also incorporated into the 14th Five-Year Plan of the party. Chinese planners view connected driving as another opportunity to outpace the West in emerging, new technologies from the outset, similar to e-mobility. Giving up quickly due to problems in the initial phase is not their approach.

Currently, the Chinese leadership is focusing on the twenty pilot cities and is additionally building a network of 30 "digital highways" across the country, which will lay the foundation for the infrastructure of connected driving in China. To further finance this, the issuance of special government bonds for vehicle-road-cloud integration is being experimented with.

*Henrik Bork is Managing Director of AsiaWaypoint, based in Beijing, PR China.  

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