For many years, foreign manufacturers experienced record growth in China. But those days are over: last year, all major car makers reported slower growth in the world’s largest car market. China’s economic slowdown can only partially explain this phenomenon. The other reason is that local car brands have become serious competitors. Furthermore the rapidly proceeding digitisation of cars and traffic systems in China could amplify this trend.
Companies and policy-makers in China are promoting vehicle connectivity as ‘the Internet of Vehicles’. This concept covers all forms of vehicle integration within a digital infrastructure, including communication between:
- A vehicle and its driver (or driver’s mobile)
- Several vehicles
- Vehicle and intelligent transportation systems
- Vehicles and the internet
- Vehicles and mobile networks
- Vehicles and satellites (satellite navigation)
- Car-related online services (pay-as-you go insurance).
Internet companies such as Baidu, Alibaba and Tencent dominate the Chinese internet and are key sources of impetus in driving the development of an Internet of Vehicles. Chinese smartphone manufacturers are the second driving force behind this trend. Xiaomi, LeTV, Huawei and ZTE have all discovered the automotive sector and re also committed to enhancing connectivity in the automotive sector.
Lastly state-owned companies are exploiting vehicle connectivity to consolidate the position of China’s Beidou satellite navigation system in the transport sector. Their long-term plan is to drive the American Global Positioning System (GPS) out of the market.
The companies involved in these new developments are all competing with each other, as they share a common goal: to design a digital ecosystem for connected cars that will provide them with a sales market for their own distinctive services and technologies and enable them to be independent of foreign suppliers and patents. They collaborate closely to this end, building cross-sector alliances where expedient. A lively network of powerful Chinese companies has thus emerged since the start of 2015, all of whom are working together to set up an Internet of Vehicles.
The Chinese Government is attempting to steer the development of the automotive sector through two fields of technology that have not been dominated by international players yet: e-mobility and the Internet of Vehicles.
Chinese car manufacturers have dominated the domestic market up till now, achieving a market share of around 75 per cent in 2015.2 A co-ordinated programme for promoting e-cars produced in China along with massive expansion and standardisation of battery-recharging facilities have helped to fuel this development.
The Internet of Vehicles represents a continuation of this strategy by the Chinese Government: they support Chinese companies in the digitisation of the automotive sector in the hope of securing them a competitive edge. Automotive companies are not the only ones to benefit, though: a number of other strategically important industries are also profiting, including the internet, information and communications sectors, quite apart from Chinese software makers. The Ministry of Industry and Information Technology (MIIT) is currently devising a strategy to promote the Internet of Vehicles as part of the 13th five-year plan (2016–2020).
Creating a competitive advantage for Chinese businesses, Beijing is no longer prepared to bow to international IT standards, patents and associated license fees, but would like to see Chinese standards adopted internationally instead. This applies to hardware and software systems for intelligent transportation systems as well as for satellite navigation and telecommunications infrastructure.
Source: Mercator Institute for China Studies