In Depth: China’s Self-Driving Tech-Makers Downshift

[para. 1] Initially, venture capitalists (VCs) were eager to invest in Chinese companies developing fully autonomous vehicles, aspiring to establish internationally recognized Chinese brands in smart car technology. However, since mid-2022, their enthusiasm has waned due to significant challenges hindering advanced self-driving technology's commercialization. To navigate this, many developers have pivoted towards creating less advanced assisted driving systems for automakers to sustain cash flow, thus maintaining investor interest.

[para. 3] This shift is timely, as the market for vehicles equipped with Level 2 and Level 2+ assisted driving systems is anticipated to grow. The Ministry of Industry and Information Technology data reveals that 55.7% of new passenger vehicles sold in the first half of 2024 included Level 2 systems, with 11% featuring Level 2+ systems. Meanwhile, SAE International classifies autonomous driving from Level 0 to Level 5. Level 2+ technology is an enhanced version of Level 2, incorporating navigation-assisted features beyond basic functionalities like adaptive cruise control.

[para. 5] However, Chinese self-driving companies struggle to capture more market share from dominant foreign players such as Germany’s Robert Bosch GmbH and Israel’s Mobileye Global Inc. Also, a domestic price war among car manufacturers pushes them towards cheaper systems, squeezing profitability for developers. As a result, some are exploring markets beyond passenger vehicles, like urban delivery, mining, and port operations, as these sectors present less complex challenges.

[para. 8] Companies like Horizon Robotics Inc., SZ DJI Technology Co. Ltd.-affiliated SZ Zhuoyu Technology Co. Ltd., and Momenta.ai are leading in China's development of driver assistance systems. Horizon Robotics focuses on Level 2 systems but offers advanced solutions like the Horizon Mono and Horizon Pilot for diverse driving conditions. By the end of 2023, their technologies were incorporated into multiple car models, highlighting their market influence.

[para. 11] On the other hand, Zhuoyu, established in 2016 as DJI’s smart driving system unit, designs and manufactures major components in-house, reducing product costs. Zhuoyu signed significant deals to equip over 20 car models with its systems in 2024. They plan mass production of an integrated sensor system for higher-priced cars in 2026.

[para. 15] Meanwhile, Momenta has transitioned to developing lower-tier assistance systems, targeting both high-end and budget markets. Their partnership with Qualcomm Technologies Inc. to launch a cost-effective smart driving system for mainstream cars exemplifies this strategy. They also took steps to design their own chips, indicative of a move towards self-sufficiency and cost reduction.

[para. 20] In robotaxi endeavors, companies like WeRide Inc. and Pony AI Inc. went public on the Nasdaq in late 2023. Despite securing funding, they face difficulties in turning robotaxis profitable. Most revenue comes from less complicated autonomous truck services, with robotaxi services yet to break even. Investors remain interested in driverless taxis for their potential efficiency gains, though profitability challenges persist.

[para. 25] Both WeRide and Pony AI are exploring international expansions, eyeing markets like the Middle East, where countries like the UAE and Saudi Arabia have outlined ambitious plans for autonomous vehicle integration by 2030. [para. 26] With new strategic partnerships and investments, such as Pony AI’s collaboration with Saudi Arabia’s Neom urban project, these companies aim to establish a foothold in these emerging markets, signaling opportunities for growth despite domestic challenges.